Process Management

News 334 views last update:6 Aug 2012

Canada's Menu Foods fights for its life

With the recall of 60 million cans and pouches of tainted petfood in March the crumpling of a dominating petfood company began. After that things got worse and it is to be seen if Menu Foods can withstand the strong forces that rule the market.

Mississauga, Ontario's Menu Foods is now facing big losses, potential lawsuits, and worst of all, lost clients, including its largest. Procter & Gamble, which accounted for over 20% of Menu's business, said last month that it would no longer buy canned food from Menu Foods. P&G sells under the brands Iams and Eukanuba.

Another petfood giant, Mars Inc., which sells brands like Nutro and Royal Canin, also plans to cut ties with Menu and will buy the company's production facility in South Dakota.

Reputation damage
Share price for Menu Foods once topped $7, but are now trading at just over $2 and second quarter sales dropped 44% from $84.3 million in 2006 to $47.2 million this year. But worse than the devastating financial figures has been the blow to Menu Foods' reputation. Reputation buys business for the future.

Menu Foods in June had to put in place a shareholders' rights plan to ward off the threat of hostile takeovers. P&G and Mars have used the recall as an opportunity to rein in an outsourcing problem, and shift some blame to Menu Foods in the process. Some other smaller companies that contract their production to Menu Foods could yet follow suit.

Menu Foods cannot afford that; the company has already lost an estimated 80% of its contract business, in which it supplied other brand-name pet food makers, which represented about 45% of its total volume.

Private labels not affected
So far, Menu Foods' troubles haven't spread to the lucrative private label market (where large supermarkets sell Menu Foods' products under their in-house brands).

Although these supermarkets feel the same way about the situation they do not have many options to go somewhere else. Prior to the recall, Menu Foods controlled over 75% of that market in Canada, and 50% in the U.S.

It could be many more months before a clearer picture emerges, but analysts are not counting out Menu Foods yet. The company in the past has proven its strength.

Related news items:
Menu Foods loses largest pet food customer    
Iams soothes consumers with free pet food
Recall of 60 million pet food cans       
$45 million damagae for Menu Foods

Related website:
Menu Foods 

Related weblogs:
Pet food scare: When will it stop?  
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