The recall was issued after positive tests at an independent laboratory revealed the presence of the E coli bacterium, which can cause vomiting and diarrhea.

The recall comes five months after baby formula was recalled after Fonterra suspected 38 tons of whey protein was potentially contaminated with botulism-causing bacteria, though it was later revealed to be a false alarm.

French food group Danone last week announced it would stop buying products from Fonterra and would sue Fonterra, seeking compensation for lost sales following the infant formula product recall.

Fonterra Brands NZ managing director Peter McClure says the timing wasn't good, but didn't think it would adversely affect the company.

"This is a totally separate issue from the last one," he told Radio New Zealand."I think our consumers have stuck with us, and will continue to do so because they know the standards we maintain."

The products affected [by the current recall] are 8700 Pams and Anchor cream 300ml and 500ml bottles with a best before date of January 21, 2014. They were distributed in the North Island from Northland to Turangi, including Gisborne, to retail and food outlets.

McClure said that in the 18 years he's been with the company there had never been an issue with E coli at the plant before. He said it was unclear how the E coli got into the product.

"It's very unlikely to have come in the milk, although that is possible. It could come from the plant, but again, that's very unlikely — tests of batches both before and after this one show absolutely clear, and it could have occurred in testing. So we're just eliminating all of those possibilities at the moment and hopefully we can determine the exact cause."