- Danone says it has terminated its contracts with Fonterra and plans to sue the New Zealand dairy exporter. The French food company says it will seek at least $300 million in damages.
- At issue is the bizarre incident in August in which Fonterra warned customers that a potentially fatal ingredient had been found in its products. Food recalls were issued in nine countries before Fonterra announced that it had made a mistake and that there was no danger.
- Among those caught in the false-alarm recalls was Danone, which pulled its baby formula from shelves in Asia. The company has since said the move resulted in a loss of at least $476 million in sales and untold damage to its reputation.
This lawsuit was inevitable. So was Danone's decision to terminate its business dealings with Fonterra. The only unanswered question here is whether or not Fonterra can survive.
The companies have been involved in negotiations over compensation for months. And that fact that no settlement was reached cannot bode well for Fonterra.