Danone is said to be seeking at least $289 million in compensation from Fonterra after recalling its milk formula in August as a result of the recent Botulism scare.
The figure far exceeds the NZ$14 million ($12.3 million) provision made by Fonterra for the recall. This week, the NZ dairy giant said in a statement that it “strongly denies” any legal liability to Danone in relation to the recall.
However, Danone has said the immediate costs of the recall was 200 million euros ($289 million). The company recalled its milk formula products in New Zealand, Singapore, Malaysia, China, Hong Kong, Vietnam, Cambodia and Thailand, on the back of the contamination scare, which later turned out to be a false alarm.
According to Danone, the recalls had a significant impact on sales of its Baby Nutrition division's sales in Asia, and it said it had also incurred non-current costs to cover recall procedures and efforts to boost sales.
“The division's third-quarter sales will be down, but despite this, our group is on track to deliver organic growth of around five per cent this quarter. We are deploying action plans to restore sales in affected markets. Their success will enable Danone to meet its growth and margin targets for 2013,” Danone's CFO, Pierre-André Térisse, Chief Financial Officer, said this week.
“Danone is currently reviewing its recourse and compensation options,” the company said.
Earlier this week, Fonterra also confirmed it was in a dispute resolution process with Danone.
“The discussions between Fonterra and Danone had been confidential with a view to reaching a mutually acceptable commercial outcome, however some aspects of these discussions have been made public this morning in the press.”
“Fonterra confirms that the discussions remain ongoing but strongly denies any legal liability to Danone in relation to the recall,” the company said.
Danone has said the immediate costs of the baby formula recall in August was 200 million euros ($289 million).
