Dive Brief:
- China has issued long-awaited updates to its food safety laws following last year's recall of infant formula. Fonterra is one of five New Zealand companies approved for formula sales to China.
- In August of last year, Fonterra issued a warning that some of its products contained a potentially fatal ingredient. Panic and a global recall began. Eventually Fonterra said it had been mistaken and that no danger existed.
- Caught up in the recall nightmare was Dannone, which used Fonterra dairy ingredients in formula it sold throughout Asia. Dannone, which terminated its contracts with Fonterra and filed a lawsuit, announced yesterday that it is buying New Zealand dairy factories of its own from two companies: Gardians and Sutton Group.
Dive Insight:
In New Zealand, they call China's insatiable appetite for infant formula the "white gold rush." There's an extraordinary amount of money involved. And, as the false-alarm recall taught, there are as many risks in the market as there are rewards.
Dannone's decision to buy its own suppliers in New Zealand is probably a wise one. The company needs to lock down supplies as the white gold rush consumes dairy from the island nation.
And Fonterra's victory in the battle to win approval to ship to China was much-needed. With a damaged reputation and Dannone's $300 million lawsuit hanging over it, there was no chance the company could survive without sales to China.
Today's developments mean that Dannone and Fonterra may both be able to put the scandal behind them.