New York - Shares of Food Technology Service Inc. and SteriGenics International Inc. rose sharply Friday after the Clinton Administration unveiled rules for treating red meat with irradiation to kill dangerous foodborne diseases.
The guidelines cast the spotlight brightest on Food Technology, a tiny Mulberry, Fla.-based company with less than $1 million in annual revenues that operates a facility that uses gamma radiation to kill bacteria in meats.
Food Technology was one of the biggest gainers on the Nasdaq, closing $1.81 higher at $4.31, on volume of 2.1 million shares, more than 90 times its normal daily average. It hit an intraday high of $6, its strongest level since last May.
The news also boosted shares in SteriGenics, which closed up $1.50 at $19.125 on the Nasdaq. The Fremont, Calif.-based company has about 13 facilities and roughly 25% of its business is dedicated to food irradiation.
SteriGenics President James Clouser, who estimates that Americans eat about seven billion pounds of hamburger every year, said the rules will have a gradual impact as facilities are built. He likens the irradiation process to an X-ray.
“It has to be an evolution not a revolution,” Clouser told Reuters. “We can process millions of pounds of hamburger today, but the reality is you have to build new plants...”
The rules, which will not be finalized until later this year, require the international radiation symbol on labels plus a statement indicating a product was treated with irradiation. Irradiation was developed a generation ago by Pillsbury Co. to prepare safe food for U.S. astronauts; the technology has been used on spices, cereals and other foods for years.
Thomas Gunderson, an analyst at Piper Jaffray, said that while meat processors may decide to build irradiation facilities near their warehouses, they will likely opt to outsource the complicated process.
“There is a slow change in public perception,” Gunderson said. “People used to think 'Oh my God, radiation! I'll glow at night!' Now they are thinking that the food may not be that good, and they might like it to be irradiated.”
Although the rules do not require companies to adopt the procedure, consumers are using a string of foodborne illnesses to raise the heat on meat sellers, according to Gunderson.
Some consumers complain about the slightly off taste of irradiated meats, but experts say that the technology could have destroyed deadly bacteria that recently contaminated hot dogs and lunch meat made by a Sara Lee Corp. plant in Michigan. The outbreak was blamed for 16 deaths.
A third company, Steris Corp., is also poised to benefit from a heightened focus on food safety.
Mentor, Ohio-based Steris focuses on sterilizing medical equipment but operates a division, called Isomedix, that irradiates food. Its stock, however, slipped 87.5 cents to close at $30.06 on the New York Stock Exchange.
Steris earned about $23 million on revenues of $205.8 million in its third quarter, versus $18.2 million on revenues of $186.6 million for the same year- earlier period.
SteriGenics earned $1.9 million on revenues of $13.4 million, compared to net income of $1.4 million on revenues of about $11.8 million for the third quarter a year ago.
Food Technology employs 10 people and operates just one plant in Florida, but Chief Executive and President Pete Ellis is hoping the proposed rules will fire up sales. It has lost about $1 million annually for the last five years.
“(The guidelines are) good news for us and our shareholders,” Ellis told Reuters.
He said he has talked with major retailers and meat processors who had anticipated the release of the guidelines. He wants to count some of the major supermarket chains among his customers and own about five facilities by year's end.
Meat Industry Insights News Service
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