Menu Foods: The President and CEO Has His Say

Streetsville, ONThe President and CEO of Menu Foods wasted little time getting to the point during the pet food manufacturer's Annual General Meeting in late June. According to the published text of his remarks, posted online at the Menu Foods corporate web site, Paul K. Henderson was onto the tainted pet food recall by the second paragraph.

Considering the first paragraph was little more than a greeting in two sentences, it's apparent that Mr. Henderson knew what was on everyone's mind, and cut to the chase.

Menu Foods is a manufacturer and supplier of wet pet foods for a host of different brands. In March of this year, after hundreds of reports of pets becoming mysteriously sick, or dying - it was revealed that wheat gluten used in the production of the foods had been tainted with melamine, a coal-based product primarily used in the production of plastics.

Melamine, according to Henderson, emits a high level of nitrogen during testing procedures. Given that the food industry uses nitrogen testing as an indicator of protein, it becomes apparent the Chinese perpetrators had blended in a cheap contaminant that would artificially boost nitrogen readings from the wheat gluten, indicating a most favourable - if bogus - level of performance.

Henderson revealed that the wheat gluten was purchased from ChemNutra of Las Vegas, which had sourced the raw material from Xuzhou Anying of China. Later in his remarks, Henderson revealed that within the past month, reporters from the Washington Post had visited the factories where production of the tainted wheat gluten was most likely to have occurred.

The factory was empty, the equipment gone.

In his remarks, Henderson reveals that over the entire 35-year history of the company, Menu Foods - indeed the entire pet food industry, in his view - had never seen anything like this before. To his knowledge, melamine has not shown up in wheat gluten until this incident, and no one in the pet food industry had ever tested for it.

The scope, and breadth of the recall has been devastating - both for pet owners, as well as the manufacturer itself. Henderson notes that Menu Foods suspended use of the suspected wheat gluten as a precaution once reports began to surface, a suspension that precluded the eventual confirmation of melamine contamination.

Henderson also stressed to shareholders during the June 29th gathering that Menu Foods took drastic action once the contamination was revealed. As of March 7th the company had discontinued all use of wheat gluten from China and began sustained testing for melamine contamination. Henderson also reveals that Menu Foods issued their product recall two weeks ahead of any other affected pet food manufacturer.

That recall, according to the company's president and CEO, involved 60 million cans of pet food.

The effect on the company?

According to Henderson, a lot of sleepless nights, strategizing and stick handling of an issue that was front and centre in the media for weeks. Taking the high road, Henderson states that the media exposure, while amounting to a pressure-cooker that cast the company in a negative light, had the benefit of alerting pet owners and the general public to the contamination alert.

Economically, Menu Foods experienced a $30 million dollar loss in sales for its first quarter of 2007, and anticipates a similar loss for the second quarter. Menu Foods also took a $42 million dollar hit for unforeseen expenses related to the recall.

The company has had to scale back production, and lay off staff as the result of downward pressure on the sales curve. Its unit price on the stock market has experienced a "significant decline" since the recall was announced.

According to Henderson in remarks dated June 29th 2007, Menu Foods is also facing more than 100 class-action lawsuits in the U.S. and Canada over the tainted pet food recall. U.S. federal court suits are being centred in the federal court at New Jersey, while cases filed in State courts may well be co-ordinated with the federal suits. A similar consolidation is being pursued in Canada.

Addressing the litigation issue, Menu Foods states that its goal is to achieve fair compensation within the framework of the law. Beyond that, the company is working with the U.S. Food and Drug Administration, Pet Food Institute, veterinarians, food safety experts and ultimately consumers in an effort to ensure quality, and to re-build the brand.

It notes that independent auditors rate Menu Food's testing of raw materials excellent or superior.

In the end, says Henderson, "...we take pride in our products, and we take responsibility for them."