Danone seeks full compensation from Fonterra

Danone's Nutricia Karicare baby formula, one of the products recalled after the recent Fonterra contaminated whey scare.

French food giant Danone has confirmed it is seeking full compensation from Fonterra for damage caused to its business following the New Zealand dairy company's botulism scare.

In a statement provided to the Reuters news agency, Danone said it had sent a notice of dispute to Fonterra on September 24.

"Danone is determined that it should be fully compensated for damages caused by the recall on eight markets," the company said. "Food safety is a non-negotiable priority and we are cooperating fully with local authorities and key stakeholders to determine the causes of the situation and clarify responsibilities."

While Danone did not provide a figure on the compensation it was seeking, Business Herald columnist Fran O'Sullivan has reported that the French firm is "arguing behind the scenes" that the brand damage has cost it around €200 million ($326 million).

Danone products were recalled in eight countries, including New Zealand and China, after Fonterra suspected that 38 tonnes of whey protein, used in a range of consumer products such as infant formula, had been contaminated with a botulism-causing bacterium.

It turned out to be a false alarm.

Danone was hardest hit in China, where consumers remain highly sensitive to food safety scares following the 2008 melamine scandal, when six babies died and thousands more became sick after consuming dairy products tainted with the industrial chemical.

In New Zealand, Danone-owned Nutricia had to recall 67,000 cans of its Karicare infant formula brand.

Fonterra yesterday confirmed it was in a dispute resolution process with Danone.

"The discussions between Fonterra and Danone had been confidential with a view to reaching a mutually acceptable commercial outcome however some aspects of these discussions have been made public this morning in the press," the company said. "Fonterra confirms that the discussions remain ongoing but strongly denies any legal liability to Danone in relation to the recall."

At its annual result announcement last week Fonterra said it had set aside $14 million for dealing with the fallout of the botulism scare.