TORONTO - Maple Leaf Foods said Monday it's bracing for a decline in sales on top of a $20-million product recall after a deadly outbreak of Listeria, but experts say the company has done everything it can to rebuild consumer confidence and should bounce back relatively quickly.
In newspaper and television ads released this weekend, Maple Leaf CEO Michael McCain offered a surprisingly candid apology on behalf of his company.
"We have an unwavering commitment to keeping your food safe with standards well beyond regulatory requirements, but this week our best efforts failed and we are deeply sorry," McCain said in the ad, which was also posted on the YouTube website.
"Tragically our products have been linked to illnesses and loss of life."
The massive recall was launched after Listeria bacteria was detected on some of the goods produced at one of the company's Toronto plants. Six people have died and six other deaths are under investigation as a result of the outbreak. The deaths are part of a total of 26 cases with confirmed links to the outbreak.
Despite McCain's apology, Maple Leaf chief financial officer Michael Vels told analysts Monday morning that no direct link has yet been made between the deaths and his company's products.
Senior executives have acknowledged that the same strain of Listeria that has been linked to the fatal outbreak has also been detected in the company's Toronto plant.
But Vels said the expanded recall announced on Saturday, as well as the less extensive recalls announced on Aug. 17 and 19, were done voluntarily and as a precaution.
Vels added that "there's no evidence of Listeria contamination in our products beyond the production lines originally under investigation" and confirmed the company does carry food liability insurance.
The multibillion-dollar food giant's quick and thorough response to the outbreak -- including recalling 220 products as a precautionary measure and closing the plant for several days -- will help ensure the company won't suffer any serious long-term damage, said analyst John Winter of John Winter and Associates.
"I think that as they've acted extremely responsibly, after a short while the consumers will forget about it... they've got a very short memory," said Winter.
"They're a leading company in their field, they produce good products and they have stepped into the breach when necessary, so in six months everybody will have forgotten about it."
Winter compared Maple Leaf's response to that of Johnson & Johnson, one of the world's biggest makers of health and consumer products, when seven people in the Chicago area died after taking cyanide-laced capsules of Extra-Strength Tylenol in 1982.
At the time, experts predicted that the brand would never recover, but within a year Johnson & Johnson had almost entirely regained its former share of the painkiller market.
The company's chairman, James Burke, was praised for initiating the extensive recall, which removed 31 million bottles of Tylenol from store shelves, and for his openness in discussing the situation with the public and the media.
"Maple Leaf's strategy is almost a textbook copy of what Johnson & Johnson did," agreed David Dunne, a marketing professor at the University of Toronto's Rotman School of Management.
"So if this is done well it can really mean that the brand doesn't have to suffer too much."
Maple Leaf stocks were down $1 to $8.80, a drop of just over 10 per cent in Monday trading on the Toronto Stock Exchange.
But Dunne said it might have been much worse and investors seemed to be responding well to Maple Leaf's policy of openness.
"What they're doing is protecting the brand and it's the brand that matters in the long term for Maple Leaf. Without the brand they don't have anything," he said.
"So they've been very, very proactive about it, unusually so, because most companies that go through crises of this nature tend to hide.... It's quite commendable from a business point of view."
But University of Alberta business professor Adam Finn said things will likely get worse for Maple Leaf before they get better.
"I think there's enough lawyers out there that like this kind of business that there will be lawsuits," he said, adding that the company should recover if it continues to handle the outbreak responsibly, but even then, it's unlikely they will ever completely regain their market share.
"I think they will recover but not entirely," said Finn.
"They can recover a very high proportion of their business, maybe 95 per cent, 98 per cent. There's only a few hardcore people who won't go back to eating roast beef. But if they don't handle it properly, then it can be a significant loss of business."
Dunne said Maple Leaf has done everything it can to protect its brand, but the end result will ultimately depend on the extent of the outbreak -- something officials have said won't be known for weeks.
"The reality is that the risks are huge, because you're not just looking at an isolated part of the business, but you're looking at a risk to every product that has the Maple Leaf name on it," he said.
"It's going to take some time for them to recover from it no matter what they do. But this kind of thing at least can help keep them in people's minds as a company that's reasonably trustworthy and when there is a problem, they face up to it and deal with it."
Maple Leaf is a multibillion-dollar food giant, whose Dempster's bread, Maple Leaf bacon and ham, Shopsy's and Burns hot dogs, Nutriwhip toppings and Tenderflake lard are well-known Canadian brands, which helped the company generate revenues of more than $5.2 billion last year.
The recall comes at a time when Maple Leaf is losing money and streamlining its meat business as it faces rising inflationary pressures on its global operations.
In its recent second quarter, the company widened its loss to $9.4 million from $1.7 million as restructuring charges offset a jump in sales.
Maple Leaf, formed years ago from the merger of Maple Leaf Mills and Canada Packers, employs about 24,000 people and has operations across Canada, the United States, the United Kingdom and Asia.
The company produces prepared meats and other consumer foods, as well as animal feed and fresh pork. It also owns Canada Bread Company, which produces the Dempster's and Olivieri brands.
Maple Leaf wants to focus on its higher value-added meat and meals business and scale back its hog processing and fresh pork operations in a restructuring expected to be completed by the end of next year.
The Toronto-based company says it expects to record the financial charges resulting from the outbreak in its third-quarter financial results.
