29 Oct 2013

Report damns handling of botulism scare

11:50 pm on 29 October 2013

A report for Fonterra lists a series of failures in the company's handling of its botulism contamination scare, including inadequate testing and a lack of senior oversight in crucial decisions.

The dairy cooperative's board commissioned the 163-page report into its precautionary recall of whey protein concentrate in August this year when concern arose that products, including infant formula, were contaminated with bacteria that could cause botulism.

Subsequent testing found the bacteria to be harmless, but the scare has damaged the company's reputation internationally.

In the report released on Tuesday, Fonterra's Independent Inquiry Committee lists 10 primary failures, including insufficient senior oversight, inadequate testing for botulism and that the company was unable track affected batches promptly.

Fonterra failed to recognise the explosive reputational risk of its food scare and didn't "join the dots" between botulism bacteria, infant formula and consumers, it said.

The report said Fonterra's management of the events in the critical early period was not well executed and it also highlighted a lack of confidence between the company and the New Zealand Government at the time.

Sir Ralph Norris, one of Fonterra's independent directors and chairman of the inquiry committee, criticised the decisions made in the lead-up to the recall.

Sir Ralph said there were 21 points during the scare that, had a different decision been made, could have prevented the issue from becoming as big as it did. But this didn't happen.

"There's a number of people, a number of decision points that could have changed this situation ... any one of those that had a different outcome may well have ended up without this particular event occurring.

"People didn't join the dots. There was a lot of decisions that were taken based around the fact that people didn't think that there was a problem. But it slowly morphed into a problem without people actually having the sense to stand back and take a big picture view."

The report makes 33 recommendations, which Fonterra chairman John Wilson said on Tuesday the company accepts.

Some customers 'deeply wounded'

The inquiry's team leader, Jack Hodder, QC, described the reaction from Fonterra's customers and stakeholders spoken to during the investigation.

"We spoke to a number of customers as part of our exercise and it's fair to say there was a range of views. You won't be surprised that some are feeling deeply wounded, others thought that it was the right thing to do was to have the precautionary recall and recognise there was always going to be some damage around that.

"In terms of various stakeholders their reactions to it were affected by the fact that, frankly, Fonterra should've had more goodwill in the bank than it did."

Gabrielle Trainor, a crisis management and communication specialist on the inquiry team, said she couldn't put a price on what it has cost Fonterra and the company needs to be as transparent as possible to save its reputation.

"It was a false alarm and I think people do now remember that, though perhaps that message hasn't got through quite as strongly as it should have."

The Independent Inquiry Committee will also review how Fonterra has implemented the recommendations nine months' time and again in 2015.

The Government is also holding two separate inquiries; a ministerial level inquiry and another by the regulator, the Ministry for Primary Industries.