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No matter what big companies claim,
they're all about the money, and many pet owners are now
choosing the safety and health of their pets over the
convenience of store bought pet foods that might contain
dangerous or deadly ingredients. Find out
What's Really in Dog Food
and you may decide to change what you are feeding your
pets as well.
Despite the recall, pet food maker is still a large
supplier
By Ian Austen Published: March 22, 2008
OTTAWA: Like many retail chains, PetSmart quickly pulled
several varieties of wet dog and cat foods made by Menu
Foods, a Canadian manufacturer, that were recalled and
have since been linked by the U.S. Food and Drug
Administration to the deaths of 14 animals.
But while the recall left empty spaces on the shelves of
PetSmart's 908 outlets, the stores still carry cans and
pouches of food made by the same company.
"We are continuing to receive some products not affected
by the recall from Menu Foods," said a spokesman for
PetSmart, Bruce Richardson. "They're a significant
supplier for everybody who does wet pet food.
Unfortunately for consumers, there were only three or
four retailers named. But virtually any major retailer
that sells pet food relies on Menu."
PetSmart is not alone in buying from Menu, whose plants
in Canada and the United States are still operating
while investigators try to determine what went wrong
with the recalled products.
Menu executives told financial analysts this week that
the company was still shipping products to Procter &
Gamble, which has contracts with Menu to produce some
Iams and Eukanuba wet foods. Procter & Gamble did not
respond to requests for comment.
Most of Menu's customers do not have long-term supply
contracts tying them to the company, but they have
nowhere else to take their business.
Menu's name is little known because it lacks its own
brands. But over the past few years, it has come to
dominate the business of making wet pet food for
retailers, and it is a widely used contract producer for
brand-name marketers like Procter & Gamble.
Other major makers of wet pet food, like Nestlé, avoid
contract work for other companies; some, like Del Monte,
are fully booked by Wal-Mart Stores. There are other
companies in the industry, including American Nutrition,
but they lack the production capacity to replace Menu.
The recall affects only wet dog and cat foods that are
chopped up and mixed with a sauce, known in the industry
as "cuts and gravy." It is not possible to determine how
many retailers and manufacturers continue to buy other
types of wet food from Menu.
This week a spokeswoman for Menu, Sarah Tuite, forwarded
a written list of questions to the company's executives.
No response came from Menu beyond an e-mail message in
which Tuite wrote: "I know all of our executives are
extremely focused on the recall right now, and working
around the clock to exhaustively test finished product
and determine where the problem lies."
Karen Burk, a spokeswoman for Wal- Mart, said its stores
had removed all Menu products. She added that Menu had
produced only selected sizes of house-brand products for
Wal-Mart. Citing company policy, she declined to say
whether Wal-Mart would continue to use Menu as a
supplier.
Several other Menu customers, including Safeway, Kroger
and Pet Valu, did not respond to interview requests.
Menu expects the recall will cost as much as 40 million
Canadian dollars, or $35 million, and many analysts are
cautious about its future.
Menu was founded in 1971 when Donald Green, its former
chairman, bought a pet-food plant in the Toronto suburb
of Mississauga, Ontario, from Quaker Oats. But it was
not until this decade that the company developed its
broad reach in the North American market.
In 2001, Menu bought the wet food operations of Doane
Pet Care, a major contract producer of dry foods in the
United States, for $15 million. Menu became a publicly
held company the next year.
Like many Canadian corporations at the time, Menu did
not become a traditional equity-based company. Instead,
it was listed on the Toronto Stock Exchange as an income
trust, a structure that avoids most corporate taxation
because most of the company's income is paid directly to
unit holders, the equivalent of shareholders.
In 2003, the company acquired a Procter & Gamble plant
in North Sioux City, South Dakota. With that came a
five-year supply agreement that accounted for about 11
percent of Menu's 356.1 million dollars in sales last
year.
On Tuesday, CIBC World Markets downgraded Menu to a
"sector underperform" rating and set a 12- to 18- month
unit price target of 3.50 dollars. At the time of the
initial offering, the units were priced at 10 dollars.
But at least one analyst, Aleem Israel of Sprott
Securities in Toronto, is confident that the company's
market dominance will be its salvation and has upgraded
the fund to "buy."
"We do not expect major fallout from customer
defections," Israel wrote in a note to investors
Wednesday. "Menu remains the largest wet pet-food
manufacturer in North America, and its track record of
safety and quality assurance has been strong."
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