One week after the Fonterra botulism scare became known, two clearly contrasting examples of response to a crisis are emerging. One appears to be of a Government that realised the implications and moved quickly to shut the problem down as fast as it could. The other is of a company that does not seem to have learnt the very harsh lessons of the San Lu incident in 2008.
Prime Minister John Key and his Government have so far carried out something approaching a text book response to a potentially very damaging crisis. The speed of the response might have had something to do with the Government looking for a diversion from Spy-gate, a scandal that may – if it drags on long enough – finish Mr Key. Weeks of increasingly negative press coverage, gaffes by the Prime Minister attacking the Human Rights Commission and more recently the Law Society and the Andrea Vance privacy row have led to increasingly furious media coverage. Buffeted by the coverage and by protests, little wonder National has leapt at the chance to show some decent leadership.
The New Zealand Government response was significant. As soon as Ministry officials found out, they alerted appropriate ministers in the Government. When the nature of the problem became known, it was escalated to the level of senior Ministers of the Crown. At various stages Prime Minister John Key, Deputy Prime Minister and Minister of Finance English, Minister for Food Safety Nikki Kaye, Minister for Trade Tim Groser, Minister for Foreign Affairs Murray McCully and Steven Joyce were all involved. The Government response was in part driven by fear of another San Lu type disaster where Fonterra was found severely wanting over the presence of melamine in its products, which were causing the deaths of babies overseas and abnormal in people.
The same cannot be said for Fonterra.
In 2008 the San Lu melamine scandal exposed the poor health and safety practices of Fonterra to the world. It exposed a corrupt underbelly in its Chinese subsidiaries in terms of how they were operated and accountability to the Chinese people as suppliers and Chinese authorities. It raised questions about how well Fonterra understood its responsibilities and the efforts it was making to comply with them.
And worse still there is ample evidence coming out about a very bad management culture in the company. The evidence can be ascertained simply by looking at the response to the second crisis, this time involving botulism that might have got into product from something as simple as a dirty pipe. So what did Fonterra do?
For four months, nothing at all. In March 2013 testing discovers traces of Clostridium, a potentially harmful bacteria. In May a contaminated batch of whey is exported to China, Australia, Malaysia, Thailand, Saudi Arabia and Vietnam as well as used locally. It was not until 31 July that anyone in a position of influence there decided to tell the Government there is a problem. Fonterra shares plunge, stagger like a drunk and then recover somewhat. The company issues a recall notice on 03 August 2013, leading to China blocking Fonterra goods and several other countries issuing cautionary advice. There was no initial apology from Fonterra until 05 August, and its explanations look more like those of a company trying to cover its backside. Even though it comes under withering fire from farmers, government ministers and the public alike, it seems reluctant to come forward with a full public apology and promise to co-operate fully with any inquiry.
Early reaction from China suggests that Fonterra may yet pay a price for its irresponsibility in terms of being a global dairy player. The reaction from Members of Parliament suggest that it is in for a testing time before an inquiry panel wanting to know why the lessons of 2008 were not learnt. But given its response to this scandal, no one should be surprised.