NZ's Fonterra Denies It Allowed Production of Tainted Milk

(Dow Jones Newswires New Zealand)

By Simon Louisson


New Zealand dairy giant Fonterra Cooperative Group Ltd. said Wednesday that it never supported and wasn't aware of a decision by a joint venture partner in China to continue to produce infant milk products which it knew were contaminated by the industrial product melamine.


The chairwoman of Shijiazhuang SanLu Group, Tian Wenhua, was cited in a report by China's state news agency Xinhua as saying that she acted on information supplied by the Auckland company, which owned 43% of SanLu before its collapse last year.


Tian was last week sentenced to life imprisonment after pleading guilty to charges of manufacturing and selling fake or substandard products that played a part in killing at least six infants and sickened hundreds of thousands. Two others who did not work for SanLu were sentenced to death.


Xinhua said rather than stopping production of tainted products after the contamination was confirmed on Aug. 1 last year, SanLu decided to limit melamine levels to a maximum of 10 milligrams for every kilogram of milk.


During her trial, Tian said the decision not to halt production was based on a document supplied by a Fonterra board member, saying that up to 20 mg of melamine was allowed in every kilogram of milk in the European Union.


"We had no knowledge that they made the decision to continuing selling these products," Fonterra Chief Executive Andrew Ferrier said at a news conference.


He said minutes of the SanLu board meetings would show the New Zealand dairy company had made it clear its advice was that there should be zero tolerance for any melamine in the milk.


He agreed numerous documents on the industrial chemical had been supplied to SanLu including a "draft" E.U. document that suggested limited amounts of melamine were permissible.


However, at no point did Fonterra tell SanLu it was acceptable to keep producing milk with melamine in it, he said.


"I'm outraged that (SanLu) managers made that decision to sell products above the zero level," Ferrier said.


Fonterra chairman Henry van der Heyden said he was confident Ferrier and Fonterra executives had acted appropriately since the scandal broke. Fonterra has been taking criticism for the two week-plus delay between when it was told of the problem and the ordering of a product recall.


"He (Ferrier) has the 100% support and confidence of the board," the chairman said.


Van der Heyden said the board had conducted an independent review of the management of Fonterra's operations involving SanLu. The New Zealand group has had to write off its NZ$200 million investment in the company.


Ferrier said one good thing to emerge from the scandal was the Chinese government had since become proactive in protecting the rights of China's consumers.


He said Fonterra remained interested in reentering China, but would be "extra, extra careful," and would in the future be certain to control its supply chain.


He said all of SanLu's remaining assets were in the hands of the receivers and any compensation to be paid by Fonterra would come from those. Fonterra, which accounts for nearly a quarter of New Zealand's exports, Wednesday cut its forecast payout to nearly 11,000 farmer shareholders to NZ$5.10 per kilogram of milk solids, from a NZ$6.00 kg forecast in November. It cited collapsing dairy prices and the global financial crisis for the cut, which will slash around NZ$1 billion from income. 1-28-09



Main Page

setstats Copyright (C) All rights reserved under

If you have any comments, please  send your email to