WELLINGTON (Reuters) - Danone <DANO.PA> says it is seeking full compensation from New Zealand dairy exporter Fonterra over a contamination scare involving a Fonterra ingredient used in milk formula produced by the French food manufacturer.

Danone confirmed it had sent a notice of dispute to Fonterra on September 24, after Fonterra said on Wednesday the two companies were in talks to resolve issues stemming from a recall of Danone products in August.

"Danone is determined that it should be fully compensated for damages caused by the recall on eight markets," the company said in a statement.

"Food safety is a non-negotiable priority and we are cooperating fully with local authorities and key stakeholders to determine the causes of the situation and clarify responsibilities."

The discussions follow the food safety scare in August, when Fonterra said it found a potentially fatal, botulism-causing bacteria in one of its products, triggering recalls of infant milk formula and sports drinks in nine countries.

Danone-owned brands were affected and the company issued a recall of its Dumex milk formula products containing the affected ingredient in China, Singapore and Malaysia and other Asian countries, while its Nutricia brand of milk formula was taken off supermarket shelves in New Zealand.

New Zealand's Ministry for Primary Industries said later that tests showed the scare had been a false alarm because whey protein concentrate made by Fonterra had been found to contain a less harmful bacteria.

The food safety warning issued by Fonterra and the New Zealand government was lifted on August 28.

The French company had said on August 30 that the recall would result in a sales fall for its baby food division in the third quarter but that it expected to meet group sales and profit targets for the year.

Baby food accounts for 20 percent of Danone's revenue, second only to its dairy business, and Asia, notably China, is a key growth market for the group at a time of sluggish demand in Europe.

Fonterra, which controls nearly a third of the world dairy trade and generates about 7 percent of New Zealand's GDP, said last week it had made a NZ$14 million ($11.56 million) provision for the recall.

($1 = 1.2107 New Zealand dollars)

(Reporting by Naomi Tajitsu; editing by Tom Pfeiffer)

 

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