I listened to Andrew Farrier and the alarm bells went off when he said "What could we have done? Should we have had a thousand tests for a thousand poisons?"
1) China has a history of counterfeit products and putting the ends before the means.
2) Considering and mitigating risks is bread and butter for investment in China.
3) Melamine has been known for over a year as a protein substitute, used to produce a protein reading in tests of diluted product - just add water and melamine then collect the profit. In April 2007 the NY Times reported American food safety regulators openly admitted that the substance was routinely added to animal feed as a fake protein.
Fonterra must have considered the possibility of rortes involving their products in China including methods by which milk can be adulterated - barkeeping 101 includes watering down the booze - adding water to any liquid, or another solid to solid chalk to coke etc being the simplest way to increase volume, and should have designed quality control testing to pick this up. If their people had bothered to ask "What could a crook do to mask dilution/cutting?" melamine was the obvious answer.
It's not so much they didn't test for or detect the melamine that's surprising rather the failure to have alarm bells ringing due to dilution/cutting. Melamine was or should have been well known to Fonterra as the likely cutting agent. The fact this wasn't stopped earlier is in my opinion more likely due to the published view melamine "is not believed to be particularly toxic" rather than ignorance as to the cause or concern over loss of brand value.
Either way Fonterra appears at best incompetent. I bet we never get to see their risk management plan for operating in China or whether any testing for dilution/cutting was done, or if so whether that was designed saavy enough to pick up the likely and well known masking agent that is killing babies.
I know which I'd prefer.
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