Industry News

Melamine scandal update
China's ex-food and drug safety chief was given a death sentence recently for taking bribes from drug companies and approving unsafe medicines. The sentence was announced by state media. Zheng Xiaoyu, director of China's State Food and Drug Administration from 1998 to 2005, was convicted of dereliction of duty and taking more than US$832,000 in cash and gifts, according to state news agency Xinhua. An antibiotic approved under Zheng was withdrawn from the market last year after 10 patients died, state media reported, and six types of fake drugs were approved while he led the agency. Zheng's sentence requires review by a higher court and approval by China's highest judicial panel before he can be executed. On a related note, Chinese authorities have announced plans for a system that would enable them to recall unsafe or unapproved foods.

The recall of contaminated petfood is expected to cost Canada's Menu Foods Income Fund at least C$45 million (US$42 million), even without taking a slump in sales or the costs of claims or litigation into account, the company said recently. Menu Foods reported a net loss of C$17.51 million, or 91.8 Canadian cents a unit, in the quarter to March 31, compared with a profit of C$1.3 million, or 73 Canadian cents a unit, in the corresponding quarter of 2006. Sales slumped to C$64.5 million, from C$93.9 million in the first quarter of 2006. Menu Foods said second-quarter sales and results would also be affected by the recall. Its largest customer, a customer that accounted for 11% of 2006 sales, has already put future orders on hold, and other orders were also in doubt. The company declined to estimate other likely costs, including legal costs, but warned of a number of risks, including a heavy dependence on key customers and the lack of long-term sales contracts.

Menu Foods recently told The Mississauga News that it has lost two major contracts with unnamed North American clients in the aftermath of the recall. CEO Paul Henderson told Canadian press that the two contracts represented about 4.5% of its sales last year. Henderson said the first customer has cancelled its orders for pouched food, while the other has opted to make its own canned food. But Henderson said he wasn't able to tie the sales losses directly to the petfood recall. "They don't necessarily share the rationale for their decision. It would be speculation on my part," Henderson said in a conference call.

Menu Foods recently announced it is phasing out ingredients from China. It won't resume using them until Menu and the “world community” are assured that they are safe, says Menu's outside counsel, David Lillehaug of Fredrikson & Byron. Petfood maker Royal Canin USA has also reportedly said it won't use vegetable proteins from China. CJ Foods has said it'll nix protein sources from “exotic” locations.

Most petfood ingredients come from the US, but China is a primary source for some B vitamins and amino acids, including taurine used in cat foods. China also supplies about 8% of the USA's wheat gluten. Rather than “shut the door” on China ingredients, Pet Food Institute (PFI) president Duane Ekedahl says better procedures are needed to ensure quality. Many petfood makers are now reportedly screening for melamine. The FDA is also requiring importers prove to the agency that China-produced vegetable proteins are safe before they're let in the US.

Sales data from Information Resources Inc. indicate US petfood sales dropped about 3.5% after March 16, 2007—the date of the first of several petfood recalls. Hardest hit were sales of wet dog and cat foods. See the Market Data section of this newsletter for the numbers. According to PFI, US veterinarians are reporting the recall issue is winding down. In the past several weeks, there have been no new reports of pets falling ill and consumers seem to be returning to their normal buying habits. For more information go to www.petfoodreport.com.

Seventy-three percent of consumers say they are “confident or very confident” in the safety of their petfood according to three rounds of public opinion surveys conducted by the Pet Food Institute (PFI). PFI recently announced the results of three public opinion surveys conducted since April 4, April 24 and May 18-21. Results also show that nearly an identical percentage say they are staying with their preferred brand of petfood. The first two surveys were commissioned by PFI and had a margin of error of +/- 3%. The third survey was part of an omnibus poll and has a margin of error of +/- 4.5%.

Melamine was used in animal feed ingredients made by a US company, health officials said recently. The announcement by the FDA was the first indication that a US company had used melamine as an animal feed ingredient. Agency officials said that melamine and related compounds were used to bind feed for cattle, sheep and goats or fish and shrimp. The FDA alerted feed manufacturers that ingredients containing melamine and related compounds were found in products made by Tembec BTLSR Inc. of Toledo, Ohio, and used by Uniscope Inc. of Johnstown, Colorado, USA.

On May 16, the recalls continued, the latest by Chenango Valley Pet Foods who recalled its ferret food. Chenango's recall was expanded to include eight petfoods, including the ferret food. These latest recalled foods do not contain rice protein concentrate, but were manufactured during the time that contaminated rice protein concentrate formulas were produced, raising the possibility of cross-contamination.

Diamond Petfoods announced that it recalled a limited quantity of Nutra Nuggets Lamb Meal and Rice Formula dry dog food in 40-pound bags because of melamine cross-contamination. The recalled product was sold through retailers in Arizona, California, Nevada, Washington, Oregon and British Columbia. The recalled product was manufactured at the same facility following production of other products that contained rice protein concentrate later found to be tainted with melamine.

Eurofins and Medallion Laboratories (and several others since) have since started offering its customers an FDA-approved test for the presence of melamine through its network of labs in both Europe and the US.

A nationwide class action lawsuit was filed against major petfood brands and retailers. A cat and dog owner from Michigan and two cat and dog owners from Florida filed the suit in the United States District Court for the Southern District of Florida. Among the defendants it names are retailers Wal-Mart Stores Inc., Target Corp., Publix Supermarkets, Winn Dixie Stores and other grocery chains as manufacturers and marketers of their own brand petfood; and Petco Animal Supplies, Pet Supermarket Inc., and PetSmart Inc. It also names Nutro Products Inc., Menu Foods, Mars Inc., Proctor and Gamble Co., Colgate Palmolive Co., Del Monte Foods and Nestle USA Inc.

The 58-page lawsuit seeks damages to consumers for the false representations made in the defendants' advertising, as well as punitive damages. The lawsuit alleges, among other claims, that the petfood companies have fraudulently and/or negligently misrepresented and concealed what is actually in their petfoods, violated deceptive and unfair trade practices and failed to warn the public of the health risks to animals associated with a diet consisting of their commercial petfoods. A copy of the complaint and supporting research materials is available at www.mflegal.com/petfoodlawsuit.

Nestle Russia to open petfood factory
On August 28, Nestlé Russia is reportedly planning to open a Nestlé Purina PetCare factory to produce petfood in Vorsino, Kaluga Region, said Nestlé's director general for the Russian market, Bernard Meunier, at a news conference. Investment in the project at the construction stage will amount to US$20 million. The new factory will be the company's 14th facility in Russia. Nestlé Purina PetCare will produce dry petfood, including Friskies and Darling brands of cat and dog food. The company will use local raw materials and packaging. The factory will annually produce about 40,000 metric tons of products to be sold in Russia and CIS countries, including Ukraine, Meunier said.

Mars unifies company name
Mars has announced that by the end of 2007 all of its units in more than 65 companies (including Masterfoods) will be known as Mars, with a few exceptions that it did not name. By introducing a unified corporate brand name, Mars hopes to reduce complexity, provide one point of reference and build greater awareness for its business.

Petfood Forum Asia planning
As Petfood Industry begins planning for its Petfood Forum Asia 2008 event, we need your input. Please click on this link to participate in a brief survey about topics of interest. The survey will take only a few minutes to complete and will help us bring you the most relevant information for the global petfood industry. Thank you for your time!

Vobra and Veterinary Institute Subotica announce joint venture
A Dutch company, Vobra Special Petfoods, and a Serbian company, Veterinary Institute Subotica, have engaged in a joint venture called Activex. Vobra (www.vobra.nl) is a Dutch family-owned company founded in 1932. The company produces petfood at three locations in the Netherlands. The dry dog and cat foods produced by Vobra are sold under its own brand names Carocroc, Carocat, Trixi, Wielco, Casa-Fera and Sanimed. The products are sold via specialized pet shops, except for Sanimed, which represents a line of therapeutic foods sold through veterinarians exclusively. Apart from its own brands, Vobra also produces dry dog and cat foods under private labels. More than 30% of Vobra's products are exported.

The Veterinary Institute Subotica (www.vetzavodsu.co.yu) is a joint stock company founded in 1921. Subotica has five departments, active in pharmacy, biology, plant protection, disinfection and feed production. Dog food production was started in 2005. Activex sells its dog food products under the brand name of Dog's Favourite.

CPM acquires Wolverine Proctor & Schwartz
CPM, a leading equipment provider for particle size reduction and pelleting, announces the acquisition of UK-based Wolverine Proctor & Schwartz Ltd. of Glasgow, Scotland. The company will be combined with CPM's US-based Wolverine Proctor, which was acquired in July of 2006.

CPM's business units include California Pellet Mill, Roskamp Champion, Beta Raven, Century Extrusion and Wolverine Proctor. CPM has more than 500 employees and production facilities in the Americas, Europe and Asia. 

Jenkins joins FSNS
Food Safety Net Services welcomes Sherri Jenkins as the new director of auditing and consulting services. Jenkins joins FSNS after 11 years with Swift and Company where most recently she held the position of director of food safety, technology and validation. 

Alcan Packaging creates customer service center
Alcan Packaging Food Americas has completed the expansion of its Neenah Technical Center in Neenah, Wisconsin, USA. The US$1 million expansion of the 115,000 square-foot facility has consolidated Alcan's customer service teams with the existing research & development organization. The investment was designed to create needed space for R&D, an Innovation Center and to centralize customer service for most of Alcan Packaging Food Americas' North American operations.

AFIA elects chair, chair-elect, board members; promotes Epperson
Keith Epperson has been promoted to vice president of the American Feed Industry Association (AFIA) as of May 17, 2007. Epperson joined AFIA in September 2005 as director, manufacturing & training. Prior to joining AFIA, Epperson held a variety of positions with Kent Feeds. Epperson divides his time between the AFIA office in Arlington, Virginia, USA and his home base of Muscatine, Iowa, USA.

Jim Sullivan, president, International Ingredient Corp., Fenton, Missouri, USA, was recently elected AFIA chairman. Sullivan has served on the AFIA board since 2004. He succeeds Mike Horn, president & CEO, Pennfield Corp. Donald Orr, president, JBS United Inc., was named chair-elect. Also at the May 17 board meeting, sixteen nominees were elected to the AFIA Board of Directors. The new members will serve a three-year term running until May 2010. They are:

•Scott Anderson, Midwest Packaging Equipment LLC;
•William C. Barr, Bill Barr & Co.;
•Cory Berg, Quality Liquid Feeds Inc.;
•Paul F. Engler, Cactus Feeders;
•Alan Gunderson, Vita Plus Corp.;
•Ross Hamilton, Darling International Inc.;
•Paul M. Kalmbach, Kalmbach Feeds;
•James E. Kieschnick, DeKalb Feeds Inc.;
•David Kravis, Nutro Products Inc.;
•John Langemeier, Alpharma Inc.;
•Michael Manning, ADM Alliance Nutrition;
•Greg McLean, Murphy-Brown LLC;
•Lars Reimann, Eurofins Scientific Inc.;
•Stephen W. Riley, Triple Crown Nutrition Inc.;
•Randall Schwalke, Blue Seal Feeds Inc.; and
•Jack Woelber, Interstates Companies.