Fonterra have just announced a New Zealand recall of 300 millilitre and 500ml bottles of Anchor and Pams fresh cream due to E-Coli contamination. The timing for Fonterra is particularly unfortunate; just last week Danone announced that it was terminating its contract with Fonterra and was suing for loss of sales as a result of a recall of milk-products in August 2013.
This earlier recall involved milk products used to make infant formula for use in China, Malaysia, Vietnam, Thailand and Saudi Arabia. Following discovery of potential Botulism problems in March, Fonterra withdrew the products in August, drawing widespread condemnation due to the delay in action. There were particular concerns in China given previous Mercury and melamine contaminations of infant milk powder. By the end of August it was confirmed by Fonterra that further tests had proved no contamination, and that the recall had been a false alarm.
Citing examples such as Tylenol and Perrier, the perceived wisdom is that early and prompt action to recall is the best route to take. However, the Fonterra 2013 recall and previous incidents such as Cadburys suggest that a speedy recall is not necessarily the only solution, and that delays may not impact shareholder value. Certainly good crisis management and speedy communications will assist, but the dilemmas of contamination, potential health concerns, reputation management and customer care can only be resolved by a thorough understanding of the business and the potential impacts of such incidents. Equally, from the perspective of Danone, the recall demonstrates the importance of understanding and maintaining trust throughout the supply chain.
Written by Helen Molyneux