Fonterra: Disappointed Ongoing Discussions With Danone Resulted In Legal Action

   By Lucy Craymer 
 

WELLINGTON--Fonterra Co-Operative Group (FCG.NZ) Thursday confirmed that Danone SA (BN.FR) has formally begun legal action against the company following a recall of baby-milk products by the New Zealand dairy giant last year.

"Fonterra will now work through the detail of Danone's claims. It continues to be confident in its position and will vigorously defend any proceedings," Fonterra said in a short statement to the New Zealand stock exchange.

Fonterra added that it had been in ongoing commercial discussions with Danone and was disappointed it had resulted in legal action.

Danone said earlier it would stop working with the supplier unless it can secure better food-safety guarantees, and that it is taking legal action via an international arbitration panel in Singapore and a high court in New Zealand after failing to reach a compensation agreement with Fonterra.

"Fonterra stands by its track record of having world-class food safety and quality standards, quality systems, and robust testing regimes across all its manufacturing facilities," the dairy giant responded.

The claims relate to a food-safety scare--ultimately a false alarm--that triggered a global recall of hundreds of thousands of cans of baby formula across Asia. Danone was hit hard by the scare as it relied heavily on Fonterra for the supply of baby formula in the rapidly growing and highly profitable Chinese market. It wants Fonterra to compensate for a large portion of lost market share and sales, which it estimated at EUR350 million ($475.4 million).

Write to Lucy Craymer at [e-mail]

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