Manufacturers and exporters of infant milk formula are flummoxed by a decision that stops them putting a synthetic additive into toddler milk - even though it's allowed for babies.
Food Standards Australia New Zealand told the trans-Tasman Ministerial Forum on Food Regulation the additive is safe for all children.
Food Safety Minister Ayesha Verrall agreed but was outvoted by the Australians who approved it only for infant milk.
But the New Zealand industry is warning that means a huge competitive disadvantage.
Oligosaccharides or HMOs occur naturally in breast milk, but infant milk producers can make an identical synthetic version.
They are approved as safe by other jurisdictions including the conservative European Food Safety Authority and have been used in infant formula in 69 countries for about five years. Many of these also allow HMOs in toddler milk.
That's why Friday's decision to approve their use for babies but not toddlers has come as big shock to the industry here.
The Infant Nutrition Council represents manufacturers and marketers. It's chief executive Jan Carey says the decision is a case of policy over science and evidence.
"Food regulation has to be based on the best possible evidence and Food Standards Australia and New Zealand (FSANZ) presented the best possible evidence. They're the experts, they got their decision independently reviewed. They still put forward their recommendation that this be approved for toddler milk drinks, it seems like the government's panel of experts are being ignored," Carey said.
She said the forum's decision to allow HMOs in infant formula, but not toddler milk just doesn't make sense.
"If it's safe for infant formula then it is safe for toddler milk and the decision by the ministers about not including HMOs in toddler milk just completely ignores science and is simply wrong," she said.
Jan Carey says every year New Zealand exports more than a billion dollars of infant formula and powder milk drinks and they are considered premium products.
Not having the HMOs in toddler milk is a huge competitive disadvantage and means companies such as Fonterra, Synlait and Westland Dairy will be forced to get exemptions through a process which requires ministerial sign-off.
Dianne Schumacher is from the industry group the Dairy Companies Association of New Zealand. As its regulatory manager she says exemptions take time.
"Which can cause a lack of market entry and puts us behind with our competitors, we need that process to be as efficient as it can be and we are working with the MPI (Ministry for Primary Industries) to try and help that, but the process will still hinder us getting things to market as quickly as competitors from other regions," she said.
Those competitors are selling into some of New Zealand's major markets including Thailand, Singapore and Malaysia.
This country's biggest market, China is still deciding whether HMOs will be part of its standard for infant and toddler formula.
Schumacher says there some big implications for the 13 companies she represents.
One, they will have to seek exemptions. Two, it is discouraging of innovation. Three, product that is being imported from countries where it is allowed puts us at a delay potentially to get it into the market, we're going to have to do different formulations for different markets," she said.
Carey says the industry will be writing a strongly worded letter to the forum's chair expressing its disappointment, pointing out the trade implications.