AFA Foods files for bankruptcy citing 'pink slime' media damage

The Pennsylvania-based company, which is one of the largest ground beef processors in the US, filed for Chapter 11 bankruptcy protection from creditors on Monday at the US Bankruptcy Court in Delaware blaming damaging media coverage relating to ‘pink slime’ in part for its decision.

The company, which recorded revenue in 2011 of $958m, has seven facilities across the US – providing an annual ground beef processing output of 800m pounds.

Several major US retailers have vowed to end their stocking of ground beef products containing lean finely textured beef, now commonly known as ‘pink slime’, following pressure from consumers.

This pressure, which has already led to the temporary suspension of operations at three Beef Products Inc. facilities, has “put a fair amount of pressure on ground beef consumption”,​ according to ground beef producer Tyson Foods.

Media coverage​

“AFA Foods (AFA) today announced that, given recent changes in the market for its ground beef products and the impact of media coverage related to Boneless Lean Beef Trimmings (BLBT), it has determined that the best way to preserve value for its stakeholders is through an orderly sale of some or all of its assets,” ​said an AFA Foods statement.

“To ensure the most efficient sales process possible and to optimise the potential results for all parties, the Company has decided to execute this sales process under the protection of the United States Bankruptcy Code.”​

The company has secured $56m in financing from its current lenders, GE Capital and Bank of America, in order to continue operations during the bankruptcy proceedings.

In the meantime, it has vowed to provide its customers with the “finest, safest, highest quality ground beef products throughout this process.”​

AFA Foods interim CEO Ron Allen said: “We believe an orderly sale through Chapter 11 will allow us to unlock this value and provide a smooth transition for our employees, customers and other business partners.”​

Beef demand ​

Controversy surrounding the use of ‘pink slime’ has led to claims by Tyson Foods chief operating officer Jim Lochner that beef demand has been hurt in the short time by the media-storm.

According to Lochner, consumer pressure and a lack of support from retailers has “put a fair amount of pressure on ground beef consumption.”​

Lochner added that the dismissal of ‘pink slime’ would lead to tighter beef supplies and higher prices – a view echoed by the American Meat Institute (AMI) which has claimed that more than 1.5m cattle will need to be slaughtered to compensate for the formulation changes.

Several major US retailers have already bowed to consumer pressure and vowed to end their purchase of ground beef products ‘pink slime’.

Following the retailer pledges, the biggest 'pink slime' producer in the US Beef Products Inc. announced that it would temporarily suspend operations at three of its US plants.

“In an effort to protect our company and its family of employees from the recent unfounded and misguided attacks on our Boneless Lean Beef Trimmings, we have had to make some unfortunate and very difficult business decisions,”​ said Beef Products Inc. president and CEO Eldon Roth.