Food Minister faces tough choice on infant formula

Tuesday, 30 July 2024

Andrew Hoggard is checking with infant formula manufacturers if they really want to “throw the baby out with the bathwater”.

By next Monday, Food Minister Andrew Hoggard will need to make a call on whether New Zealand should opt in or opt out of a new trans-Tasman standard for infant formula.

At stake may be about $2 billion of exports and many hundred of jobs, but also — if some public health experts are to believed — the developmental prospects of an unknown number of infants around the world.

Talking to The Post, on Monday, Hoggard made clear it wasn’t shaping up to be straightforward decision.

What is the new trans-Tasman infant formula standard?

The standard, unassumingly called P1028, has been developed by Food Standards Australia and New Zealand and runs to 445 pages.

Hoggard says there's “a lot of good stuff in the standard” that regulates the composition of infant formula.

But it would also impose new controls on the statements manufacturers could make on their products.

There can be a fine line between product information and what might be described as marketing.

Public health experts have been concerned some statements on packaging may be spurious and persuade parents to unnecessarily feed infants formula in preference to breast milk.

The standard aims to address that concern by preventing manufacturers shouting out about items their formula contains, with that information only able to be shown as a simple list of ingredients.

What’s the problem?

The local management of French multinational Danone, which employs 441 people in New Zealand exporting about $1 billion of infant formula each year, argues the rules would prevent it telling consumers about genuine advances in its products.

It also believes that the tougher labelling rules would make its products less appealing to consumers in China and South-East Asia, meaning Danone might need to switch its manufacturing away from New Zealand, to avoid losing sales there.

Fsanz says a cost-benefit analysis concluded Australian and New Zealand infant formula would continue to be competitive in international markets because of its “strong reputation and high trust”.

But Hoggard says its analysis “didn’t contain any numbers” or give him enough comfort that the labelling controls wouldn’t hit sales.

Danone appealed to Hoggard to call for a review of the labelling standards, which he did when he met with Australian federal and state food ministers on Thursday.

But the Australian ministers refused his request.

Danone’s Nutricia factory near Balclutha is one site where a wrong decision could cost jobs.

“Some of the pushback I was getting was that the Europeans are going to move to a similar labelling position as well,” Hoggard says.

So what are Hoggard’s options now?

Either set aside his concerns and agree to the new trans-Tasman standard, or “opt-out” of the Fsanz standard altogether.

Hoggard says the Government can’t endorse the trans-Tasman standard while opting out of only the labelling requirements.

“The ultimate is we’d ‘copy and paste’ 99% of it, put in what we want for the labelling and away we go.”

However, in practice, additional steps such as fresh rounds of consultation might be required.

The Government currently lacks the legal mechanism to produce its own foods standards, but one is the pipeline Primary Industries Regulatory Systems Amendment Bill, he says.

What are risks of opting into the Fsanz standard?

Danone could shift manufacturing away from New Zealand, as its Sydney-based director of legal compliance, Maria Venetoulis, has warned is possible.

Even if Danone didn’t take that drastic step, locally-made infant formula might lose market share in China to overseas manufacturers.

It is not only Danone’s sales that could be at stake. Other companies, including A2, are involved in manufacturing infant formula and New Zealand’s exports are believed to be about $2b a year.

And the risks of opting out?

Aside from the hassle of coming up with a new standard of its own, New Zealand risks ending up on the wrong side of a public health debate if the EU does indeed implement rules similar to Fsanz’.

In the worst case scenario, it could become viewed in time as an outlier in supporting an infant formula standard that tolerated spurious or irrelevant claims by manufacturers.

That could ultimately emerge as a bigger threat to the export industry than the labelling restrictions themselves.

There is also the practical issue that infant formula made in New Zealand could no longer be exported to Australia without being relabelled.

Hoggard notes a not insignificant amount of infant formula is exported to Australia and then transported in suitcases by Chinese tourists and students for resale in China on Alibaba.

“That's the other thing that will need to be weighed up,” Hoggard says.

What’s he’s going to do?

Hoggard is seeking advice from officials on the extent to which Fsanz’s labelling rules could be expected to impact exports, and on their level of confidence that the EU really will adopt rules similar to the Fsanz standard.

But he acknowledges that coming up with clear evidence in a week is a tough ask.

He is also consulting with infant formula manufacturers on whether — having failed to secure a review of the Fsanz standard — they do really want the Government to go as far as “throwing the baby out with the bathwater”, as he puts it.

That appears no foregone conclusion.

Danone’s overall interests are likely to be in having global standards that are as closely aligned as possible, whatever they may be.

Venetoulis would say only on Monday that it would work with the Government to “find a way forward that retains the good in Fsanz’s standards but allows export of New Zealand-labelled infant formula into Australia”.