Fonterra, dairy industry giant and also New Zealand's largest company, has been in the news of late, for all the wrong reasons. Fonterra processes raw milk and exports 97% the resultant products for further processing and consumption in countries around the world.
The cause of the recent events was a suspicious product test, which raised the possibility that the bacteria that can lead to botulism was present in a 38-tonne batch of whey product manufactured in early 2012. The whey product is used in the manufacture of infant milk formula, and botulism can be fatal. Understandably, the event became front page news, with flow-on ramifications in political, economic and tourism circles, very quickly.
At this point, I want to acknowledge that mistakes, unexpected events and crises happen. This is a fact of life. The test of one's mettle comes in the response.
On the surface, it would appear that Fonterra has failed to manage the crisis well, despite an exemplar case being widely available. In 1982, packets of the then market-dominant Tylenol product were laced with cyanide. Seven people died from unknowingly consuming poisoned capsules. Johnson & Johnson's response to the crisis was exemplary. They immediately withdrew every box of Tylenol from sale, established a 1-800 helpline and actively sought media coverage. While Johnson & Johnson took a short-term hit, they emerged stronger than before. Compare that with delays in reporting the possibility of the problem to the authorities, and seemingly poorly briefed representatives at press briefings. And where was the Chairman?
No doubt a review (or, more probably, several reviews) will be conducted to discover how the problem occurred; why it was not discovered earlier; what processing, communications, information sharing and other processes failed; and how the whole affair was managed. I hope that, in the process, someone thinks to look to other similar cases—like the Johnson and Johnson one—and to learn from them!
Thoughts on corporate governance, strategy and effective board practice; our place in the world; and, other things that catch my attention.