Danone to sue New Zealand's Fonterra over baby formula recall

Wed Jan 8, 2014 11:01pm EST
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By Naomi Tajitsu and Geert De Clercq

WELLINGTON/PARIS (Reuters) - French food group Danone (DANO.PA: Quote) said it would sue wholesale dairy exporter Fonterra (FSF.NZ: Quote) and stop buying products from the New Zealand firm following a contamination scare that sparked the recall of infant milk formula across Asia.

The world's largest yoghurt maker did not say how much money it was seeking, but it has previously said it wanted full compensation for what it says were 350 million euros ($476 million) in lost sales following the recall of the company's Dumex and Karicare infant formula products.

Danone is one of Fonterra's biggest milk powder customers, according to analysts who cover the sector. Fonterra, which said it would contest the suit "vigorously", declined to give details on its sales to the French firm.

In August, Fonterra said it had found a potentially fatal ingredient in a range of products sold by multinational companies. After recalls were issued across nine countries including China, the scare turned out to be a false alarm because the ingredient was found to contain a less harmful bacteria.

In a statement, Danone said it was starting proceedings in the New Zealand High Court against the world's largest dairy processor, which supplies a range of dairy ingredients to the French firm. Danone would also start arbitration proceedings in Singapore to obtain compensation.

The company said it was also terminating its supply contract with Fonterra and would make any further collaboration contingent on a commitment by Fonterra to full transparency and compliance with Danone's food safety procedures.

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

Danone told Reuters it would source products from other global suppliers, without elaborating.   Continued...