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Abbott making 'progress' repairing Fonterra botulism scare damage

By Mark Astley+

17-Jul-2014
Last updated on 18-Jul-2014 at 12:08 GMT2014-07-18T12:08:55Z

Abbott making 'progress' repairing Fonterra botulism scare damage

Abbott Laboratories' CEO believes the company has “recovered about as well" as it could have in the year since the Fonterra WPC botulism scare that led it to recall infant formula in China, Vietnam, and Saudi Arabia.

Speaking on Abbott's Q2 conference call with analysts, Miles White, chairman and CEO, Abbott Laboratories, said the company has made progress over the last 11 months to recapture market share lost as a result of the action it was forced to take.

Illinois-based Abbott recalled batches of infant formula on the orders of the Chinese General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) in August 2013 - days after Fonterra alerted eight customers that three lots of WPC potentially contaminated with Clostridium botulinum had entered the supply chain.

In the same week, Abbott pulled infant formula suspecting of containing the WPC in question from shelves in Vietnam and Saudi Arabia.

Abbott chief White pinpointed the scare, later revealed to have been a false alarm, as the "single biggest...setback" for the company in 2013.

"When it happens it's a year to recover because the consumer is an incredibly quality conscious consumer," he said, "once that consumer has shifted to another brand it's very difficult to regain them."

Nearly twelve months on, Abbott is feeling the effect of the Fonterra botulism scare. 

US$40m impact

In its Q2 2014 financial results, published yesterday, Abbott reported pediatric nutrition sales of US$963m (€712m) for the quarter, a 0.5% year-on-year decrease.

It has estimated the impact of the Fonterra botulism scare on its sales at US$40m (€29.5m) - an improvement on the US$75m  (€55.4m) quoted by Abbott in Q1.

"That wasn't something anybody anticipated, it wasn't something anybody wanted to happen, including Fonterra. But when it happens, it does set you back a bit," White told analysts.

"I think we've recovered about as well as we could have within that year time frame."

"I like the progress that our team is making in China and other countries."

Recapturing market share

Efforts by Abbott to recapture market share lost in the countries affected by its recalls are underway.

In Q2, Abbott launched several pediatric nutrition products, including an infant formula called Eleva in China. This is set to be followed by the Chinese launch of its new Similac QINTI infant formula, which will be manufactured at a newly constructed plant in the country.

Alongside these developments, Abbott and Fonterra recently sealed a deal that if approved will see them join forces to build a hub of up to five dairy farms in China. The project, which the companies claim will produce more than 160m liters of milk each year, came about as a direct result of the WPC incident, said White.

"You can spend your time arguing about something nobody wanted to happen, or you can look ahead and say, where are our opportunities?" White continued.

"So we constructively looked at what the companies could do together, and out of that came the notion of this dairy hub idea in China, which I think and they think will be very important for serving China," he added.

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