Supplied - Fonterra

Fonterra confirms French compo talks

FONTERRA has confirmed that it is in a dispute resolution process with a key customer, French food group Danone, following the whey protein concentrate precautionary recall in August this year.

"The discussions between Fonterra and Danone had been confidential with a view to reaching a mutually acceptable commercial outcome however some aspects of these discussions have been made public this morning in the press," it said.

"Fonterra confirms that the discussions remain ongoing but strongly denies any legal liability to Danone in relation to the recall," Fonterra said.

Columnist Fran O'Sullivan wrote in today's edition of the NZ Herald that Danone had invoked the dispute mechanism in its multimillion-dollar contract with Fonterra after it met Prime Minister John Key in Paris last week to discuss the NZ firm's refusal to stump up major financial damages over the botulism food scare.

Danone owns the Auckland-based manufacturer Nutricia, maker of the Karicare infant formula brand which took a punishing after the Fonterra scare resulted in some of its key products being subject to a multi-country food recall.

Much of the alleged brand damage occurred in China where many Chinese consumers boycotted New Zealand-sourced infant formula (which had been selling at a premium on supermarket shelves) after the food scare became public, O'Sullivan wrote.

The Karicare brand was strongly affected in New Zealand after former Fonterra executive Gary Romano wrongly said on TV3's Campbell Live that all Karicare brands were potentially affected. This was later corrected to just two specific Karicare lines, but Danone has since argued Romano's statements compounded the damage.

The scare turned out to be the upshot of a false-positive test.

Units in the NZX-listed Fonterra Shareholders Fund last traded at $7.05, up 2c from Tuesday's close.