Fonterra CEO Theo Spierings discusses how he managed the latest food-safety scare and the dairy exporter’s plans to rebuild consumer confidence

September 29, 2013, 12:43 p.m. ET

Fonterra Aims to Rebuild Consumer Confidence

CEO Theo Spierings discusses how he managed the latest food-safety scare and the dairy exporter’s plans to rebuild consumer confidence.



When Theo Spierings’s phone rang on Aug. 1, he knew it must be bad news. The chief executive of Fonterra Cooperative Group Ltd., the world’s biggest dairy exporter, was in Europe to attend a family funeral, and he didn’t expect to be disturbed. But the message passed to him from the company’s headquarters in New Zealand couldn’t wait: Bacteria had been discovered in some of the company’s milk products. So began a chain of events that sparked a global recall of some Fonterra products, hurt trade ties with China, and caused New Zealand’s currency to fall sharply against the U.S. dollar. It also created tensions between Fonterra and New Zealand’s government, which wants to know how much the cooperative knew about the food-safety issue, and when. Dairy sales overseas account for a quarter of exports from New Zealand, nicknamed the Saudi Arabia of milk. Fonterra—a cooperative of 10,500 individual farmers—is among the nation’s most profitable organizations. Netherlands-born Mr. Spierings has led the cooperative’s efforts to repair its reputation over the past two months, including making a public apology in China, a major buyer of its milk products.Rebuilding consumer confidence will take time. The latest scare was the third quality issue with Fonterra products in recent years. The cooperative owned a stake in a company involved in the 2008 melamine scandal in China in which six babies died and 300,000 were sickened. Earlier this year, management acknowledged finding traces of the chemical dicyandiamide, or DCD, in its milk powder.

Mr. Spierings recently spoke with The Wall Street Journal at Fonterra’s Auckland office about how he managed the latest food-safety scare and how the company plans to repair its image and rebuild consumer confidence.

Edited excerpts:

WSJ: What were your first thoughts when the botulism scare arose?

Mr. Spierings: I am a food technologist, my first career before going into business. So when I heard the news, my first thought was: “How is this possible?” Botulism doesn’t normally happen [in milk] so it was very, very strange, particularly in this part of the world.

But I thought when you have that test result, with that conclusion, you have nowhere to go.

I got the information at two minutes to midnight or maybe even one minute past midnight and if you have that information on the table you have to act. I knew it was going to be very painful. I knew there wasn’t a massive risk out there, but there was a risk and I had to do something, so I did.

WSJ: What immediate action did you take?

Mr. Spierings: The first thing I did was ask what products are affected, which customers, which geographies, and I needed that information very fast. We got that first-line information although it kept moving a bit because the products are difficult to trace. Straight after, when we had the overview we engaged with New Zealand’s Ministry of Primary Industries, with the board, with the whole government. We immediately decided it was a New Zealand milk issue, so Gary Romano [the former managing director of New Zealand Milk Products, Fonterra’s local division] would front for it here and I would go to China. Those decisions were made straight away.

WSJ: If it happened again, today, what would you do differently?

Mr. Spierings: When I went to the press conference in Beijing I was told there would be 35 people at most. There were 150 people; it was a global event. If I had to do it again I would have lifted it from a New Zealand milk crisis to a Fonterra crisis, and I would really make decisions around who is leading the crisis and who is facing the media.

WSJ: How do you feel that Fonterra’s image has been affected?

Mr. Spierings: When there is this kind of food-safety scare there is always anxiety. Our name has been around different issues—although in the melamine scandal we were the whistleblowers and DCD was not a food-safety issue. That doesn’t help angst with consumers. So we really have to rebuild our reputation. Our customers still have a big belief in us, especially in China and Asia.

Governments say, “You blew the whistle on yourself, and you have been very tough on yourself.” We have received a lot of praise from them. Still, there’s an impact out there among consumers, and that is going to take time.

WSJ: What are you doing to repair your relationship with consumers?

Mr. Spierings: We have a plan to rebuild our reputation, which has five different platforms. One is really how do we become the NASA of food safety and quality in the world, and I really think we have the technology and the integrated model to deliver on that. We have to be seen as trusted at home. Consumers will only be convinced if they see we are praised at home, welcomed by the government. We must be approachable, visible, available. We need to improve our traceability. Those kinds of things will rebuild confidence.

WSJ: What are you doing to ensure this doesn’t happen again?

Mr. Spierings: People have asked me—can you guarantee that it will never happen again? I can’t. Food-safety risk is unfortunately out there and that’s why in all our systems we have a recall procedure. Big companies in the world do a recall once a week and you don’t hear a lot about that.

WSJ: China is core to your future plans. Why?

Mr. Spierings: Fonterra has the No. 1 or No. 2 position in food service and consumer brand business in five or six markets in the world, but those are the countries with smaller populations. We need to focus on limited geographies where there are a lot of new consumers like Indonesia, China and possibly Brazil. China offers a huge opportunity in digital, e-commerce, in new routes to markets. There is no other market in the world that is so big and where the top three players have less than 20% market share. There is a massive opportunity.

WSJ: What do you like best about your job and what are the main challenges?

Mr. Spierings: Let’s start with the good news. What I really like best about the job is that this is a cooperative with endless possibilities. We have the framework around milk pools, assets and markets around the world and customers to be a true global champion.

What is sometimes a challenge for me is that Fonterra is so big, in a New Zealand context, that we carry a lot of weight on our shoulders for the country, for the dairy sector, and I’m not sure that it’s always appreciated. That may be an understatement.

Write to Rebecca Howard at


Education: Bachelor of Arts in Food Technology/Biotechnology; Master’s in Business Administration.

Career: Joined Fonterra in 2011; has a 25-year history in the global dairy industry and has held a variety of general management, operations and supply chain, and sales and marketing positions in multiple countries.

Extracurricular: Sailing

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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