Testing of contaminated dairy products for the potentially deadly botulism toxin was delayed for more than two months while Fonterra haggled over price with AgResearch, an independent review has found.
The review, which followed the results of Fonterra’s internal inquiry published last month, examined the causes of the botulism scare involving three batches of whey protein concentrate made at the dairy giant’s Hautapu plant.
In its results published yesterday, the review team led by Jack Hodder QC made 33 recommendations, including that Fonterra’s board should explicitly endorse the paramount importance of food safety.
«Improvisation just doesn’t cut it,» he said.
That theme underpinned all the report’s recommendations, said Hodder.
«The thing that underlies much of [the report] is a cultural idea, that the move away from pure cost efficiency towards the idea of food safety and quality needs to be borne in mind by everybody in the organisation from the very top to the very bottom. There’s no misunderstanding about that.»
The report reveals that Fonterra first contacted AgResearch to ask how to check whether clostridium bacteria found in the whey could be the dangerous botulinum strain, as well as how much it would cost to do the testing, on May 7.
Fonterra confirmed it wanted AgResearch to do the testing on June 26, but haggled over the price and terms of the contract until the deal was done on July 18 at a price of $7500.
AgResearch delivered its initial findings on July 31 suggesting, incorrectly as it turned out, that samples of the whey contained botulism.
After AgResearch delivered its preliminary report on August 2, Fonterra revealed the potential contamination publicly on August 3 leading to a major recall of dairy products, including infant formula, made by Fonterra customers. Further testing showed the contamination to be a false alarm.
Sir Ralph Norris, who chaired the committee overseeing Hodder’s inquiry team, said Fonterra staff did not expect the testing to reveal botulinum, which contributed to a lack of urgency and delay in involving senior staff.
«People didn’t join the dots. People didn’t think there was a problem and it slowly morphed into a problem without people having the sense to stand back
and look at the big picture view,» he said.
The report said there was a general understanding in the dairy industry that botulinum contamination was not an issue with whey protein concentrate and Fonterra’s own science team saw it as highly unlikely.
As well as operational and governance issues, the review found Fonterra’s communications were inadequate for a business of its scale.
The co-op had «a strong, historic and unusual dependence» on an external public relations firm, said the report.
It did not name the firm involved, Baldwin Boyle, but said using an external PR contractor had some drawbacks, including that the firm’s work was restricted to what it was obliged to do in its contract and its focus was diluted by its attention to other clients.
Hodder said when the public relations crisis hit, «Fonterra should have had more goodwill in the bank than it did.»
Fonterra chairman John Wilson said the board was committed to implementing the 33 recommendations in the report.
Directors were encouraged that the independent review echoed the findings of the management review.
«There are no contradictions between the recommendations,» he said. «Much of the recommended change is already underway.»
A key finding was that Fonterra did not routinely use sulphite reducing clostridia tests on its whey protein concentrate, although it was contractually required to do so by at least one customer.
The review also found the tests commissioned for botulism were inadequate, as was its crisis management and external communications.
«There was some lack of alignment and confidence between Fonterra and the New Zealand government in the critical fortnight after the contamination concerns were advised to the government and made public,» said the report.
Although it proved a false alarm, the scare damaged confidence in New Zealand dairy products and could lead to costly litigation.
French company Danone, whose subsidiary makes infant formula using Fonterra ingredients, is reportedly considering a 200 million euro claim against Fonterra for lost sales.
INQUIRY TEAM MEMBERS
Jack Hodder, QC, Chapman Tripp
Gabrielle Trainor, Australian crisis management and communications expert
Jacob Heida: Dutch dairy industry expert
Process
Team visited 8 dairy factories, interviewed 70 Fonterra staff members, discussed with 30 stakeholders such as customers, farmers and journalists.
Conclusion
«The inquiry team has been left with a strong impression that Fonterra will use the WPC80 events as a catalyst for positive . . . change. . . That would be a very fine legacy from a very difficult period in Fonterra’s history.’
Source: Stuff