Chicago - Customers may be wary of buying Sara Lee Corp.'s hot dogs and other meats after the products were linked to an illness that killed at least 6 people, but analysts said it won't permanently stain the image of a company that built its reputation on pie and cheesecake.
Sara Lee's Bil Mar Foods division last month voluntarily recalled hot dogs and other meat products made at its Zeeland, Mich., plant after an outbreak of a food-borne illness. The meat may be contaminated with the Listeria bacterium, which causes an illness that can kill infants, the elderly and people with weakened immune systems.
Researchers at the U.S. Centers for Disease Control and Prevention (CDC) on Thursday said six adults have died and two pregnant women have had spontaneous abortions since August because of meat products containing Listeria bacteria.
“Typically, when there is a recall or a food-safety issue, what you see is a temporary drop-off in consumption,” said Janet Riley, spokeswoman for the American Meat Institute, which represents meat packers and processors. “Typically, you see consumption come back over time,” she said.
Sara Lee is the fifth-largest U.S. meat company with annual revenues of more than $3 billion from its meat division alone. Its meat products include Ball Park hot dogs, Sara Lee deli meats and many other brands, but it also makes such diverse products as Coach handbags and Playtex bras.
Sara Lee spokeswoman Theresa Herlevsen said the Chicago-based food and consumer products company is fully cooperating with federal investigators to determine the source of the Listeria contamination.
“We are working very closely with the CDC and we're confident that we've taken the most responsible action that we can for our consumers,” she said.
Listeriosis can cause fever, muscle aches, nausea and diarrhea. The CDC said about 1,850 people become seriously ill with listeriosis each year and on average 425 of them die.
Consumers have been bombarded with food-safety issues recently, which may add to concerns about eating meat. In the last few months alone, several other companies including meat producer Hormel Foods Corp. (NYSE:HRL - news) and food retailer Winn-Dixie Stores Inc. (NYSE:WIN - news) have also recalled meat products because of possible contamination.
Still, analysts said Sara Lee's recall shouldn't have a significant impact on the company's earnings.
“After an incident like this, some brands falter but others recover without difficulty,” Eric Katzman, food industry analyst with Merrill Lynch, said in a research note on Friday.
Katzman said in the worst-case scenario, Sara Lee's sales would fall $250 million because of the recall, and its 1999 earnings would fall by 1 to 2 cents per share. Sara Lee has annual revenues of about $20 billion.
The Michigan plant is one of the largest of Sara Lee's 18 plants. Katzman estimated it produced about $240 million in sales, or about 8 percent of Sara Lee's total meat sales.
Herlevsen said Sara Lee did not release information about sales or production of individual plants.
Herlevsen said the company did not expect the recall to taint its image because it was issued in the earliest stages of the CDC investigation. That should reassure consumers that Sara Lee will act responsibly if there is ever a problem with its products, she said.
“They (consumers) can expect and know that these products are wholesome and healthy,” Herlevsen said.
Shares of Sara Lee were down $1.125 at $26.50 on the New York Stock Exchange.
Meat Industry Insights News Service
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