Fonterra botulism scare failures laid bare in board inquiry

New Zealand dairy giant Fonterra failed to recognize the "explosive" risk to its reputation caused by its global botulism scare in August when it first surfaced, according to an independent inquiry commissioned by the company's board of directors.

The inquiry report, released Tuesday, made 33 recommendations to improve help avoid a repeat of the fiasco that saw a global recall of products after a batch of whey protein concentrate (WPC) was falsely identified as having been contaminated with a bacterium that could cause botulism.

The inquiry team found a number of factors, including a lack of senior oversight of crucial decisions, problems with tracing potentially affected product and belated escalation of the issue, contributed to the event in August this year.

"There were shortcomings in a number of areas, which, compounded by a number of events and co-incidences, converged to create this significant issue," Jack Hodder, who led the inquiry team, said in a statement.

The inquiry found that as well as failures in WPC testing and the preparation and cleaning in regimes, the company was "unable to promptly and definitively track the destinations" of the affected WPC batches.

Staff also belatedly recognized "the explosive reputational risk involved" to Fonterra's global reputation and delayed informing senior management and the board.

Fonterra's crisis management planning, including external communications, was inadequate for the event and the external communications were "not well executed."

The report also highlighted a "lack of alignment and confidence between Fonterra and the New Zealand government in the critical fortnight after the contamination concerns were advised to the government and made public."

Fonterra chairman John Wilson said the board was fully committed to implementing the recommendations made.

"Much of the recommended change is already underway, or has already been identified as needing to be changed," he said in the statement.

The board would also reconvene the independent inquiry committee in nine months and again in 18 months to assist in reviewing progress.

Chief executive Theo Spierings said the report provided Fonterra management with important in-depth observations and recommendations.

"We have learned lessons from what has been a difficult experience, subsequently found to be a false alarm. We understand the anxiety caused at the time to our customers, regulators, shareholders and other stakeholders, both in New Zealand and around the world, and especially parents concerned for the welfare of their children," Spierings said in a statement.

Primary Industries Minister Nathan Guy issued a brief statement saying the government noted the release of the Fonterra inquiry into the WPC "incident."

"It is important to note that this is Fonterra's inquiry and the government has its own inquiries underway into the incident," Guy said.

The government's own Ministerial Inquiry was expected to deliver an interim report in mid-December, and the Ministry for Primary Industries' compliance investigation was expected to be concluded by the end of the year.