Do things differently?
In retrospect would you have handled the contamination crisis any differently? Would you have implemented the recall sooner?
Henderson : Recognize that for several weeks, there was conflicting information about whether a problem even existed, let alone what the source of that problem might be. Even in the face of inconclusive data, we acted. We demonstrated our responsibility to our customers, the petfood industry and pet owners, by acting with diligence and speed. We devoted our technical resources to finding out what was going on. Even before wheat gluten was identified as the possible source of problems, we suspended its use out of an abundance of caution. Menu Foods' first recall was more than two weeks before any other manufacturer initiated their recall. This is evidence of our commitment to the safety and quality of our products, to our customers and to the pet owners they serve.
Keys to recovery
What are your company's keys to recovering from the recall crisis?
Henderson : As you might expect, there have been a lot of sleepless nights over the melamine and related compounds (MARC) recall. Our employees have rolled up their sleeves and are doing everything they can to move the company forward: by designing and putting in place a series of concrete programs and measures to reinforce customer confidence in Menu Foods.
Our people in the trenches-our direct sales force-are industry veterans who well understand the importance of trust between customer and supplier. With the support of our technical staff, they have been tireless in their efforts to explain in detail to our customers and potential customers our quality assurance efforts. The vast majority of our customers recognized that we were not responsible for this situation and have stuck with us through this difficult time.
We have every confidence we will recover from this. No one is pretending the road back is an easy one. But we have a lot going for us. We are a strong company in a strong business.
New industry-wide safeguards
What needs to be done industry-wide to address petfood safety?
Henderson : The globalization of the animal and human food supply systems is a fact. But this trend in globalization brings new challenges, requires new safeguards, the resources to implement them and a new determination to strengthen our controls. Such an initiative demands industry-wide cooperation and action. Through the Pet Food Institute (PFI), Menu Foods will participate in the recently announced National Pet Food Commission to provide oversight and direction in establishing increased safeguards within our industry.
What is the outlook for the future of your company? Any projections or possible new directions?
Henderson : We will rebuild our business and seek out new growth. For the vast majority of our remaining customers, Menu Foods has either resumed shipment of cuts and gravy products or will do so during the third quarter. For those remaining customers we continue to work to get them as much useful information as quickly as possible so that they can make informed business decisions about restarting their business with us. Our lenders have been very supportive. We have every confidence that we can recover from this.
Given the support we've received and our employees' commitment, we intend to continue as a high quality provider and market leader in the petfood industry. We'll be in business for a long time.
Why was the entire petfood industry baffled by the inclusion of melamine and related compounds in petfood ingredients? The Chinese have reportedly been adding melamine to plant protein products for several years. Who should have checked up on these Chinese suppliers?
Henderson : At the recent Global Food Safety & Quality Conference, Dr. David Acheson, assistant secretary for food protection at the US Food and Drug Administration (FDA), said, "Melamine was an out-of-the box risk FDA had not thought about. There was not even a definitive analysis measure for melamine." We at Menu were also unaware of any reports that melamine or related compounds were suspected as a component to the vegetable proteins used by the human or petfood industries. Since the incident, Menu no longer sources vegetable proteins from China, and we test all vegetable proteins for melamine.
It is wrong to characterize the melamine and related compounds (MARC) recall as a failure of supplier quality programs. It was the result of a fraudulent act by Chinese suppliers that no one could have anticipated.
Given Mars recent tendency to purchase companies recovering from a major setback, has Mars shown interest in purchasing Menu?
Henderson : On August 9, 2007, Menu announced that we entered into agreements to release Mars from certain contractual obligations to purchase product from Menu and to sell Mars our production facility in North Sioux City, South Dakota, USA. We believe this is in the best interests of our company and our unit holders. Going forward, we will meet our expected customer demand through our three remaining facilities. Menu will receive a total of US$26.3 million under the terms of these transactions, which will be used to reduce indebtedness with secured lenders. The release is effective immediately, and the plant sale is expected to close about October 1, 2007.
How has the recall changed your relationships with your suppliers?
Henderson : We are part of a global economic environment where it is common to source suppliers worldwide. Manufacturers all have to heighten our awareness to ensure we work with the best suppliers available. Menu has made changes in our own processes and we suspect that many other companies and industries are doing the same.
The entire industry was affected by the fraudulent acts of the Chinese wheat gluten suppliers. The globalization of the animal and human food supply systems is a fact. But this trend in globalization brings new challenges, requires new safeguards, the resources to implement them and a new determination to strengthen our controls. Such an initiative demands industry-wide cooperation and action.
I can tell you that Menu Foods no longer sources plant proteins from China and we are actively looking at new US and European suppliers for other ingredients that have been traditionally provided by Chinese suppliers.
What surprised you the most about this entire ordeal?
Henderson : The fraud by the Chinese suppliers was a surprise to the entire industry. No one in this industry suspected melamine. It just hasn't ever happened before and none of the industry standard tests, which we all used, could have detected it. To our knowledge, no petfood or human food manufacturer had ever tested wheat gluten for melamine prior to this.
As pet owners ourselves, it was difficult. We were very saddened by the events. It is a complex story. The MARC recall affected as many as 11 petfood manufacturers and is a watershed moment in the petfood industry.
What's your opinion of the media's handling of the situation?
Henderson : From the moment we announced the first recall, media coverage has been extensive and for a time it seemed almost constant. While there were more than a few instances of erroneous reporting, the fact remains that the coverage did facilitate the publication of all brands affected. This helped pet owners identify and return contaminated products listed in the recall. So that was good.
From a communications perspective, what are the most important things to do in a situation like the recall crisis?
Henderson : We work to get as much useful information to our customers as quickly as possible. Our direct sales force is made up of industry veterans who understand the importance of trust between customer and supplier. With the support of our technical staff, they worked with our customers to understand and implement the recall and then to explain in detail to our customers and potential customers our quality assurance efforts. We are dedicated to getting the word out that we are producing products with industry-leading quality.
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