26 Aug 2013

Fonterra's Sri Lankan operations still on hold

7:19 am on 26 August 2013

Fonterra says the situation in Sri Lanka is still not stable enough for the company to resume its operations.

A court-ordered ban on the sale and advertising of Fonterra products was lifted on Saturday. The ban had been imposed after claims the agricultural chemical dicyandiamide (DCD) was reported to have been detected in milk powder.

Fonterra suspended its operations in Sri Lanka last week and stood down its 750 staff there until further notice after a nationalist group protested outside one of its plants about the alleged contamination.

Sri Lankan consul to New Zealand Aruna Abeygoonesekera says the court could not find sufficient evidence that Fonterra has mislead consumers.

Fonterra Brands managing director Leon Clement says the company has absolute confidence in its products and is pleased the court has lifted the ban.

He says Fonterra is working with Sri Lankan and New Zealand authorities on a long-term proposal to support its Sri Lankan customers and the dairy industry there.

Mr Abeygoonesekera says Fonterra will find it difficult to regain the trust of Sri Lankans and restore consumer confidence.

He says Fonterra should be able to resume operations in Sri Lanka soon but will have to get more involved in the industry there if it's to mend the damage done to its brand.

"They need to get more involved with the milk producing industry in Sri Lanka and actually amend their business model," he says.

Mr Abeygoonesekera says that means passing on expert knowledge to the Sri Lankan dairy industry.

He says Sri Lankan consumers are very clear that they will not accept milk powder containing any DCD and Fonterra should have listened to their concerns.

In April, Fonterra's global ambassador and All Black captain Richie McCaw visited the country.

Richie McCaw said at the time that the two day visit made him realise how big Fonterra and the Anchor brand are in the region, with Anchor advertising signs everywhere.

He said the farmers and children he met on the trip told him Fonterra was a big part of their lives, with its farmer development initiatives and its 35 year history in the country.