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Wellington - French food group Danone says it will sue wholesale dairy exporter Fonterra and stop buying products from the New Zealand firm following a contamination scare that sparked the recall of infant milk formula across Asia.
The world's largest yoghurt maker did not say how much money it was seeking, but it has previously said it wanted full compensation for what it says were €350m in lost sales following the recall of the company's Dumex and Karicare infant formula products.
Danone buys a range of dairy ingredients from Fonterra, but is one of its biggest customers for milk powder, according to analysts who cover the sector.
Fonterra, which said it would contest the suit "vigorously", declined to give details on its sales to the French firm.
Fatal ingredient
Danone has said that Fonterra supplied about 16% of the milk ingredients for its baby food business, which accounts for 20% of its total revenue.
Fonterra said in August that it had found a potentially fatal ingredient in a range of products sold by multinational companies.
After recalls were issued across nine countries, including China, the scare turned out to be a false alarm because the ingredient was found to contain less harmful bacteria.
Danone said it was starting proceedings in the New Zealand high court against the world's largest dairy processor, as well as arbitration proceedings in Singapore to bring all facts to light and obtain compensation.
The company said it was also terminating its supply contract with Fonterra and would make any further collaboration contingent on a commitment by Fonterra to full transparency and compliance with Danone's food safety procedures.
Consumer demand
"This affair illustrates serious failings on Fonterra's part in applying the quality standards required in the food industry," Danone said.
Danone has a cushion, analyst say, since the sudden, sharp drop in consumer demand means there is a large amount of product that still needs to be sold.
Fonterra, a farmer-owned co-operative, has denied any legal liability to Danone regarding the recall.
"Fonterra has been in ongoing commercial discussions with Danone and is disappointed that they have resulted in legal action," the company said in a statement.
Shares in Fonterra's trading fund closed down 1.7%, while Danone shares were down 0.7%.
The world's largest yoghurt maker did not say how much money it was seeking, but it has previously said it wanted full compensation for what it says were €350m in lost sales following the recall of the company's Dumex and Karicare infant formula products.
Danone buys a range of dairy ingredients from Fonterra, but is one of its biggest customers for milk powder, according to analysts who cover the sector.
Fonterra, which said it would contest the suit "vigorously", declined to give details on its sales to the French firm.
Fatal ingredient
Danone has said that Fonterra supplied about 16% of the milk ingredients for its baby food business, which accounts for 20% of its total revenue.
Fonterra said in August that it had found a potentially fatal ingredient in a range of products sold by multinational companies.
After recalls were issued across nine countries, including China, the scare turned out to be a false alarm because the ingredient was found to contain less harmful bacteria.
Danone said it was starting proceedings in the New Zealand high court against the world's largest dairy processor, as well as arbitration proceedings in Singapore to bring all facts to light and obtain compensation.
The company said it was also terminating its supply contract with Fonterra and would make any further collaboration contingent on a commitment by Fonterra to full transparency and compliance with Danone's food safety procedures.
Consumer demand
"This affair illustrates serious failings on Fonterra's part in applying the quality standards required in the food industry," Danone said.
Danone has a cushion, analyst say, since the sudden, sharp drop in consumer demand means there is a large amount of product that still needs to be sold.
Fonterra, a farmer-owned co-operative, has denied any legal liability to Danone regarding the recall.
"Fonterra has been in ongoing commercial discussions with Danone and is disappointed that they have resulted in legal action," the company said in a statement.
Shares in Fonterra's trading fund closed down 1.7%, while Danone shares were down 0.7%.
