How Toxic is LBO Debt? Food Safety Issues Spreading in PE-Owned Food
Following the overnight bankruptcy of the Topps meat company in October as a consequence of the second-largest recall of contaminated meat in US history, food safety concerns have again emerged in connection with private equity ownership of food companies.
Four cases of botulism poisoning in the US and 2 in Canada have been linked to carrot juice produced by private equity-owned Bolthouse Farms of Bakersfield, California, the largest North American carrot producer, with annual sales of ca. USD 400 million. Private equity investors Madison Dearborn Partners began buying up shares in Bolthouse in 2005, beginning with a USD 1.2 billion 57% stake in the business.
On September 29, the US Food and Drug Agency urged consumers not to drink the company's carrot juice when a Florida woman suffering from paralysis become the fourth US victim. "Cases of botulism from processed food are extremely rare in the US", noted the FDA. Two cases of botulism poisoning linked to the product were subsequently identified in Canada, suggesting the problem may be at the source or in the company's cold chain rather than lying with inadequate refrigeration on the consumer end, as Bolthouse has suggested. On October 9, the US Centers for Disease Control and Prevention noted in an official release that "information obtained from patient interviews regarding storage and transport of the carrot juice did not confirm mishandling by the patients."
Bolthouse recalled the suspect juices - and has begun laying off workers, starting with those responsible for…food sanitation, i.e. the key workers in the food safety chain.
On November 5, the Bakersfield Californian reported that "Wm. Bolthouse Farms Inc., one of the nation's largest carrot producers, last week told at least 100 workers they would be laid off from the company's Bakersfield plant on East Brundage Lane, according to the United Farm Workers labor union. Many of the affected workers were employed in the company's sanitation department, the unit responsible for scrubbing machines to protect against the spread of foodborne illnesses such as the E. coli bacteria, UFW organizing director Armando Elenes said.
"The UFW learned of the layoffs through worker reports and a Friday letter to workers from Bolthouse Farms human resources director Tom Selim.
"As most of you are aware, the Company is undergoing some organizational changes here at the E. Brundage Plant that are designed to improve our efficiencies as well as lower our operating costs," the letter reads.
"Layoffs associated with this reduction in force will become effective on January 2, 2008, which is the date we anticipate your employment will be terminated," the letter states.
Raul Montes, 42, says he worked for Bolthouse Farms for almost 10 years. He learned of his impending termination early Friday morning, after concluding his night shift in the sanitation department."
The following day, the paper reported that "About 200 workers at Bakersfield's Wm. Bolthouse Farms Inc. carrot production facility will lose their jobs around Jan. 2, according to a brief statement released by the company Tuesday.
"The total exceeds the United Farm Workers' Monday estimate of 100 to 120 affected workers.
"The layoffs are the result of a "restructuring of the company's organization" and will "help Bolthouse retain its competitive advantage," the release states."