“Product has been put on hold, isolated or never left the warehouse,” he told the Auckland Federated Farmers annual meeting in early May.
“These types of quality issues are a fact of life for any food company dealing with a fresh product.”
Auckland Federated Farmers president, Wendy Clark, said the precautionary approach was commendable, but she wanted to know how the botulinum scare blew up.
“It was a Swiss cheese effect where all the holes lined up,” Spaans said.
“It took time to trace all of the product within our customers’ supply chains and there were a whole range of things which added up to an unfortunate event.”
It had been a very big wake up call with progress made on the recommendations made in the independent review of the incident and a risk committee as well as an incident management team now set up.
There had also been a change in the way people looked at food safety and quality in Fonterra, Spaans said.
“We simply can’t have another food scare like WPC80.”
Auckland Federated Farmers Dairy chairman Phillip Bell said he was disappointed at the handling of the scare and believed Fonterra had been remiss in its face-to-face discussions with shareholders.
“It should have taken them into its confidence more,” he said.
Spaans said he was not a director at the time but was getting emails twice a day from chairman John Wilson, so felt well informed.
“It was a management issue which the chief executive had to front, not a governance issue,” he said.
While Theo Spierings had been overseas manufacturing general manager, Gary Romano, was in the country and able to speak to farmers and the media.
In answer to a question from Federated Farmers Dairy vice-chairman Kevin Robinson about competition for milk, Spaans said Fonterra would be chasing milk supply in the 2014-15 season.
“We’re going to put the story out that we’re better than we’ve been in the past and compete for milk,” he said.
The benefits of being a Fonterra shareholder would be emphasised to ensure the co-op retained its present shareholders as well.
“We’ve always put investment in to take all milk so you will see us competing to retain and grow supply.”
The 2013-14 season’s flush was 10% above the previous season’s, well above the 5% headroom allowed for in Fonterra processing facilities which led to milk being trucked to the South Island. The co-op had a number of capital investment projects planned to increase its milk processing capacity across its current asset base in both the North and South Islands, including a milk concentration plant that will help to increase milk transfer from the North Island to the South Island.
“We’re trying to get ahead of the milk curve and that’s why investment that’s been planned for three to five years out has been brought forward.”
That would mean milk could be made into powder or cheese depending on demand. The most efficient products to make in New Zealand were powders while it made more sense to produce cheese in Australia, using whey streams for infant formula manufacturing.
Since Fonterra was formed it had spent $1.8 billion on stainless steel with 24% of this processing capacity wholemilk powder-capable, double what it used to be.
“The industry has doubled in size over that time,” he said.
“Whole milk powder and foodservice are the fast growing categories and we’re increasingly capturing high returns in nutrition in China and South East Asia.”
Fonterra would look to roll its brands out into Asia and the Middle East but at present there was just 5% growth in milk products in Asia compared with 15% in China.
“It’s a wonderful time to be a dairy farmer,” he said.
“Global demand is high and supply has been limited.”
Research showed that once families earned US$5000-$10,000 a year they started spending more on food. By 2025, 4.2 billion people would be earning that much and spending a greater proportion of their income on food with protein making up an increasing part of their diet.
