Coke Raised the Flag on Fungicide-Tainted OJ

The fungicide-tainted orange juice story has yet another twist. First, the U.S. Food & Drug Administration announced on Feb. 11 that it was suspending all orange juice imports from anywhere in the world. Then on Thursday, Coca-Cola (NYSE:KO) said it was the source of the information that the FDA decided to act on.

The FDA says it first got a report of the fungicide on Dec. 28 and began its investigation. The fungicide, called carbendazim, is legal in Brazil, where it’s sprayed on trees to prevent the spread of mold. In the U.S., however, carbendazim is illegal.

Despite the ban on OJ imports, the FDA has said it has no plans to pull juice containing low levels of carbendazim. Coca-Cola, which owns Minute Maid, does use some Brazilian juice in its products, but it said in a statement that it believed the Brazilian juice poses no harm and it’s following the FDA’s lead as the investigation continues.

Market reaction to the fungicide flap has dented KO shares in the past two trading sessions. The stock was down on Wednesday by 1.8% and a further 0.72% on Thursday, closing at $67.57. Coke rival PepsiCo (NYSE:PEP), which owns Tropicana, has also suffered similarly in the past two days. A UBS analyst downgraded both from buy to neutral on Wednesday, citing economic headwinds as well as the Brazilian fungicide problem.

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