Fonterra shuts down in Sri Lanka after ‘threats’

New Zealand dairy giant Fonterra Co-operative said yesterday it had suspended operations in Sri Lanka after the world's largest dairy exporter faced product bans, court cases and angry demonstrators over its supposedly tainted milk products in the country.

Earlier this week, it was banned by a Sri Lankan court from selling or advertising its products after the country's food safety authorities said they found high levels of the agricultural chemical dicyandiamide (DCD) in two batches of milk powder it tested. Fonterra, which has been recently targeted by China for food safety bans, vigorously disputes the finding.

Four of Fonterra's top officials have since been charged with contempt of court for failing to adhere to the bans, while a Sri Lanka state institute said it would test all milk powder in the market.

Industry observers in New Zealand say the row is not about food safety, but is an attempt by the government to promote its domestic dairy industry.

The debate triggered an angry demonstration on Thursday. More than 100 members of a hardline nationalist party in President Mahinda Rajapaksa's ruling coalition gathered outside Fonterra's regional offices near Colombo to demand a ban on the company's products in the country as riot police looked on.

"The temporary suspension is the right thing to do. It is a precautionary measure to ensure our 755 people working there are safe," Chief Executive Theo Spierings said in a statement.