Meat recall could cost millions more: Maple Leaf

The ongoing recall of Maple Leaf Foods products will cost the company at least $20 million directly, but it's too early to say how much more of a hit it will take in lost sales and to pay for advertising to rebuild its image, the conglomerate's CFO says.

The recall of Maple Leaf Foods products will cost the company at least $20 million directly, but it's too early to say how much more of a hit it will take in lost sales and to pay for advertising to rebuild its image, the Toronto-based food conglomerate's CFO said Monday.

"We are internally unable to estimate the effect on sales going forward," Maple Leaf's Michael Vels said.

Over the weekend, a Maple Leaf meat plant in Toronto was confirmed as involved in a Canada-wide outbreak of the food-borne bacterial illness listeriosis. Maple Leaf upgraded a precautionary recall of 23 of its products, issued last week, to all 220 packaged meats from the plant. It said the recall would directly cost $20 million in refunds to customers and fees to sanitize its facilities — 10 times more than first estimated.

But the resulting sting to Maple Leafs' image could cost millions more in lost sales, Vels told analysts Monday in a conference call.

Vels also said the company would probably have to boost spending for advertising and customer relations as a result of the recall, but that those costs would pale in comparison to the hit to sales. Maple Leaf has taken out public-service advertisements on TV to publicize the matter.

The company plans to record charges related to the outbreak in its financial third quarter, Vels said.

Shares of Maple Leaf were down $1, or 10.2 per cent, to $8.80 at the close of trading Monday in Toronto. Before news of the recall emerged last week, the stock was trading in the $11 range.

Maple Leaf Foods three-month TSX chart

Vels said Maple Leaf is confident that its recalls have been effective, but he acknowledged the process is complicated and affects products that may have been manufactured as early as January 2008.

"Our primary responsibility and need at this stage has been to remove the recalled products from the market.... We've provided the list of products and we've been in direct contact and have talked with every single one of the customers and distributors that have received and distributed that product."

Efforts to sanitize the Toronto facility were going well and the company hopes to reopen it on Tuesday, pending further test results, Vels said.

12 deaths

Provincial and federal health officials said Monday afternoon they had begun using a more inclusive method for tallying outbreak cases to make sure none was missed.

By that count, the outbreak, caused by the bacterium Listeria monocytogenes, has been linked to 12 deaths out of 26 confirmed cases of the disease in British Columbia, Ontario, Quebec and Saskatchewan. Eleven deaths were in Ontario and one was in B.C.

A further 29 cases of listeriosis remain under investigation as possibly spawned by the outbreak, officials said at a news conference in Ottawa on Monday.

On Saturday night, public health agents disclosed that lab tests conducted by Health Canada showed the link between the outbreak and two recalled meat products from Maple Leaf.

Test results for a third product were a close match to the outbreak strain, but showed a slight variance. The recalled Maple Leaf meat products include products sold under the Schneiders, Sure Slice, Deli Gourmet and Burns Bites brands. Maple Leaf meat products are also distributed to nursing homes, restaurants and deli counters across the country — including McDonald's and Mr. Sub.

Maple Leaf president and CEO Michael McCain said Sunday at a news conference in Toronto that the expanded recall at the Maple Leaf plant was a precautionary measure and that no trace of the listeria strain had been found in any products beyond the ones that were recalled earlier this month.

"We had to take the most conservative approach possible … and recalled 100 per cent of the production from the entire facility," McCain said.

On Monday, a Calgary-based company said over two dozen of its sandwiches, some of which contain Maple Leaf Foods deli meats, might also be contaminated with listeria. Lucerne Foods said it is recalling 28 varieties of sandwiches under the Safeway and TakeAway Café brands at Safeway and Mac's convenience stores in Alberta and Saskatchewan.