Wednesday, July 6, 2022

Fonterra crisis: How Fonterra’s botulism scare unfolded

May 2012: Fonterra’s Hautapu site in Waikato produced a type of whey protein concentrate (WPC80) using plant and machinery that included a dirty pipe, where it was thought air-borne soil deposits contained the bacteria Clostridium botulinum, which can cause botulism. “It was a little-used piece of pipe work which was not sanitised properly at the time,” Fonterra said. Three batches totalling 38 tonnes were produced at that time, the majority of which was sold to eight Fonterra customers. WPC80 is an ingredient in a range of products, including infant formula, growing-up milk powder and sports drinks. It is also used in calf milk replacer (CMR). All WPC produced at the time passed food safety tests and was cleared for sale. 

March 2013: Fonterra prepared to use the remainder of the WPC80 batches from Hautapu made 10 months earlier in value-added formulations at Waitoa, New Zealand, and Darnum, Australia. New tests were done and elevated levels of Clostridium were detected, indicating a potential quality issue. “There are hundreds of different strains of Clostridium, the majority of which are harmless,” the company said. The WPC80 was still within specification for further use and Fonterra could have stopped testing at that time. But it wished to find out the nature of the Clostridium involved so did more testing. Product samples were tested over the following months to identify the specific strain of the bacteria. 

Wednesday, July 31: Fonterra received confirmation of Clostridium botulinum in WPC80 samples held at Waitoa and Darnum. It said later it contacted the eight customers immediately and notified the appropriate authorities, so that any potentially affected product could be removed from the marketplace. Company executives said the presence of Clostridium botulinum was a surprise to Fonterra and had not occurred in NZ dairy products before. 

Midnight, Friday, August 2: Fonterra released a media statement advising of a quality issue involving three batches of WPC80 produced at a NZ manufacturing site in May 2012. “As a result, these customers are urgently investigating whether any of the affected product, which contains a strain of Clostridium, is in their supply chains. If need be, they will initiate consumer product recalls,” the company said. 

Saturday, August 3: Media conference by Gary Romano, managing director of NZ Milk Products, the NZ manufacturing arm of Fonterra, and Kerry Underhill, group director, communications. Fonterra chief executive Theo Spierings was in Europe and would be going to China immediately. Romano and Underhill detailed the discovery of infected WPC80 from the remainder of the Hautapu May 2012 batches. “There have been no reports of any illness linked to the consumption of the affected whey protein. Dairy products such as fresh milk, yoghurt, cheese, spreads and UHT milk products are not affected. Right until the end of the testing (July 31) we have never had any expectation that Clostridium botulinum would be found in our products,” Romano said, explaining why Fonterra had not initiated recalls in May 2012, March 2013 or subsequently. “It was unusual and quite specific testing.”

Fonterra would not name the eight customers, saying it had no “visibility” over their products and distribution chains and it was up to customers and the relevant food safety authorities to make statements and/or recalls.

Later in the day Fonterra confirmed no Fonterra-branded consumer products were affected by the quality issue. It assured consumers in global markets including Australia, Asia, China, Latin America, NZ and the Middle East none of its range of branded consumer products contained the affected whey protein concentrate (WPC80). It gave further details of the eight affected customers – some of whom received it as base product and others as a finished product made by Fonterra using the affected WPC80 as an ingredient. Of these customers, three were food companies, two were beverage companies, and three were companies that manufactured animal stock feed. 

Sunday, August 4: Another media conference by Romano and Underhill. Spierings was already in China meeting staff members, embassy officials, customers and regulators. Economic Development Minister Steven Joyce and Trade Minister Tim Groser met Fonterra chairman John Wilson and others during the afternoon. Romano named eight customers: Danone, which made infant formula in NZ and China; Vitaco, which made NZ sport drinks; Fonterra animal feed subsidiary NZAgbiz, which made CMR; Maxum, which made Australian animal feed; Wahaha, which made a Chinee protein-enriched drink; Coca-Cola, which made drinks in NZ and China. Vitaco, Wahaha and Coca-Cola used further processing and heat treatment that would have killed the bacteria, Danone had recalled product and NZAgbiz and Maxum had either made a recall or “contained” the affected products in store. NZAgbiz announced an immediate product recall of a small amount of CMR sold in the North Island. Fonterra veterinarian Lindsay Burton said the health risk posed by the affected CMR was very small. 

Monday, August 5: Fonterra Shareholders Fund (FSF) listed units opened sharemarket trading at $6.50, down 8%, but recovered to finish the day at $6.86. The Danone subsidiary in NZ, Nutricia, announced a recall of two infant formula products, Karicare Infant Formula stage one (two batch numbers) and Karicare Follow-up Formula stage two (one batch number). The issue did not involve any Karicare products sold in Australia.

Prime Minister John Key said he was staggered by the time that had elapsed before Fonterra had notified the Government and consumers about potential contamination. Joyce and Ministry for Primary Industries (MPI) officials were sent to Fonterra’s Auckland and Hamilton offices to check records.

Fonterra held a third media conference, including one involving Spierings by telephone from China. Spierings started by apologising to all NZ and Chinese consumers. Fonterra said more than half of the 38 tonnes of suspect WPC80 had gone into animal feed or further processing by Coca-Cola, Wahaha and Vitaco, 13.5 tonnes went to Australia and was made into infant formula and 3.6 tonnes stayed in NZ and was made into infant formula. Spierings said more than 90% of the affected products had been located and contained or recalled. He expected all products would be located in 24-48 hours.

China had not imposed a blanket ban on all NZ dairy products, Fonterra said on advice from MPI. It had temporarily suspended importation of whey powder and dairy base powder – a whey-based dairy ingredient used in making infant formula – produced by Fonterra, or produced in Australia using Fonterra’s whey protein powder, including whey protein concentrate, as an ingredient. China had also increased inspection and supervision at the border for NZ dairy products and indicated extra testing might be required. 

Nutricia announced the recall of all batches of Karicare Infant Formula and Follow-up Formula. Karicare is the market leader in New Zealand. Nutricia said it had extended the recall following receipt of more information from Fonterra.

Tuesday, August 6: FSF unit price rose above $7, close to the $7.12 closing price on Friday, August 2.

Finance Minister Bill English said The Treasury did not expect an economic slowdown from the Fonterra botulism crisis. Product bans appeared narrower than first thought but the risk to reputation was still real.

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