The Toronto-based pet food maker among the hardest hit by last year’s pet food scare involving Chinese melamine posted a net loss of $62 million for fiscal 2007.
Menu Foods Income Fund reported a net loss of $62.13 million on $244.8 million in sales for the year, down from $6.43 million in net income on $356.2 million in sales during 2006.
“It would not be an overstatement to say that 2007 was the most unsettling time in Menu’s 37-year history,” the income trust said in its year-end report, released Wednesday.
The company launched a recall in March 2007, following indications that some cuts-and-gravy dog and cat foods made by Menu for in-store brands and other companies may have been affecting the renal health of some animals in the U.S.
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“Curiously, many people don’t even realize that several other pet food manufacturers had recalls of their own. Such was 2007 for Menu Foods,” the company wrote.
“What finally came to light was a fraud on the pet food community that had been committed halfway around the world. A manufacturer of wheat gluten in China had apparently adulterated their product by adding melamine and other compounds in order to artificially inflate protein levels to bring them into a range where the wheat gluten could be sold.”
The gluten was then bought by North American pet food makers as a protein ingredient for their products. Standard industry testing didn’t detect either the melamine or “other compounds which would not be expected to be found in the wheat gluten,” the company wrote.
The recall, directly, cost Menu Foods $55 million, but it also cost the company “significant sales” after it suspended shipments of all cuts-and-gravy products. Customers who’d accounted for approximately 37 per cent of Menu’s volume in 2006 decided to stop buying its products, the company said.
Menu Foods also restructured starting in October, selling a South Dakota production plant. Its workforce at the end of 2007 was down by 27 per cent from 2006 levels.
However, “throughout the last half of 2007, Menu’s remaining customers have been getting back into business,” the company said, and its sales volumes are now “slowly but surely” increasing.
Menu last month “followed the leading national brand manufacturers” and raised the prices charged to its private-label customers. Those increases are expected to increase Menu’s sales figures by over three per cent, and help it recover some of the cost increases the company had eaten since its last price increase, the company said Wednesday.
