* Fonterra disputes accusations of tainted products
* Suspension follows Sri Lanka protests against Fonterra
* Analyst: Backlash in Sri Lanka driven by 'industry
By Naomi Tajitsu and Shihar Aneez
WELLINGTON/COLOMBO, Aug 23 New Zealand dairy
giant Fonterra Co-operative said on Friday it had
suspended operations in Sri Lanka after the world's largest
dairy exporter faced product bans, court cases and angry
demonstrators over its milk products in the country.
Earlier this week, it was banned by a Sri Lankan court from
selling or advertising its products after the country's food
safety authorities said they found high levels of the
agricultural chemical dicyandiamide (DCD) in two batches of milk
powder it tested. Fonterra vigorously disputes the finding.
Four of Fonterra's top officials have since been charged
with contempt of court for failing to adhere to the bans, while
a Sri Lanka state institute said it would test all milk powder
in the market.
The debate triggered an angry demonstration on Thursday.
More than 100 members of a hardline nationalist party in
President Mahinda Rajipaksa's ruling coalition gathered outside
Fonterra's regional offices near Colombo to demand a ban on the
company's products in the country as riot police looked on.
"The temporary suspension is the right thing to do. It is a
precautionary measure to ensure our 755 people working there are
safe," Chief Executive Theo Spierings said in a statement.
"Recent events, however, have made it difficult to maintain
day-to-day operations, and we need to get them resolved."
Speaking to Radio New Zealand, he added that it was unclear
when operations would resume in the country.
"We need to have a talk about the situation," Spierings
said. "We need to be seen as a sustainable partner in the
country, we need to have those discussions before we continue
Fonterra's critics in Sri Lanka on Friday said the protests
were prompted by the company's disregard for legal rulings.
"We did not request Fonterra to close down. What we wanted
is to make sure that Sri Lankan people, mainly the children, do
not get DCD contaminated milk," said Saman Rathnapriya, a leader
of the National Health Services Union, the main petitioner for
the ban on the company's products.
"The public protest could have been prevented if Fonterra
had acted according to the court ruling and stopped its
distribution and misleading publicity."
The action in Sri Lanka follows a global food scare after
Fonterra said that some of its products could contain a bacteria
that can cause botulism. Its products have been removed from
shelves in around nine countries, including China, while other
countries have restricted imports.
Shares in Fonterra's tradeable investment fund closed 0.43
percent lower on Friday.
Fonterra has had a presence in Sri Lanka for around 50
years, and its Anchor brand commands a 65 percent market share
of the country's milk powder industry.
In New Zealand, Sri Lanka's actions are widely seen as a
move to pressure Fonterra and promote local dairy farmers.
"There clearly are industry politics going on over there,"
said Keith Woodford, professor of Farm Management and
Agribusiness at Lincoln University. "There's no doubt that Sri
Lanka wishes to have its own dairy industry."
Sri Lanka is a top-10 importer of New Zealand dairy
products, with roughly $196 million of the country's total milk
powder imports of around $300 million coming from New Zealand
last year. The majority is supplied by Fonterra.
Milk powder exports to Sri Lanka account for roughly 2
percent of New Zealand's overall dairy exports.
Sri Lanka has been trying to promote consumption of local
fresh milk to stem capital flows out of the country and increase
the viability of domestic farmers.