‘Pink Slime’ Is Suppressing Beef Demand

by InvestorPlace Staff | March 29, 2012 1:39 pm

“Pink slime” news seems to have staying power, much like one of those foods that you go on tasting long after you eat it. The latest round in the controversy over the formerly standard practice of blending ammonia-treated beef scraps into fresh chopped meat came from the beef industry.

In an investor conference this week, Tyson Foods (NYSE:TSN[1]) Chief Operating Officer Jim Lochner said the hubbub is causing a decline in overall beef demand as consumers react negatively to the ongoing controversy.  The Wall Street Journal[2] quoted Lochner saying the story has “put a fair amount of pressure on ground beef consumption.” But the paper added that “Mr. Lochner framed the issue as a ‘two-week event’ and said that demand should ‘recover quite quickly.’”

That may not be the case, however. In an Associated Press report[3] today, the news agency quoted Larry Smith of the PR firm Institute for Crisis Management saying, “I can’t think of a single solitary message that a manufacturer could use that would resonate with anybody right now.”

Indeed, given the big consumer names[4] that have already sworn off what the meat industry calls “lean, finely textured beef” — including McDonald’s (NYSE:MCD[5]), Supervalue (NYSE:SVU[6]), Safeway (NYSE:SWY[7]), Kroger (NYSE:KR[8]), BJ’s, Giant, Royal Ahold (PINK:AHONY[9]) subsidiary Stop & Shop — it’ll be hard to convince Americans that the stuff will ever be considered acceptable fare again.

There may be a cost involved in this, of course. The AP also noted that “National Meat Association spokesman Jeremy Russell said if consumers insist on eliminating this product from ground beef, prices will go up and lean beef trimmings will have to be imported to replace it.”

But if the U.S. Department of Agriculture also decides to eliminate pink slime from the nation’s school lunch program[10], that could be the blow that ends the controversy once and for all.

Endnotes:
  1. TSN: http://studio-5.financialcontent.com/investplace/quote?Symbol=TSN
  2. The Wall Street Journal: http://online.wsj.com/article/SB10001424052702303404704577307594046006090.html
  3. Associated Press report: http://hosted.ap.org/dynamic/stories/U/US_PINK_SLIME_PLANT_TOUR
  4. big consumer names: http://investorplace.com/2012/03/pink-slime-follow-svu-swy-kr-ahony-wmt/
  5. MCD: http://studio-5.financialcontent.com/investplace/quote?Symbol=MCD
  6. SVU: http://studio-5.financialcontent.com/investplace/quote?Symbol=SVU
  7. SWY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SWY
  8. KR: http://studio-5.financialcontent.com/investplace/quote?Symbol=KR
  9. AHONY: http://studio-5.financialcontent.com/investplace/quote?Symbol=AHONY
  10. pink slime from the nation’s school lunch program: http://investorplace.com/2012/03/pink-slime-lives-in-the-u-s-school-lunch-program/

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