Fonterra crisis dents NZ’s ‘100% Pure’ image

Fonterra’s association with melamine contamination in baby formula - which claimed lives in China - has dogged the company. AAP

Although Fonterra has tracked down the contaminated whey protein used in some varieties of infant milk formula, and batches of affected products exported to countries such as China have been pulled off supermarket shelves, the long-term ramifications for New Zealand’s image as a safe producer of food and beverages could be severe.

The incident is the third food quality problem to have hit New Zealand’s largest business venture, and the world’s largest exporter of dairy products, in the past five years. In 2008 a jointly-owned company in China was implicated in a melamine contamination scandal which resulted in nearly 300,000 infants becoming ill and six dying. In January this year dairy farmers had to stop spraying the anti-water pollution chemical dicyanimide onto pastures after traces were found in New Zealand milk.

In recent months meat exports to China have been held up twice because of certification errors and Zespri, the country’s largest kiwifruit exporter, was implicated in a scam to avoid paying full Chinese import duties.

A study, which some of my colleagues co-authored, casts some light on why mistakes by food and beverage exporters could have wider ramifications for New Zealand’s broader image. The researchers discovered that imported milk brands that were perceived to have closer business relationships to the guilty domestic brand implicated in the Chinese melamine scandal in 2008 were more likely to be considered by consumers to be guilty by association than more distant brands.

If one extrapolates this finding to a wider country context, then guilt by association could influence overseas consumers’ perceptions of New Zealand’s clean and green image. The possible impact would have to be assessed through market research, but one could hypothesise that the level of negativity is likely to be related to how closely overseas customers and visitors associate problematic New Zealand food and beverage exporters’ actions with other aspects of the country’s image, such as the “100% Pure” branding campaign designed to attract tourists.

The study also produced insights into the psychology behind negative brand perceptions. Consumers initially react to quality problems with spontaneous judgements or heuristics based on emotion and experience. Longer term, these emotional responses might be tempered by more deliberate and rational analysis of the situation. If the situation stabilises, the threat is neutralised and the guilty firm appears to take corrective action, then consumers might forgive a transgression and resume buying the affected brand. This implies that the severe dent to New Zealand’s clean-and-green image might also recover, but is likely to take a long time.

The latter point also resonates with public relations and marketing research into corporate reputation and crisis management. For example, a study into the recall of infected non-pasteurised cheese in Quebec highlighted the need for firms to develop crisis management procedures that emphasise prevention, preparedness and recovery. The latter requires immediate response to failures and disasters, compensation for affected consumers, and on-going communications to assure stakeholders that the guilty firms can be trusted to act responsibly in the future. In other words, as I wrote in an article with Sabrina Helm, reputation is based on anticipated future conduct.

The question in the current crisis is whether the New Zealand government, companies and industry groups can commit to long-term reductions in water pollution and other food safety hazards and ongoing communications to repair damaged corporate and country reputations.