‘Pink Slime’ Disease Forces Beef Processor to File for Bankruptcy

The struggling AFA Foods company succumbs to huge drop in demand


“Pink slime” has sent AFA Foods to the emergency room. The processor of ground beef has filed for bankruptcy protection, blaming the fallout over the beef filler that has become vilified in nearly all quarters recently.

According to The Wall Street Journal, “AFA said ground-beef demand has dropped sharply in recent weeks, curbing a rebound in sales the company had been counting on. The company produces ground beef, buying the filler known as finely textured beef and grinding it into its products.”

“It came at exactly the wrong time for the company,” AFA Chief Restructuring Officer David Beckman told the Journal. That’s because the company had been working on a turnaround plan and had restructured debt in hopes of buying time until the traditionally stronger summer grilling season kicked in.

But no such luck.

Just last week, Tyson Foods (NYSE:TSN) Chief Operating Officer Jim Lochner said the hubbub is causing a decline in overall beef demand as consumers react negatively to the ongoing controversy. Already, a slew of the big consumer names have sworn off what the meat industry calls “lean, finely textured beef” — including McDonald’s (NYSE:MCD), Supervalue (NYSE:SVU), Safeway (NYSE:SWY), Kroger (NYSE:KR), BJ’s, Giant, Royal Ahold (PINK:AHONY) subsidiary Stop & Shop.

AFA isn’t the only beef processor feeling the pain. A major producer of the ammonia-treated (to kill bacteria) beef filler, Beef Products Inc., announced last week that it’s shuttering three of its four processing plants. Cargill is also cutting back its beef filler production.

Article printed from InvestorPlace Media, http://investorplace.com/2012/04/afa-foods-succumbs-to-pink-slime-disease/.

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