Baby formula manufacturer Nutricia says it is considering cutting jobs in New Zealand and Australia as a consequence of the Fonterra botulism scare.
Nutricia's parent company, the international food giant Danone, is seeking at least $328 million in compensation from Fonterra after having to recall a large amount of its milk products due to the contamination alert that proved false.
Nutricia was forced to recall infant formula, including 67,000 cans in New Zealand alone, after Fonterra incorrectly warned it could be contaminated with a potentially fatal bacteria in August this year.
Later tests showed that the products were not tainted with the bacterium that could cause botulism, and the scare sparked three big investigations and a major Government overhaul.
Nutricia said on Wednesday it has indications that confidence and trust of consumers in New Zealand is recovering since the contamination scare, but overseas demand has been slow to respond.
As a consequence, the company is consulting with employees about a proposed restructure of its operations which may include job losses. It says it is aiming to keep any cuts to a minimum and will try to redeploy any workers made redundant within the wider organisation.
The Infant Formula Exporters Association says it isn't surprised that Nutricia is considering job cuts. Chairperson Michael Barnett said smaller manufacturers are also facing problems.
"They've lost the confidence of their supply chains and networks and that really has put their businesses at risk. So I wouldn't be surprised if we saw smaller companies face the prospect of either stepping out of China or getting out of business altogether by the end of this year."