Monday, February 23, 2009

It Ain’t Small Peanuts: The Hidden Costs of the Peanut Recall

This is a long rant; be forewarned!

FDA inspections and reports, supplemented by investigative reports in the media, indicate that the Peanut Corporation of America (PCA), under the direction of owner Stewart Parnell, knowingly:

• Failed to obtain proper licenses and inspections required for food processing facilities.
• Failed to maintain clean, safe, and healthy facilities in which to process and package food products.
• Failed to clean up filthy and decrepit facilities, even when told to do so by the FDA.
• Knew that roaches, rats, and mice (living and dead), mold, dirt, feathers, excrement, and water leaks were present in food areas, and that these conditions created a very high risk of contamination.
• Knew that peanut products had been contaminated by mold, water, etc.; instructed employees to falsify test results and to re-package contaminated products for shipment to unsuspecting customers.
Knew that salmonella was present in products that were shipped to customers for use in human food. This happened not once, not twice, but at least a dozen times, probably more. Mr. Parnell ordered employees to ship the contaminated products, complaining that safety testing cost too much money.

Any contamination in our food supply is of concern, of course, but because peanut products are used in so many processed foods, and because PCA was a major supplier for many of the largest food makers in the country, this salmonella outbreak has affected thousands of products, including cookies, ice cream, dog biscuits, and nutritional bars.

The result so far? Nine deaths and 654 illnesses documented in 44 states and Canada, all linked to contaminated products from PCA. More than half of those sickened are children. And how many mild cases have been unreported?

More than 2500 items from hundreds of suppliers have been recalled, and the list grows day by day. Because these products typically have a long shelf life, and because so few consumers seem to be taking action to identify and discard affected foods, it’s likely that we will see a steady stream of cases for a long time to come.

Our immediate concern, of course, is for the families affected by illness and death. But what about the other costs of this recall? What hath Mr. Parnell wrought?
For those who were sickened, count the cost of lost work time, either to care for one’s self or to care for ill family members. For those without medical insurance, count the cost of medical expenses; for those without paid sick time, count lost wages.

For all consumers, count the cost of wasted food and money as we discard contaminated foods. Count the loss of productivity and waste of time if we choose to return recalled foods to the places of purchase (if, indeed, we can even remember where we bought them!).

For consumers who sue PCA or other suppliers, count the cost of litigation and the subsequent increase in commercial insurance premiums, which ultimately comes out of our pockets.

For workers in the food industry affected by the recall, consider the cost of reduced employment. not only for the workers and their families, but for the communities which must support them.

And for all of us, count the increase in health insurance and in general product prices, as explained below.
It’s no surprise that PCA has had to close its plants, enter Chapter 7 bankruptcy, and lay off most of its employees. But countless other businesses have been affected, too, not only by the huge expenses associated with conducting recalls, but in lost sales, damaged reputation, and more.

One of the hundreds of food makers affected by the recall is Forward Foods LLC; the firm has filed for Chapter 11 bankruptcy so that it can continue to operate while managing the recall of several products which contain tainted peanuts from PCA. Forward Foods estimates that the recall will take 90 days and will cost the company $4 million. How many workers will Forward Foods have to lay off?

Scott’s Miracle-Gro had to recall five varieties of wild bird food because they contained PCA peanut products. Bird food included in the recall involves about $500,000 in annual revenue. Shares of Scotts Miracle-Gro fell as much as 11 percent a day after its recall. How many people lost money as a result of the stock decline? And how many other businesses were similarly affected? (See below for another way that Scott was affected.)

As fears about contaminated peanut products continue to spread, peanut farmers are already seeing a significant decline in demand for peanuts and peanut products. Orders for 2009 are way down, and farmers will plant fewer acres of peanuts this spring. More lost jobs.


These lost jobs translate into increased strain on community resources, especially food banks, shelters, and others who help people in transition.

The cruel irony here is that of all food consumers, food banks may bear the largest economic burden of this recall. High nutritional density and stable shelf storage make peanuts and peanut products staple items at food banks.. Across the country, though, food banks have had to discard thousands of pounds of potentially contaminated food products, at a time when national unemployment is rising and more people are in need. And these charitable institutions have had to devote precious volunteer resources to sorting through food inventories again and again as new recalls are issued each day and week.


It should be no surprise that lawsuits have been issued left and right:

• PCA is named in a rapidly-growing number of personal-injury suits, seeking financial compensation for those sickened or killed by PCA’s contaminated products.
• PCA will undoubtedly be named in lawsuits from its commercial customers, seeking compensation for the expenses associated with recalls, lost reputation, etc.
• Down the product chain, Scott’s Miracle-Gro is suing Cereal Byproducts Co., claiming breach of contract and negligent misrepresentation and alleging that Cereal Byproducts gave Scott's false information about the origins of its peanut products. Scott's is seeking unspecified damages, but said it expects to incur expenses of more than $75,000 for the purchase of products, recall costs, lost profits and injury to goodwill.

PCA is also the subject of a federal criminal investigation (and who pays for that?) which could lead to charges against Mr. Parnell and other company officials. Georgia officials have already indicated that if the federal government does not pursue charges, they will move to charge Mr. Parnell with manslaughter. (Interesting to note that Mr. Parnell recently pleaded the Fifth before a congressional committee, refusing to answer questions that might incriminate him.)

We all pay for litigation, since litigation raises commercial insurance rates, and businesses pass those costs on in higher product prices for consumer products.

If you still haven’t checked your pantry for contaminated products, do it today!
If you’ve stopped eating peanut butter but are still eating granola bars, you’re in trouble!
Click HERE or HERE to learn what to do to protect yourself and your family.

Remember: Most peanut butter is OK! Most other peanut-containing foods are NOT OK!

1 comment:

  1. So glad you forewarned of the length of the "rant", so prior to reading I could go get the rest of my home made banana ice cream, with no peanuts of course. That was a beautiful, though discouraging, description of the costs to society (us) of business leaders with no integrity. As if we needed another example with so many in the financial sector apparently vying for top honors in the no-integrity list of shame.


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