Three batches of whey protein concentrate, totaling 38 metric tons, tested positive for Clostridium botulinum, the company said. The bacterium can cause botulism, a rare and sometimes fatal illness. Fonterra, one of the world’s largest dairy exporters, said eight customers had been affected, in New Zealand, Australia, China, Vietnam, Thailand, Malaysia and Saudi Arabia.

Fonterra said Monday that the contamination had been traced to a pipe that had not been properly cleaned in one of its New Zealand processing plants. Executives stressed that the source of the problem had been fixed.

The company’s chief executive, Theo Spierings, flew to Beijing for a news conference to address the issue.

“We deeply apologize to the people who have been affected by the issue,” Mr. Spierings said at the conference, which was broadcast by the Reuters news agency.

China and Vietnam stopped some dairy imports from New Zealand in response to the contamination scare, but the company said they had not issued blanket bans. Fonterra said China had banned products made in Australia using Fonterra’s whey protein, which had been produced in New Zealand, but had not banned any Australian whey protein.

The Ministry for Primary Industries “has confirmed that China has not closed the market to New Zealand dairy products and that China is being quite specific about the range of Fonterra products which it has temporarily suspended,” Fonterra’s New Zealand milk products managing director, Gary Romano, said Monday in a statement to the New Zealand stock market.

“Whole milk powder and skim milk powder have not been suspended,” he added.

The RIA Novosti news agency in Russia reported that Russia had banned imports of all Fonterra products, even though it was not on the list of affected countries.

The affected batches of whey protein were produced in May 2012, but the company said the first signs of contamination had not been spotted until March, when the product was tested in Australia. The specific strain was not identified until July 31. Fonterra executives have been questioned in New Zealand and China about why it took so long to identify the problem and alert consumers.

Fonterra said more than half of the affected product had gone to three companies: Coca-Cola, the Chinese beverage giant Wahaha and the New Zealand health food company Vitaco. It said processing methods at those companies had eliminated any danger from the bacteria.

But the main concerns focused on infant formula. Many Chinese consumers prefer to buy imported products because of concerns about the safety of domestic brands.

Nearly 90 percent of China’s $1.9 billion worth of milk powder imports last year originated in New Zealand, Reuters reported.

In 2008, the Chinese dairy company Sanlu and 21 others were found to have added the toxic chemical melamine to bulk up formulas. Six children died and thousands were sickened as a result. Fonterra owned part of Sanlu at the time.

“We totally understand that there’s concern of parents and other consumers around the world,” Mr. Spierings said at the news conference. “Parents have the right to know that infant nutrition and other dairy-related products is 100 percent safe.”

The New Zealand prime minister, John Key, said the government shared that concern. “We’re talking about the potential health implications for babies, and that’s something the government takes extremely seriously,” he told reporters at a news conference Monday.

According to a report by Rabobank, Fonterra is the fourth-largest dairy company by revenue, with $15.7 billion in revenue in 2012, behind Nestlé, Danone and Lactalis.

In New Zealand, the dairy industry accounts for about 11.5 billion New Zealand dollars, or about $9 billion, in export earnings, according to a research note by the bank ASB. That amounts to about a quarter of the country’s total goods exports.

The research note also said that the contamination scare would probably cause the country some short-term reputational damage but that it was too early to predict any longer-term effects.

“It would be naïve to think we’re going to get away without a bloody nose, but let’s hope the damage is limited to that,” New Zealand’s trade minister, Tim Groser, said at a news conference. The economic development minister, Steven Joyce, flew to Auckland on Monday to meet with senior members of Fonterra’s management.

The contamination is the third controversy that the company has faced in the past six years.

First there was the melamine scandal involving Sanlu. Then, early this year, it was disclosed Fonterra had discovered that residues of the agricultural chemical dicyandiamide in some of its whole milk powder, skim milk powder and buttermilk powder in September 2012. Although the company said the risks were minimal, use of the chemical on farmland was suspended.

Fonterra is a farmers’ cooperative and is not publicly listed, but it trades nonvoting units as shares on the New Zealand and Australian stock markets. On Monday, the shares opened down about 8 percent on the New Zealand exchange but went on to regain some of their value and closed at 6.86 dollars, a drop of 3.65 percent.

The New Zealand dollar also fell by about a cent to 0.7740 U.S. cent in early trading, before regaining some ground.

In Shanghai, China Modern Dairy shares rose 7.6 percent, while Biostime, which imports the bulk of its dairy products from Europe, surged 8.6 percent, Reuters reported. But Want Want China, which obtains most of its raw milk from Fonterra, fell 3.2 percent.

Article source: http://www.nytimes.com/2013/08/06/business/global/new-zealand-dairy-giant-apologizes-over-tainted-formula.html?partner=rss&emc=rss