FOOD SAFETY HITS THE BUSINESS NEWS

I was pleasantly surprised yesterday when reading the stock market news on the CNBC website – as I always do, usually at least twice a day. For once they actually covered the latest food recalls among all the talk of earnings, forecasts, bank frauds and so on. This was unusual. Analysts almost always ignore such events. Why not, if it doesn’t affect stock prices?

And, oddly enough, even the announcement of huge recalls never DO seem to impact the recalling company’s stock price. In all the years that I have been following both food recalls and the stock market, I have always found this hard to understand.

After all, recalls can be very expensive. Not only do the companies involved have to spend a lot of money on tracing where their food went, and getting it back, but it even costs them to safely dispose of it. Over the longer term, they often suffer in terms of a damaged brand and may lose customers. Food producer frequently have to spend a great deal of money overhauling or replacing their equipment and facilities and even close them down for a period of time. Many small and medium size companies or food growers or distributors never recover and go under.

I have often felt sorry for many good safety-conscious family enterprises and caught in this type of very unpleasant situation, especially if their products were contaminated through no fault of their own. This can happen when their ingredients suppliers were to blame, and they simply had no way of knowing. Even now, I remember the owner of one such small company weeping over the phone to me as the FDA inspectors were crawling over his business, and I also remember several small women-owned food production companies, where I knew how hard the owners had worked and how conscientious they were about food safety, but I doubted they would survive.

So back to CNBC. What suddenly prompted their attention to the hummus, walnut and sprouts recalls? It probably had something to do with the fact that we suddenly had three recalls in close proximity, although that is not at all unusual. But their attention was also caught by another event that happened recently. A few weeks ago WalMart Stores settled lawsuits with the families of 23 people who had died from having eaten the Listeria-contaminated cantaloupes sold by the retailer in 2011. Of course, the terms of the settlement were not disclosed, but I would guess it was in the hundreds of millions of dollars.

To your good health

TSF