STEVEN Chaur, the managing director of Patties Foods, which sells Nanna’s frozen mixed berries, got home from work on Wednesday night and looked inside his freezer. He discovered what many other households did. “I found in my freezer at least five packets of different frozen berries from our company.”
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“We eat volumes of these berries,” says Chaur of his family. “I have two teenage daughters who eat smoothies like there’s no tomorrow.”

A day earlier, Patties Foods had published ads in newspapers nationally announcing a recall on its Nanna’s and Creative Gourmet frozen mixed berries because they had been linked to a string of Hepatitis A infections.

The ads, however, were already too late as many frightened and angry households across the country had heard via radio or social media that eating the berries might be a risk. They had been clearing out their freezers of frozen berry products well before Chaur looked inside his.

Chaur’s family, like others, is in danger of contracting Hepatitis A if laboratory tests prove the recalled frozen berries were contaminated. So far, state health authorities have found the only common link between the Hepatitis A outbreak is that each person who has been infected had eaten the now recalled Patties frozen berry products, typically the mixed berries.

Lab tests will have to confirm if this link is correct and the results may take weeks.

By Friday evening there were 14 reported cases of Hepatitis A nationally and health experts expect there could be more.

Chaur hasn’t yet been tested for Hepatitis A. “We’re taking a wait and see approach,” he says.

“From what I’ve seen from the medical advice being now published in the paper the incidence of contracting it is low. It’s not a long-term illness.”

He’s not being dismissive. “I haven’t even thought about it [getting tested for Hepatitis A]. I’m thinking about the public more than myself. We’re deeply concerned about public safety.”

Chaur, a veteran of the food industry, was appointed Patties managing director last April. Less than a year into the job, he has found himself in the middle of a food-safety nightmare.

CoOL back in the spotlightThe Hepatitis A outbreak has triggered public outrage and become a political football as politicians bicker over whether food standards, labelling and safety should be improved as imported foods in Australia grow. The berries were sourced from China and Chile and were processed and packed in a plant in China. In the decade to 2012-13, Australia’s imports of food from China almost doubled. China’s share of Australia’s $11.6 billion in food imports sits at about 7 per cent.

The food scare has sparked debate once again around how consumers want more country of origin labelling on food. Agricultural Minister Barnaby Joyce added his voice in support of that debate last week. It put him at odds with Prime Minister Tony Abbott, who said such labelling would only create more red tape and drive up supermarket prices. Woolworths and Coles, however, have indicated they support better food labelling for customers.

Nonetheless, the Prime Minister stood his ground. “The bottom line is that companies shouldn’t be poisoning their customers,” he told ABC radio. His words echoed those across social media. One Twitter user posted: “Gee Nanna tried to poison me!”

Food Standards Australia and New Zealand says that over the past decade most product recalls, one in three, have been done because of food contamination. Incorrect labelling is the next highest reason products are recalled.

Mismanaging the messageIt’s been just over a week since Patties learned of the potential Hepatitis A link to its products and it appears to be losing the public relations battle. In the public and some politicians’ minds it’s guilty even if it the jury is still out until the lab tests are in.

“If you don’t get your message out quickly about your concern and your obvious approach to customers during a crisis then somebody else will provide a different version and through the media that’s happening,” says Ross Campbell, chief executive of RCA Crisis Management. In his opinion, Patties was too slow in getting information to worried customers.

It’s a point that Chaur concedes. “We were a bit slow on getting things onto the website. We didn’t get anything on there until Sunday and again it was about dealing with facts.

“Part of the delay of communicating with people on Facebook and telephone and emails is we’ve had to be guided by the health department about what we can say and what we can’t say.”

The company was also busy notifying supermarkets and grocery stores to recall not only the mixed berries but Nanna’s raspberries.

Legal constraints added another layer in curtailing the company’s public response, says Chaur. There’s been speculation in the mass media of a potential class action.

“There’s a lot of angry people on Facebook making a lot of angry comments,” he says. “We track that every single minute of the day. We would love to communicate with those people but we just can’t.”

The Black Friday callPatties Foods is a Victorian company better known by its brands such as Four’n’Twenty pies and sausage rolls, Patties party foods, Herbert Adams pastry and Nanna’s apple pie.

Patties began as a humble cake shop bought by the Dutch immigrant Rijs family in 1966 and it grew from there. The Rijs family continues to own 40 per cent of the company, which listed on the stock exchange almost a decade ago, and two family members are directors on the board. Chaur says he speaks with the family daily.

On Friday, February 13, Patties management received a phone call around 2pm from the Victorian Health Department informing it that a number of cases of Hepatitis A had occurred and that the common link among those infected was that they had consumed Patties frozen mixed berries. “For us it was a surprise,” says Chaur.

He says months and months of testing in China and in Australia of various batches of berries had shown nothing to suggest contamination and tests are done for Hepatitis A, norovirus, E. coli, staph and heavy metals. Now labs are testing batches of Patties frozen berries dating back to June last year.

Patties has about half of the frozen fruit market in Australia, according to Chaur. It’s a market that has been growing rapidly in recent years but even so its contribution to Patties total profits is minuscule. About 95 per cent of the company’s profit comes from its savoury products, says Chaur.

In 2014, the company reported a net profit of $16.7 million, with net debt of $63.7 million. Its share price, which has fallen on the scandal, was already substantially underperforming the broader food and retail sector. Since 2012, its shares had fallen almost a quarter while the ASX300 Retail index was up 47 per cent.

While Chaur says the frozen fruit category has grown about 40 per cent, it was only as recently as 2013 that Patties took an $11.8 million impairment charge on its frozen food fruit business. This was before Chaur joined the company.

“In the last two years this category has gone from a marginal growth category to now growing at 40 per cent. When we took that decision it was really based on a view that potentially the category wasn’t going to grow as fast as originally we may have thought. With the ensuing 18 months after that impairment decision the category has absolutely boomed as consumers have discovered it.”

Looking localPatties has sourced frozen berries globally since the mid-2000s but it was only from October last year that it began packaging its frozen berries in China, which it says related to a decision to reduce damage to the fruit that occurred when shipping it back to Australia to be packed, and also because of an adoption of new packaging.

As a step towards winning back customer trust, Chaur says the company may consider sourcing from Australian berry producers in the future.

“If somebody can present to me with the volume metric solution to the berry problem, we’d happily buy in Australia.”

He also said another hurdle in making frozen berries in Australia was that it required “specialised freezing technology and Australian berry growers are not set up to do that currently”.

Chaur says for its savoury products everything is Australian sourced.

“All of our savoury products are produced with Australian ingredients in Bairnsdale in a very safe country location. And the communication to consumers is to absolutely uphold the trust of the product we make in Bairnsdale [in Victoria]. We still need to establish whether there is indeed a correlation with the Hepatitis A with a particular facility in China.”

China is no stranger to quality problems in food, drugs or toys and its string of food scares from melamine in baby formula to expired beef and chicken being supplied to Starbucks, Burger King and McDonald’s, are well known.

For foreign businesses the buck stops with them not China. When hit by a scandal, either because of an unscrupulous supplier or lack of quality control or just plain bad luck, it only serves to highlight the importance for companies in having detailed knowledge of their supply chains in countries such as China and also good crisis management. Patties management says they are comfortable on both counts, although they will be reviewed.

Research by Les Coleman a senior lecturer at University of Melbourne has found that costs of corporate crises are measured in “tens of millions of dollars” and one in four companies does not survive. An example was Garabaldi Smallgoods, which declared bankruptcy after a child died and many more people became ill from e-coli after eating contaminated mettwurst.

Chaur is sending a specialist team to the plant in China to do testing but this will be delayed because of the closure of businesses for the Chinese New Year. The delay will only stoke community concerns.

This story Administrator ready to work first appeared on Nanjing Night Net.