Communication gap between MPI and the exporters — Barnett

Listen to more in-depth analysis from Michael Barnett on the 1080 threat on NBR Radio

There is "a void of communication between MPI and the exporters" that has lead to untested product being sent to China, Infant Formula Exporters’ Association chairman Michael Barnett said on TV One’s Q+A programme.

Earlier this week, Mr Barnett told NBR a $2 million shipment had been stopped at the Chinese border following the 1080 scare going public.

The association's chief administrative officer, Carrickmore boss Chris Claridge, said up to $30 million in formula was on its way to China that lacked certification under a scheme announced Tuesday. Mr Barnett said smaller exporters were not part of the conversation between the Ministry of Primary Industries and milk power producers since the 1080 letters were sent in November.

“I think it’s going to be a case of ‘there’s a constituency out there – doesn’t matter whether you’re Fonterra or whether you’re a small exporter. You deserve a communication that keeps you in the loop. If that had happened, there would have been less noise in the market and less frustration and tension,” Mr Barnett  said.

The 1080 scare would hit some of his members in the pocket.

“The production that these people have got in place and the orders that they thought they had in place, the cashflow that they thought they had in place has stopped. What they’re waiting on now is for a distributor come back and put in place those orders and confirm them again. They’ve taken a hit,” he said.

Mr Barnett is also critical of the government for going public when they did.

“I think irrespective of what happens, there’s always going to be a number of opinions. I think if I have a look at the major food distributors around the world associated with food, associated with beverage, most that I have spoken to and most experts that we have spoken to have said, ‘You do not go public on these sorts of issues.’

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RAW DATA: Q+A transcript: Infant Formula Exporters' Association Michael Barnett

Watch the interview here

HEATHER I’m joined now by Michael Barnett of the Infant Formula Exporters’ Association. Michael, do you feel as calm as Bill English does? Don’t you have a shipment that can’t get into China?

MICHAEL Some individual exporters – they’ve got a lot of skin on the table. Couple of million dollars’ worth of product sitting on a wharf and being delayed. They’ve probably got more concern than the minister. If I looked at the big picture, I still think the Chinese are smarter than what we’ve alluded to. They understand sloppy process. So when we talked about botulism last year, that was an issue that they could not comprehend. Terrorism – they know that that’s something that’s quite different. So I think their response has been muted, and the social media has been a hell of a lot quieter than what I would have expected.

HEATHER Can you just update us on what is happening with that shipment? Is it still stuck outside China?

MICHAEL The ship has arrived. I think just quickly, an exporter – this particular exporter’s probably putting about 20 shipments in a year. What would normally happen – you do a seven-day pre-clearance with your document. The boat arrives, you would expect to get it, on average, the product off the wharf in about 20 days. This shipment – the product has arrived; the Chinese, at the port, have said extra certification is required, and before we can release that, we’re going to have to test it, and they’ll be spot-checking for 1080.

HEATHER Okay, so you say you needed extra certification. Did you not know that that was necessary? Did your members not know that?

MICHAEL No and I think that what we’ve probably had since the letter that was originally sent to Fonterra and Federated Farmers – there’s been a void of communication between, I’ll say, MPI and the exporters, so they’ve continued to export; their end product has not been tested.

HEATHER So you’re saying that MPI failed to let your members know they needed that certification?

MICHAEL Probably comes to a matter of opinion. If it had… I would think from an industry perspective, if there was any real risk, somebody should have said, ‘Stop,’ so they’d stop anything that was going to go to a consumer, test, and certify. And if we’d done that back, then, you probably would have needed to tell a relatively small group of people, but you would have had control of the end point of your product.

HEATHER You’re essentially saying that you’ve been kept out of the loop?

MICHAEL I think there’s been a number of people being kept out of the loop. And I think in looking back, MPI would probably look and say there is a group of stakeholders, and it isn’t a case of ‘we’re government and we know best’. I think it’s going to be a case of ‘there’s a constituency out there – doesn’t matter whether you’re Fonterra or whether you’re a small exporter. You deserve a communication that keeps you in the loop. If that had happened, there would have been less noise in the market and less frustration and tension.

HEATHER So do you think that MPI, as you say, didn’t keep you in the loop to try and limit the number of people who knew?

MICHAEL I think initially it might have been a case of doing that, but in actual fact, the news got to us as an exporters association before we were even briefed by government.

HEATHER All right. Are you able to tell us how you found out?

MICHAEL Not by whom, but it was the market. I mean, it’s a relatively small market. You know, you don’t have to go too far before somebody talks.

HEATHER Look, you have said that some of your members have seen a drop off in sales and some of their entire orders have been cancelled. The Government says there’s been minimal impact in the market. Who’s wrong here? You can’t both be right.

MICHAEL It depends who you’re looking at. If you’re looking at Fonterra, and I have to say, people like Fonterra and Tatua have been superb to the small guys, they really have. They’ve offered them resources and use of their people. They can probably survive. They’ve got strong balance sheets, they’ve got good communications, good people on the ground in China. I’m a small exporter, I’m putting my product into a China market, I’m low on resources. A couple of million dollar hit or a slow-down in payment, I’m dead. I work with a distributor – the distributor I have to convince to work for me. He gets information that New Zealand product could be at risk, he has choices. He’s going to look and say, ‘I can deal with France, I can deal with Denmark, I can deal with Australia. I don’t have to deal with a New Zealand brand. All I’m interested in doing is getting a product on to a shelf, getting it off, money in my pockets.’ So he’s going to look at a New Zealand product and say, ‘I have a higher risk there.’ So we’ve had distributors come to the New Zealand people and say, ‘We’d like to put a hold on the orders that we’ve got with you at the moment. We want to see how this plays out. So far, it’s played out in a muted way. We may not have that…

HEATHER Are you saying that it is a hit that has the potential to come? Not that you’ve actually taken a hit yet?

MICHAEL They haven't taken a hit yet.

The only hit that we’ve seen so far is a delay at the border, and we’ve been quite open and factual about that. The future hit is a distributor waiting to see what happens in the China market. And as I say, so far the response from the China market has been muted.

HEATHER Michael, you’ve shifted your position on this slightly, because earlier in the week, you were saying that these are—your members have taken a hit. Why are you only saying now that they only have the potential to take a hit?

MICHAEL They have taken a hit, because the orders that they had in place, the distributor has put a hold on taking those. So they’ve taken a hit.

HEATHER That doesn’t necessarily mean, though, that that will actually flow through into finances that they lose.

MICHAEL The production that these people have got in place and the orders that they thought they had in place, the cashflow that they thought they had in place has stopped. What they’re waiting on now is for a distributor come back and put in place those orders and confirm them again. They’ve taken a hit.

HEATHER You are pretty critical of the government for going public. Why is that?

MICHAEL I think irrespective of what happens, there’s always going to be a number of opinions. I think if I have a look at the major food distributors around the world associated with food, associated with beverage, most that I have spoken to and most experts that we have spoken to have said, ‘You do not go public on these sorts of issues.’ It has a flow-on effect. What you do is you get a copycat; what you do, in order to say, ‘We’ve done this to our supply chain to ensure security,’ you’re exposing what the—what your weaknesses might be.

HEATHER Do you not accept that government’s position, though, that had it not gone public and we had all found out, they would have been hauled over the coals for keeping a secret like this?

MICHAEL I think the other option that you’ve got would have been to stop, to test and to certify. I think that the point at which you did go out, you could have had a much better story to put in place than what we’ve currently got. As I say, I think there’s always going to be a difference in opinion as to the process that you might have undertaken. Most exporters, most associated with the food industry, would say they get 40 or 50 of these a year. They do not go public.

HEATHER Do you think it’s done harm to go public?

MICHAEL I think we’ve been fortunate. I think what it has shown up is a weakness in our system that has showed up that if we had something like this, we need a better plan, we need a better engagement with business, rather than working from a base that ‘government knows best’.

HEATHER How cross are you with the government for going public?

MICHAEL I don’t think you can be cross with the government for going public. I guess I’m probably more frustrated on behalf of those small exporters that there wasn’t a full engagement with the industry sector, that you are finding out through the back door, you’re picking up part stories, you are accused of, ‘We’re not talking to you because we’re afraid of a leak.’ It has been a frustration and attention going through this. And let’s face it, it’s been 100 days – it’s been 100 days to get to a balloon going up and then a media frenzy.

HEATHER Okay, we’ve got the Ministry of Primary Industries minister coming up very shortly. What would you like to say to him?

MICHAEL I think a better engagement… When I look at the way this has been handled, I look at two levels – the first one, I think that we had to have somebody lead. Prime Minister Key stepped in, and, to my mind, operated and operated well. If I have a look at MPI, I think a better engagement with the sector. To me, I’ll have a look at controlling, not the media story, but controlling the product to the consumer. After all, that’s who we were looking to look after. They could have got 25 people in a room and explained and controlled end product with that communication, rather than including some – the big guys – and not including others – the little guys – and yet, we are all part of one sector. We should all have had good communication.

HEATHER Okay, ultimately, you just feel left out. Michael Barnett of the Infant Formula Exporters’ Association. Thank you very much for joining me.