020130 Beef Scandal Deals New Blow to Japan's Snow Brand

Tokyo - Japan's Snow Brand Food Co Ltd said it had falsely claimed Australian beef was Japanese in an attempt to get state cash after the outbreak of mad cow disease, prompting a hefty slide in its share price.

Snow Brand Food is 65% owned by Snow Brand Milk Products Co Ltd , Japan's largest maker of dairy products, whose reputation has yet to recover from a poisoning scandal in June 2000, which left over 10,000 people ill.

The meat packing unit said employees had put 13.8 tonnes (13,800 kg) of Australian beef into boxes marked for Japanese beef last October, as part of a 280-tonne sale to a government- subsidised industry group.

Japanese Prime Minister Junichiro Koizumi said Snow Brand had broken the law and would be investigated.

"This is illegal. It hurts not just Snow Brand's name but the public," he told reporters. "We need to throughly investigate."

The Japan Meat Processors Association purchased the beef as part of a government effort to alleviate a slowdown in sales of domestic beef and remove uninspected beef from the market following the outbreak of mad cow disease last September.

"Such wrongdoing is inexcusable," the government's top spokesman, Yasuo Fukuda, was quoted by Kyodo news agency as telling reporters. "I doubt this case is the only one."

The news drove down shares of Snow Brand Food to a new lifetime low of 64 yen, before they closed at 72 yen, down 21.74% from Tuesday.

Despite efforts by Snow Brand Food to distance its parent from the scandal, shares in Snow Brand Milk also plummeted, falling 49 yen or 21.88% to 175 yen.

"Since it was our employees who did this, I can only apologise," Snow Brand Food President Shozo Yoshida told a crowded news conference.

"This matter does not concern our parent company, Snow Brand Milk. The responsibility lies with our company alone," he said.

Snow Brand Milk said in a statement it plans to order a thorough investigation into the matter and will direct all of its group companies to comply with the law.

SLOWING SALES

Snow Brand Food said a manager of one of its meat processing unit in the Kansai region in western Japan had become worried about a build-up of beef inventory and ordered a warehouse company to fill boxes marked for Japanese beef with Australian.

It added that the manager had not falsely labelled beef again in November and December, when similar sales to the meat processing association took place.

Despite government assurances about the safety of Japanese beef, sales have slowed dramatically after the first reported case of mad cow disease whose human variant is thought to have killed more than 100 people in Europe.

Japan's Agriculture Minister Tsutomu Takebe told a news conference his ministry had already begun an investigation into the incident, describing it as "like a criminal act".

Snow Brand Food said it would return the payments of about nine million yen ($67,280) it had already received from the Japan Meat Processors Association. Snow Brand Food was slated to receive about 300 million yen for the 280-tonne sale.

Snow Brand Milk is still trying to recover consumer confidence after the poisoning scandal almost 18 months ago, which forced the company to post a group net loss of 52 billion yen in 2000/01.

Its shares have tumbled over 70% in value since late June 2000 and expectations are for another loss in the current business year to March.

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