Pink Slime Maker Files For Bankruptcy: Pink Slips Galore As The Pink Sheets Beckon
In the first of two major bankruptcy stories du jour (the next one coming up shortly), we learn that AFA Foods, best known for being the maker of "pink slime", and a portfolio company of labor unions and Clinton afficionado Ron Burkle and his PE firm Yucaipa, has just filed for bankruptcy. The reason? The sudden public realization what pink slime is, and just how prevalent it is - perhaps it is best to think of it as the Bernie Madoff of the food industry - it was always there, yet it took a wholesale shift in public awareness and consciousness for the firm to realize it would have been prudent to come up with a slightly different name for its ground-beef product. As for whether or not the company is going to the pink sheets, well no. But one thing is certain: the management team is about to get a pink slip.
Celebrity chef Jamie Oliver is among food activists who have criticized the use of what they dubbed “pink slime,” a filler produced by treating finely ground beef scraps with ammonia hydroxide to kill pathogens. Beef Products Inc. last week temporarily suspended production at three plants because of consumer concerns. U.S. Agriculture Secretary Tom Vilsack said March 28 that the product, referred to in the industry as lean, finely textured beef, is safe to eat.
“Ongoing media attention has called into question the wholesomeness” of the meat, and has “dramatically reduced the demand for all ground beef products,” AFA interim Chief Executive Officer Ron Allen said in court papers.
Ground beef demand will soften in the next several months as consumers shift to meat that doesn’t contain the lean, finely textured beef, said Ann Gurkin, an analyst for Davenport & Co. Last month, the USDA said schools in the government’s lunch program can order ground beef without the product following public pressure to remove it from cafeterias.
It is initially unclear what impact on cattle prices this development will have, as there are major shifts in both supply and demand.
Reduced use of the product will further tighten beef supplies, said Gurkin, a Richmond, Virginia-based analyst who has a “buy” rating on Tyson. U.S. beef production will drop 4.4 percent in 2012 from a year earlier, the USDA forecast March 9.
Given the issue has only come up in the past few weeks, the effect on Tyson’s sales and earnings is unclear, Gurkin said. She said she is “monitoring” it because demand usually rises with the approaching summer grilling season in the U.S.
Among AFA’s largest unsecured creditors listed in court papers are meat suppliers Orleans International Inc., owed $8.3 million, and Tyson Fresh Meats (IBP), owed $3.27 million.
One thing is certain: the company's 850 workers are about to be without a job, which ironically is good - in the BLS' seasonally adjusted lexicon this means a gain in jobs.
AFA has about 850 full-time employees and annual revenue of $958 million, according to the statement. The company obtained a $56 million credit line from GE Capital and Bank of America Corp. (BAC) to carry it through the bankruptcy process.
While one can hope that as a result of this food fiasco Americans will become more self-aware about the color of the slime they ingest, one would be wise to not hold their breath: after all we are talking about America here.
By the way, the caption picture is not of pink slime. It is of the just as appealingly titled "meat slurry", core product of chicken "nuggets."
Guess What’s in The Picture [Foodlike Substance]
A) Strawberry ice cream
C) Plastic foam
D) None of the above
What you need to know:
Folks, this is mechanically separated chicken, an invention of the late 20th century. Someone figured out in the 1960?s that meat processors can eek eke out a few more percent of profit from chickens, turkeys, pigs, and cows by scraping the bones 100% clean of meat. This is done by machines, not humans, by passing bones leftover after the initial cutting through a high pressure sieve. The paste you see in the picture above is the result.
This paste goes on to become the main ingredient in many a hot dog, bologna, chicken nuggets, pepperoni, salami, jerky etc…
The industry calls this method AMR – Advanced Meat Recovery.
In 2004, as a result of mad cow disease (Bovine Spongiform Encephalopathy), the USDA’s Food Safety and Inspection Service (FSIS) ruled that beef could no longer be processed this way, because testing showed that parts of the bovine central nervous system ended up in the meat.
As for products using mechanically separated chicken and pork, FSIS ruled that they are safe to eat, but required them to be labeled as such.
Despite them being safe, FSIS states that no more than 20% of the meat in a hot dog come from mechanically separated pork.
What to do at the supermarket:
It’s always a better to choice to see a real cut of meat at the butcher counter in the supermarket and then decide what you want done with it. Buying something prepared in a factory, such as chicken nuggets, or hot dogs, you’ll always get the worst meat, and it will always be combined with additives and other sources of fat.