When 90% of China’s imported milk comes from New Zealand, and when you are the single largest seller in this category, the last thing you want is for government authorities to recall your product. Unfortunately, this is precisely the predicament that Fonterra finds itself in now that the New Zealand Milk Recall Ripples Across Asia. A bacteria causing botulism was found in some products.
According to the Financial Times:
“For a long time, New Zealand has marketed its products overseas as being ‘100 per cent pure’ and this has been especially true of its dairy products,” said China’s state-owned Xinhua news agency. “However, Fonterra has had a series of problems and this is beginning to shake the confidence of some Chinese consumers in its ‘100 per cent pure’ milk powder.”
Now place this issue into the context of a nation where few things concern parents more than healthy food for their children. A seemingly endless series of food scandals have rocked China for nearly 5 consecutive years. Foreign producers such as Fonterra or Wyeth have been the benefactors, so much so that Chinese authorities are now investigating several companies for anti-trust practices because these firms are seen to be profiting handsomely from the lack of trust in local producers.
The history of reputation management might suggest that a firm with a good name, such as Fonterra, could weather this crisis with the right response to numerous stakeholders…especially parents (Fonterra’s apology). But given that Fonterra’s growth strategy includes a heavy focus on China, few things would seem more important than correcting the source of this bacteria and then acting decisively to protect the firm’s good name.