Cover up claims distort product safety issue

Every issue manager knows that perception IS reality. But that seems to have been a hard-learned lesson for New Zealand dairy giant Fonterra.

When minute traces of an agricultural chemical were found in its milk powder the company stressed that it was not a health concern.

And when it was revealed that the company knew about the problem months before it became public, Fonterra argued it was “not material.” Furthermore, they argued the timing had nothing to do with the allegation that the disclosure was supposedly withheld until after a major stock market placement of Fonterra shares.

Sadly, in issue management, simply stating and then repeating your own version of the facts is rarely enough. Perception trumps reality every time, and in China – a major market for New Zealand milk powder – there was reported renewed panic among housewives still spooked by the melamine in baby formula scandal of 2008. As a result, New Zealand’s Ambassador in China had to offer a “fulsome apology” to Chinese consumers for any “confusion” caused.

Coincidentally, Fonterra was a partner in the Chinese company at the forefront of the earlier melamine disaster. But were the two contamination cases legitimately comparable? Absolutely not.

New Zealand-produced milk powder was found to contain traces of the chemical dicyandiamide (DCD), which was applied on a small number of dairy farms to improve soil nutrients. Fonterra said the level detected was 100 times less than the European health standard, and government experts agreed (although its use was subsequently suspended). No-one was injured and no product was recalled.

By contrast, milk supplied to the Chinese company Sanlu in 2008 by local contractors was deliberately spiked with the industrial chemical melamine to increase the apparent protein level. Six babies died from kidney failure, up to 300,000 became sick, two managers were sentenced to death, other people were imprisoned, and Sanlu was promptly declared bankrupt.

While the two cases were in no way comparable, they were repeatedly linked in the media, and allegations of cover up provided a convenient common thread. In the Sanlu case, it is widely believed the melamine scandal was deliberately hushed up to avoid embarrassing the Chinese Government just before the Beijing Olympics and that Chinese journalists went along with the deception.

There was no such journalistic complicity in New Zealand, where allegations of cover up seemed unstoppable, fuelled by various stakeholders eagerly pointing the finger of blame at each other. Widespread adverse reports carried headlines such as “The big cover up? The DCD residue debacle” (Dominion Post); Fonterra’s delayed disclosure at issue” (Fairfax Media); “Another food scare, another crisis” (NZ Herald); “DCD safe, but Fonterra botched the optics” (Timaru Herald).

The media commentary was consistent across the country. Namely, Fonterra may have been right about the scientific facts . . . but it badly mishandled the public relations. American newsman Steve Hayworth once memorably said: “People will forgive a screw up, but they will never forgive a cover up.” He might have added that it doesn’t seem to matter whether the alleged cover up is real or simply perceived.

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About managingoutcomes

Issue and crisis management expert
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