Tiger Brands wiped more than R1bn off its market value after recalling millions of canned vegetable products on Monday in the latest food safety concern for a company that is still reeling from the discovery of the deadly Listeria strain at its meat processing factory.
About 20-million canned products in this recall include products from the Koo and Hugo’s canned vegetable range that were produced from May 1 2019 to May 5 2021. These include baked beans.
The crux of the safety issue is a welding technique that left defects in seams that could make the tins vulnerable to cracks and lead to leaks, Tiger Brands said in a statement, adding that it identified the issue as part of its internal quality assurance processes.
The recall raises fresh questions about food safety at Tiger Brands, which is still smarting from a deadly outbreak of listeriosis, caused by Listeria monocytogenes that hammered its reputation and triggered a class-action lawsuit from victims of the rare yet virulent form of food poisoning.
Shares in the company fell as much as 6.9% on the news before recovering slightly to close 3.86% weaker at R195.16, valuing Tiger Brands at about R37bn. The fall was its biggest since November 27 2020.
“This latest setback, combined with the lost sales from the recent unrest, will affect Tiger Brands’ ability to continue their positive sales growth trend,” said Sonam Ramlal, portfolio manager at The Robert Group.
“Tiger Brands will have to come up with even more efficiencies if they wish to improve operating margins,” said Ramlal.
The financial impact of the recall, including the cost of the potentially affected stock that may be written off, transport and storage costs, as well as the loss of margin on the returned stock, is estimated at between R500m and R650m, which is 2% of the group’s revenue.
Tiger Brands said no health issues to date had been reported relating to the affected product range, which makes up 9% of annual revenue. However, there is a low probability of illness and injury if the contaminated product is consumed.
In terms of the Consumer Protection Act, consumers have a right to fair value, good quality and safety, said Thezi Mabuza, acting head of the National Consumer Commission.
“While the commission is pleased with Tiger Brands’ investigation into this problem and the precautionary recall, consumer safety comes first.
“Therefore, the commission will only rest when all these products are removed from the market and consumers get their refunds.”
Koo canned fruit, which is produced using a different can from a different manufacturing plant, is not affected by this defect and does not form part of the recall. Koo canned pilchards are also not affected as the cans come from a different supplier.
“As things stand, it does seem that Tiger Brands has acted quickly and decisively, compared with [the] previous occasion when it handled the listeriosis case,” said Jeremy Sampson, CEO of Brand Finance Africa, a brand valuation consultancy house. “In a crisis situation, you act fast and maintain your integrity. Let’s face it, from time to time things like this will happen.”
Tiger Brands, which owns brands including Albany bread and Tastic rice, was still recovering from the fallout of the listeriosis outbreak, which damaged its reputation and cost investors billions of rand. Its share traded at about R390.53 before the outbreak in March 2018.
The listeriosis outbreak, which was traced to the company’s processed meats factory, triggered a yet-to-be resolved class-action lawsuit. It killed more than 200 people and left more than 1,000 sick.
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