Danone to sue Fonterra over WPC contamination scare

Danone is set to sue New Zealand-based dairy exporter Fonterra for the losses it suffered following the whey protein concentrate (WPC80) botulism scare last year.

A botulism alert by Fonterra in August prompted a recall of certain infant formula products in more than seven countries; however, further investigations revealed the presence of clostridium sporogenes, which does not cause botulism.

Danone stated that the incident affected its sales, profitability and free cash flow goals for 2013.

"This affair illustrates serious failings on Fonterra’s part in applying the quality standards required in the food industry," Danone said in a statement.

The company has terminated an existing contract with Fonterra, and is seeking compensation for losses incurred due to the recall of its Dumex and Karicare products in Asia and New Zealand.

It is also initiating proceedings in the New Zealand High Court, as well as arbitration proceedings in Singapore to obtain compensation.

Although the company did not divulge how much money it was seeking in compensation, it previously estimated €350m in lost sales.

Fonterra said that it has been in ongoing commercial discussions with Danone, and is disappointed that they have resulted in legal action.

The company said it will now work through the detail of Danone’s claims and will vigorously defend any proceedings.

In October 2013, Danone and Fonterra initiated talks to reach a commercial solution.

Fonterra earlier said it had reached commercial agreements with six of the eight recall-affected firms, and that it was close to reaching a commercial deal with a nutritional company affected by the scare.