By Rebecca Howard
WELLINGTON, New Zealand--Fonterra Cooperative Group Ltd. has
begun compensation talks with major dairy customer Danone SA, as it
battles to draw a line under a food-safety scare that triggered a
global recall of some milk products and hurt New Zealand's
reputation as a reliable food supplier.
In early August, Fonterra said three batches of one of its dairy
products, whey protein concentrate, might contain harmful bacteria.
The news led to product recalls in countries including China and
New Zealand, affecting Danone and other companies.
While subsequent testing indicated that the organism wasn't in
fact harmful, the New Zealand government and Fonterra are
conducting several investigations into the incident and the way it
was handled.
The recall dented the image of the dairy sector in New Zealand,
which markets itself as an exporter of high-quality food. Dairy
sales overseas account for around a quarter of New Zealand's
exports and Fonterra supplies the bulk of those products.
Fonterra and Danone were in confidential talks to reach an
agreement that was acceptable to both sides, Fonterra said
Wednesday. It confirmed discussions are ongoing "but strongly
denies any legal liability to Danone in relation to the
recall."
Danone officials weren't immediately available for comment. In
late August, the company said recalling several of its infant
formula products in eight Asian markets had a significant impact on
the group's Asian baby nutrition division and that it was reviewing
its "recourse and compensation options."
In New Zealand, Danone owns Auckland-based Nutricia, which makes
the Karicare infant formula brand that was part of the recall. A
spokeswoman said she was unable to comment on the compensation
talks.
At its annual results last week, Fonterra said it has set aside
14 million New Zealand dollars (US$11.5 million) to settle damages
claims for the financial year ended July 31. Chief Executive Theo
Spierings said then it was too soon to comment on the total cost of
the food scare.
Write to Rebecca Howard at rebecca.howard@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires