Toronto pet food maker Menu Foods plans a round of restructuring and cost-cutting to recover from its major product recalls this spring.
The company, a major North American producer of “wet” pet foods sold under in-house supermarket and grocery store labels, said today that it’s revised the estimated cost of recalling products made between last November and this March, up to $55 million from $45 million.
“The volume of customer returns and associated costs are now estimated to be greater than originally anticipated,” the company said in a release.
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The recalls follow cases in which house pets were sickened by foods containing tainted wheat gluten that the company traced to a specific supplier in China. The gluten was found to be adulterated with melamine, a chemical used in fertilizers and resins but sometimes used illicitly to give an appearance of added protein content in animal feeds.
The income fund said it will mark an accounting charge of just over $25 million, associated with severance resulting from a 10 to 15 per cent cut in its workforce, write-offs of some pre-recall packaging and inventory, write-downs of idle assets and the write-offs of “a previously capitalized customer relationship.”
Specifically, the company said, customers who represented about 37 per cent of its sales volume last year have since told Menu Foods that they’ll be buying their products elsewhere.
In “sharing the pain,” Menu Foods’ CEO announced he would take a 22 per cent cut in compensation, senior executives would take a 17 per cent cut and board members would take a 20 per cent cut.
The actual cash costs of these cutbacks to the income fund is expected to be only about $6.2 million, the company noted.
Menu Foods also announced Wednesday that it’s sealed the deal to sell its manufacturing plant at North Sioux City, S.D., to Mars, Inc., the California-based candy and food company whose pet food brands include Pedigree and Whiskas.
