WELLINGTON, Dec 9 (Reuters) - A New Zealand inquiry into a food safety scare involving the Fonterra dairy co-operative has found that both the government and the world's largest dairy exporter were unprepared to deal with a 2013 global recall which turned out to be a false alarm.
The government released on Tuesday the results of its final inquiry into an incident in August 2013 when Fonterra announced that some of its whey protein concentrate, an ingredient used in food and beverage products, may be contaminated with a botulism-causing toxin.
This sparked a recall of millions of infant formula, sports drinks and other products manufactured by French food giant Danone and other major global food, beverage and pharmaceutical firms from supermarket shelves across Asia and in the Middle East.
While the contamination was eventually found to be non-toxic, the incident shook confidence in New Zealand's reputation as a source of clean, safe food products and highlighted the South Pacific nation's dependence on its agricultural exports.
Independent contributors to the report said that Fonterra, a farmer-owned co-operative, and the government lacked the procedures and co-ordination to deal with the incident.
"The dairy company at the epicentre of this crisis, Fonterra, was not ready for a crisis of this magnitude," Professor Alan Reilly, chief executive of Ireland's food safety authority said in his report.
He said that in focusing on production and market share, the company "placed the nurturing of a genuine food safety culture in the company on the back-burner.
"By reworking, rather than downgrading, the contaminated WPC80, Fonterra recovered about $150,000. The cost to the company and the reputational damage for New Zealand magnified this figure many times over."
Fonterra said the report reaffirmed many of the findings in its own review conducted last year, and defended its actions taken to deal with the recall.
"At the time of the recall, we did what was right based on the evidence we had," CEO Theo Spierings said in a statement.
He added that Tuesday's report "highlights once again that New Zealand's dairy food production and safety systems are as safe as any in the world."
The recall was most widespread in China, a major dairy importer since a fatal infant formula poisoning scandal in 2008, and raised concerns about supply security which ramped up volatility in global dairy prices at the time.
Danone is suing Fonterra for full compensation for what it has said was 350 million euros ($431.20 million) in lost sales following the recall, and has stopped buying products from the New Zealand firm.
The inquiry noted that Fonterra had improved its food safety and quality and crisis management procedures, while recommending better co-ordination between industry and the government to plan and manage their crisis response, including disclosing information to customers.
"The law should be amended to give the ministry a specific statutory power to compel disclosure of relevant information needed to respond effectively to a food safety incident," it said.
"The power should include the ability to disclose such information to any affected party." ($1 = 0.8117 euros) (Reporting by Naomi Tajitsu; Editing by Susan Fenton)