The French dairy giant announced yesterday that after months of talks with Fonterra relating to the precautionary WPC alert and subsequent recalls, it has decided to cancel its current supply contract and pursue legal action.
“Danone is terminating its existing supply contract with Fonterra and making any further collaboration contingent on a commitment by its supplier to full transparency and compliance with the cutting-edge food safety procedures applied to all products supplied to Danone," said a statement issued by Danone.
“Danone is also initiating proceedings in the New Zealand High Court, as well as arbitration proceedings in Singapore to bring all facts to light and to obtain compensation for the harm it has suffered.”
In a statement, Fonterra vowed to "vigorously defend any proceedings."
On 2 August 2013, Fonterra informed eight customers, including Danone-owned Dumex and Nutricia Australia New Zealand (Nutricia ANZ), that three batches of WPC potentially contaminated with botulism-causing Clostridium botulinum had entered the supply chain. Tests later revealed that the bacteria found were Clostridium sporogenes – a non-toxic Clostridium strain.
This information came too late, however, for Nutricia ANZ and Dumex, who had already initiated product recalls in New Zealand, Cambodia, Thailand, China, Hong Kong, Malaysia and Singapore.
Within its Q3 results, published in November 2013, Danone estimated losses as a result of the recalls at €350m ($476m).
Fonterra confirmed in October 2013 that it had entered into a “dispute resolution process” with Danone “with a view to reaching a mutually acceptable commercial outcome.” Despite entering into these talks with Danone, Fonterra has consistently denied any legal liability.
In a statement issued earlier today, the company said it was "disappointed" that its negotiations with Danone failed.
“Fonterra has been in on-going commercial discussions with Danone and is disappointed that they have resulted in legal action,” said the statement.
“Fonterra will not work through the details of Danone’s claims. It continues to be confident in its position and will vigorously defend any proceedings.”
In December during Fonterra's annual Shareholders' Fund meeting, CEO Theo Spierings said that seven of the eight manufacturers affected by the WPC alert had accepted a "commercial solution" tabled by the company.
Responding to concerns about the potential payment of compensation to Danone, Spierings said that its tabled "commercial solution" appeared "to be a route that is not working out."