* Fonterra says talks on commercial solution dragging on
* Danone says negotiations continue, no further comment
* Danone lost 350 million euros in sales following recall
By Naomi Tajitsu
WELLINGTON/PARIS, Dec 2 New Zealand dairy
exporter Fonterra may face legal action from France's
Danone over the recall of infant formula containing a
potentially contaminated Fonterra ingredient, the company said
In August Fonterra said it had found a potentially fatal
ingredient contained in a range of products sold by a number of
After recalls were issued across nine countries including
China and Malaysia, the food safety scare turned out to be a
false alarm because the ingredient was found to contain a less
Danone is seeking full compensation for what it says were
350 million euros ($476 million) in lost sales following the
recall of its infant formula products in Asia and New Zealand.
The two sides started negotiations in October to try to
resolve the dispute.
"We're still in talks (with Danone)," Fonterra CEO Theo
Spierings told Reuters in a telephone interview. "I put a
commercial proposition on the table at the end of October and I
haven't heard back on that proposition.
"If their counterproposal is commercial, I would of course
entertain a commercial discussion. If their reply is legal, then
we would have a different discussion."
A Danone spokeswoman told Reuters on Monday the group was
"still in talks" with Fonterra and would make no further
In October, Danone said it was taking longer than expected
to recover from the recall of high-margin infant formula and cut
its sales, profitability and free cash flow goals for 2013.
Baby food accounts for 20 percent of Danone's revenue,
second only to its dairy business, and Asia, notably China, is a
key growth market for the group at a time of sluggish demand in
At an annual meeting of Fonterra's shareholder fund on
Monday, the co-operative said negotiations with Danone were
"In Danone's case ... we have worked on a commercial
solution for months," Spierings said. "That appears to be a
route that is not working out."
Fonterra has earmarked NZ$14 million ($11.4 million) to deal
with recall-related issues and Spierings said that the funds
have yet to be tapped.
Commercial agreements with six of the eight firms affected
by the recall have been reached and Spierings said he was "very,
very close" to reaching a commercial solution with an affected
U.S. company Abbott Laboratories recalled its infant
formula products containing the questionable ingredient in China
and Vietnam and the company said it took a $90 million hit in
lost sales in the third quarter and expected sales would suffer
into the first half of 2014.
Other companies affected by the recall include Coca-Cola
China, Chinese beverage maker Wahaha, as well as animal feed and
nutritional products manufacturers in Australia and New Zealand.