The world’s largest yoghurt-maker Danone is taking legal action against New Zealand’s Fonterra over last year’s baby milk formula contamination scare, which resulted in recalls across Asia.

The French food group also announced it is terminating its contacts with Fonterra and it is seeking compensation for loss of sales.

Fonterra, the world’s largest milk processor, had issued a warning in August that some of its products were infected by a botulism-causing bacteria. It prompted Danone, which uses Fonterra ingredients in its infant milk formula, to issue recalls in various countries. But investigations later revealed Fonterra’s warning to be a false alarm.

Danone previously cited that Fonterra supplied about 16 per cent of the milk ingredients for its baby food business, which accounts for 20 per cent of its total revenue.

In a statement today Fonterra said it “will vigorously defend any proceedings” and it had been in “ongoing commercial discussions with Danone and is disappointed that they have resulted in legal action”.

Danone has said it will now source its products from other firms but has declined to elaborated.

Reuters news agency has cited Glanbia, which is building a new multimillion milk powder plant on the Kilkenny-Waterford border, as a potential supplier.

Glanbia has declined to comment on these reports.

In addition, Arla Foods has also been cited as a potential new supplier for Danone.