Danone awarded €105m damages from Fonterra over botulism scare

In December the New Zealand Herald reported that an arbitration tribunal in Singapore determined Fonterra must pay Danone €105m to cover a product recall linked to a false botulism scare in 2013.

On August 2, 2013, Fonterra issued an alert concerning a possible contamination of certain ingredients supplied to Danone. Additional tests revealed later  that the suspect ingredient was a non-toxic bacteria.

Danone has estimated the botulism scare cost it 300 million euros in operating profit and 370 million euros in sales.

Fonterra said it was disappointed with the ruling and argued that liability under its supply agreement with Danone was limited.

Danone issued a statement welcoming the decision and stated that the company was still evaluating whether it would continue with the separate legal action in New Zealand.

The incident which prompted the recall in 2013 led to Danone terminating its supply agreement with Fonterra. Danone expanded its operations in New Zealand by directly contracting with milk producers and establishing its own primary processing facilities. The workers in the Danone operations have been organized by the IUF affiliate, the New Zealand Dairy Workers Union (NZDWU).

Danone’s competitor Fonterra is a cooperative owned by more than 13000 New Zealand farmers. It is the world’s biggest dairy exporter.