29 September 2008
Does Fonterra deserve its Sanlu punishment?
Fonterra is facing a major crisis over the way it and Sanlu, which it 43% owns, handled the recall of Sanlu's infant formula contaminated with the toxic protein-boosting agent melamine.
Some highly emotional criticism has been fired in
Fonterra's direction, as might be expected given the nature of the crisis. The
human implications of contaminating infant formula on such a scale are
Given these realities WHAM believes the biggest mistake
that Fonterra has made was to get involved in Sanlu in the way it did. A 43%
shareholding in a Chinese food manufacturer inevitably had more downside than
upside for Fonterra.
What a price to pay. Putting your brand – your most
important asset – at risk in return for getting market knowledge that could
have been achieved in many other, less risky, ways. If Fonterra was going to
buy into Sanlu, its shareholding should have either been below 10% or been
large enough to give it day-to-day control.
- Trevor Walton