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Supply Chain

Danone Awarded €105 Million After Fonterra Contamination Scare

Danone has been awarded €105 million in damages, to be paid by New Zealand dairy company Fonterra, following a contamination scare in 2013.

The dairy goods giant was forced to recall a number of infant milk products in eight countries, after its supplier Fonterra said there was a risk of contamination in its whey protein that could lead to botulism.

The scare was later deemed to be a false alarm, but a Singapore arbitration has ruled that Danone should be compensated for costs suffered at the time.

Danone says that it welcomes this decision as a guarantee that 'the lessons from the crisis will not be forgotten', and will help to champion the highest standards of food safety across the industry.

Liability

As a result of the arbitration, Fonterra has lowered its forecast earnings per share range for the 2017/2018 financial year, from between 45 - 55 cents, to 35 - 45 cents.

The dairy cooperative says that it is in a strong financial position, and is able to meet these costs, but is disappointed at the result.

“We are disappointed that the arbitration tribunal did not fully recognise the terms of our supply agreement with Danone, including the agreed limitations of liability, which was the basis on which we had agreed to do business,” said Theo Spierings, CEO of Fonterra.

“While there was never any risk to the public, we have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems."

In April 2014, Fonterra was fined by judgement of the Wellington District Court for having breached several provisions of New Zealand's food safety regulations.

© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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