(Updates with analyst comment in third paragraph.)
Jan. 14 (Bloomberg) -- Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, is reassuring consumers on food safety as the second contamination scare in less than a year threatens to erode confidence in its products.
About 8,700 bottles of fresh cream already distributed to retail outlets in regions of New Zealand’s North Island are being recalled after tests showed high levels of the E.Coli bacteria, the Auckland-based company said late yesterday. The recall comes just five months after Fonterra warned that a whey protein used in baby formula may have been tainted with a potentially fatal botulism-causing bacteria, in what turned out to be a false alarm.
The latest incident “is small and appears contained but we, like the wider public, would like to understand what created this scare and the need for a recall,” said Andy Bowley, an analyst at Forsyth Barr Ltd. in Wellington, who has a “reduce” recommendation on the Fonterra Shareholders’ Fund. “The wider public image impact isn’t good following what happened last year.”
Fonterra is still working to rebuild its reputation after the botulism warning prompted product recalls across Asia and saw countries including China temporarily halt imports of some of the company’s milk powders. France’s Danone, the world’s biggest yogurt maker, last week canceled its supply contract with Fonterra and sued in the New Zealand High Court for compensation, saying the botulism recall cost it 300 million euros ($410 million).
Shares in the Fonterra Shareholders’ Fund, a publicly traded trust that tracks the cooperative’s dividend payout and earnings, fell 3 cents this morning before recovering to trade 2 cents higher at NZ$5.65 at 12:45 p.m. in Wellington.
The cream contaminated with E.Coli, which can cause food poisoning, was distributed only in New Zealand, Fonterra said.
“This is a totally separate issue from the last one,” Peter McClure, managing director of Fonterra Brands NZ, told Radio New Zealand. “You wouldn’t want this at any time and now is not a good time for us, but we’re doing everything we can. Consumers can rest assured on our record of supplying high quality milk and cream into this market.”
The fresh cream was distributed under the Anchor and Pams brands with a best-before date of Jan. 21. It was produced at the company’s Takanini plant last week.
No other product from the plant, which processes 1 million liters of milk a day, showed anything unusual in testing, McClure said. Fonterra is investigating how the contamination occurred, he said.
The recall is evidence that Fonterra’s food-safety testing has worked, Willy Leferink, chairman of Federated Farmers of New Zealand’s dairy division, said in a statement. Still, politicians including Green Party agriculture spokesman Steffan Browning warned that the recall was another blow to New Zealand’s global brand.
“New Zealand needs Fonterra to be reliable and maintain a spotless reputation,” Browning said in a statement. “Any mistake by them impacts on all of us.”
--Editors: Matthew Brockett, Edward Johnson