France’s Danone launches court action against Fonterra over food scare, ends supply contract

Thursday 9th January 2014

Danone, the world's biggest yoghurt maker, has launched legal proceedings against Fonterra Cooperative Group over last year's whey protein concentrate recall and ended its existing supply contract with the New Zealand dairy exporter.

The Paris-based food processing company is initiating proceedings in the New Zealand High Court and arbitration proceedings in Singapore "to bring all facts to light and to obtain compensation for the harm it has suffered," it said in a statement. Danone put the cost of last year's WPC 80 recall at 350 million euros when it announced its third-quarter results, while Auckland-based Fonterra recognised a contingent liability of just $14 million in its own accounts.

Last August, Fonterra quarantined several batches of whey protein concentrate amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria. The whey protein was ultimately cleared as a false alarm.

Danone will also terminate existing supply contract with Fonterra and make "any further collaboration contingent on a commitment by its supplier to full transparency and compliance with the cutting-edge food safety procedures applied to all products supplied," it said.

"As a leading food company, Danone makes food safety an absolute priority and is committed to working only with suppliers that share and respect the same demanding professional standards," it said.

Of the eight customers affected by Fonterra's recall, the New Zealand company agreed to a commercial outcome with all of them except Danone, including extending supply contracts for the next 10 years and agreeing to volume increases.

In December, Fonterra chief executive Theo Spierings said he expected any court action would show the New Zealand company has no liability in its contract.

NZX-listed units in the Fonterra Shareholders' Fund were unchanged at $5.86 yesterday, while shares in Danone fell 1.3 percent to 51.17 euros.

BusinessDesk.co.nz

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