August 26, 2008 / 11:01 PM / 9 years ago

Maple Leaf's future seen at risk amid food recall

WINNIPEG, Manitoba (Reuters) - Maple Leaf Foods Inc (MFI.TO) stock took another beating on Tuesday and some observers said the very survival of the company may be at risk as more products were pulled from store shelves amid a deadly food poisoning outbreak.

<p>Maple Leaf Foods President and CEO Michael McCain addresses shareholders at the company's annual general meeting in Toronto April 26, 2006. Canadian health officials said on Monday 12 people have died out of 26 confirmed cases of listeriosis, a food poisoning that genetic tests linked to prepared meats from a Toronto plant owned by Maple Leaf Foods Inc &lt;MFI.TO&gt;. REUTERS/J.P. Moczulski</p>

Shares of Maple Leaf, which is also facing a series of class action suits, skidded another 9 percent amid a huge recall of deli meats linked to a listeriosis outbreak that has been associated with 15 deaths.

Chief Executive Michael McCain has called the outbreak the biggest crisis in Maple Leaf’s 100-year history. Some analysts said the future of the company is at stake.

“This is kind of a bet-the-company kind of issue,” said Jim Etscorn, a product liability lawyer with U.S. firm Baker Hostetler LLP.

“This thing’s not going to die down any time soon,” he said.

Four ready-made sandwich brands were recalled on Tuesday on fears they may contain some of the meat products that Maple Leaf has already recalled.

McCain, whose family owns a 40 percent stake in the company, apologized publicly to consumers after officials confirmed meat from one of its 23 plants tested positive for the same strain of listeria bacteria that has made 29 people sick, including the 15 who have died.

Another 30 cases are under investigation, health officials said on Tuesday. Of the deaths, listeriosis was the underlying or contributing cause in six cases, and is under investigation in nine others.


Maple Leaf has a good strategy for relating to consumers in the wake of the outbreak, but it misstepped when it said it would open its plant on Tuesday before regulators had approved the plan, said Gene Grabowski of Levick Strategic Communications in Washington.

In the next few days, Maple Leaf needs to lay out a detailed plan for how it will prevent more listeriosis cases, said Grabowski, who has been involved in crisis communications for more than 120 recalls.

“You can do everything technically right ... and still lose the business, if you mishandle the communication,” he said.

The company has now said it hopes to reopen the Toronto plant on Thursday and will work with health officials who will test and hold products until they are satisfied the food is safe.

“They’re going to remain under strict control. They’re going to be subject to a severe statistical sampling regime,” said Richard Arsenault, acting director of the meat programs division of the Canadian Food Inspection Agency.

The company may not be able to identify exactly how its products became contaminated, but it will need to show where it could have happened, and establish new practices to prevent it from happening again, Arsenault said.

Maple Leaf and the government need to do more to prove that Canada has high food-safety standards because of the 12 deaths, said William Leiss, a risk communication expert at the University of Ottawa.

“The important thing is to get to the bottom of the scope of the outbreak, and I think that’s not yet clear that they have,” said Leiss.

One stock analyst put a buy rating on Maple Leaf shares. Bob Gibson of Octagon Capital said he believes most consumers will keep eating deli meat after the crisis fades from the headlines, and there are few other large processors.

“Maple Leaf has a dominant market share in Canada,” Gibson said. “If you decide you’re going to eat deli foods, you’re pretty much going to buy those products.”

The company’s shares have lost more then 25 percent of their value since the recall began last week, closing at C$7.99 on Tuesday, well below their 52-week high of C$16.25, set last September.

($1=$1.05 Canadian)

Additional reporting by Jeffrey Jones in Calgary; editing by Rob Wilson

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