Fonterra shifts 'silo' culture since WPC food scare

Fonterra Cooperative Group claims to have made significant progress on the entrenched "silo" mentality it was criticised for in the government's final report into last year's whey protein contamination scare.

Stage two of the government inquiry into the WPC80 recall has recommended the Ministry for Primary Industries beef up its ability to manage food safety, including statutory powers to force companies to disclose relevant information that could then be handed over to other affected parties.

Fonterra was caught up in a false food scare last year when it quarantined several batches of WPC amid fears it was contaminated with a potentially dangerous form of the clostridium bacteria, though was ultimately cleared as a false alarm.

The inquiry found there were four immediate causes of the botulism scare all of which sheet home the blame to Fonterra: the Hautapu plant's improvised reprocessing of WPC80 without a risk assessment, testing for Clostridium botulinum without sufficient consideration, approving toxin testing without understanding what that meant, and failing to advise both the Ministry for Primary Industries and its customers much sooner of a potential food safety problem.

Another contributing factor to the crisis which damaged Fonterra and New Zealand's reputation for food safety was that Fonterra's workplace culture exhibited an entrenched "silo" mentality that robbed the company of some of the cohesion vital in an organisation of its size, the report said. That was exacerbated by fairly constant restructuring in recent years.

Many of those interviewed for the inquiry referred to the persistence with which individual business units, and even teams within those units, continued to operate as semi-autonomous operations. One interviewee noted "silos remained very real despite the 'one company' message."

Fonterra's group manager of strategy Maury Leyland said the company felt "very strongly that silo mentality should not be part of our culture" and since September last year had worked on changing that, particularly within the business units involved. The NZMP business unit had been wound up and split between two divisions, Global Operations and Global Ingredients. There was now stronger emphasis on complying with company standards and Leyland said this new culture was being led from the top in the way the leadership team, which included a number of new faces, was now working together.

That's been noticed by the government. Primary Industries Minister Nathan Guy said Fonterra has taken the issue "extremely seriously" and was making changes to put food safety at the front of its overall systems.

"We have noticed a change in their culture, we've noticed a greater connectivity through to the regulator," Guy told a briefing in Wellington. "I trust Fonterra. There are learnings for Fonterra from both of these reports, and they've shown they have been reactive and picked up those recommendations and are changing."

The inquiry said there was no doubt about the impact of the incident on Fonterra, from boardroom to factory floor, that had spurred Fonterra into a series of comprehensive changes aimed at strengthening food safety and quality and crisis management capability. There have been two reviews, operational and board, which resulted in 53 short, medium and long-term initiatives including improving food safety and traceability.

Leyland said those had been narrowed into 36 recommendations in seven key areas of which 29 were now completed and the remainder would be within the next few weeks. However many of the recommendations were multi-year programmes, including finalising traceability which runs out to 2017 to reach world-leading response times. She's confident Fonterra now had a world class food safety programme in place, but would welcome any further improvements that could be made from the latest report.

The report said Fonterra had lacked an updated, well-rehearsed crisis plan to implement, as well as a crisis management team to spring into action. Leyland said as part of their changed culture there had already been two mock crisis incidents staged in May and November. While the first one didn't go so well, the November one was said by external observers to have gone a lot better, Leyland said.

"This is a learning journey and we're just going to keep getting better and better," she said. The report said Fonterra had committed itself to quarterly training for all key staff designated to join in any crisis response but Leyland said group-wide crisis practises will be held only once or twice a year in future.

Among the changes the cooperative has introduced, the Fonterra board has made food safety one of the top two agenda items as it strives to develop a food safety culture, rather than just a programme of food safety, the report said. The inquiry observed, however, that despite the changes made, the role of quality coordinator still seems to have insufficient status within Fonterra, - and indeed, the same applies in other food manufacturing companies. "Yet such roles are critical to ensuring best practice," it said.

Leyland said she couldn't comment on the criticism until reading the report in more detail.

The inquiry report said good can come out of bad and that the lessons it had drawn from the WPC80 incident could be useful for the dairy industry and wider food manufacturing sector to strengthen their own food safety culture.