By Lucy Craymer
WELLINGTON--Fonterra Co-Operative Group (FCG.NZ) Thursday
confirmed that Danone SA (BN.FR) has formally begun legal action
against the company following a recall of baby-milk products by the
New Zealand dairy giant last year.
"Fonterra will now work through the detail of Danone's claims.
It continues to be confident in its position and will vigorously
defend any proceedings," Fonterra said in a short statement to the
New Zealand stock exchange.
Fonterra added that it had been in ongoing commercial
discussions with Danone and was disappointed it had resulted in
legal action.
Danone said earlier it would stop working with the supplier
unless it can secure better food-safety guarantees, and that it is
taking legal action via an international arbitration panel in
Singapore and a high court in New Zealand after failing to reach a
compensation agreement with Fonterra.
"Fonterra stands by its track record of having world-class food
safety and quality standards, quality systems, and robust testing
regimes across all its manufacturing facilities," the dairy giant
responded.
The claims relate to a food-safety scare--ultimately a false
alarm--that triggered a global recall of hundreds of thousands of
cans of baby formula across Asia. Danone was hit hard by the scare
as it relied heavily on Fonterra for the supply of baby formula in
the rapidly growing and highly profitable Chinese market. It wants
Fonterra to compensate for a large portion of lost market share and
sales, which it estimated at EUR350 million ($475.4 million).
Write to Lucy Craymer at lucy.craymer@wsj.com
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