The Market Impact From Pink Slime

By Rebecca Lipman | March 29, 2012 AAA

Written by Rebecca Lipman


History tells us these things tend to blow over pretty quickly. Consider: Do you still eat pork after the H1N1 scare? Probably. But the pink slime issue has hit such heights of disgust with consumers, who have loudly demanded it stay out of their supermarkets, fast food, and especially school lunches.

The outcry went so far as to have shut down three of its four Beef Products Inc. plants that produce the meat, and the owner has admitted the product is pretty much done with.

School Lunches
The U.S. Department of Agriculture, which buys the product for its national school lunch program, came under attack for its use of the product. No matter that of the 117 million pounds of beef ordered nationally for school lunches last year, "only" 6% was pink slime.

Fact is, the beef is mixed with other beef, so eating a school burger is really a roll of the dice. "That means anywhere from none to nearly 3 million pounds of beef from the USDA that was served in California schools last year could have been lean finely textured beef," reports the Huffington Post.

Schools now have the option to reject pink slime products in their school lunches... There's really no mystery over what schools chose.

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Business Section: Investing Ideas

Concerned and disgusted consumers are now searching for meat of a higher quality. Many meat suppliers like Tyson Foods Inc. (NYSE:TSN) have taken a hit from the controversy. Yet CEO Jim Lochner says he doesn't expect this pressure to last more than two weeks.

If that's true, perhaps the companies seeing gains over the pink-slime hype will be brought back to prior levels, and vice-versa for those who lost ground from lower demand.

Others on the front lines of the debate include major supermarkets such as Kroger Co. (NYSE:KR), Safeway Inc. (NYSE:SWY) and Supervalu Inc. (NYSE:SVU) which announced they would phase out the product's use. As did Walmart (NYSE:WMT).

McDonald's (NYSE:MCD), Taco Bell (NYSE:YUM) and Burger King all decided in January they would stop using the "pink slime" in their food after pressure from celebrity chef Jamie Oliver. This is a hit to margins as purer meats will come at a higher cost.

Here's a list of companies with significant exposure to Pink Slime. (Click here to access free, interactive tools to analyze these ideas.)

1. The Kroger Co. (NYSE:KR): Operates as a retailer in the United States

2. McDonald's Corp. (NYSE:MCD): Operates as a foodservice retailer worldwide

3. SUPERVALU Inc. (NYSE:SVU): Operates retail food stores in the United States

4. Safeway Inc. (NYSE:SWY): Operates as a food and drug retailer in North America

5. Tyson Foods Inc. (NYSE:TSN): Engages in the production, distribution, and marketing of chicken, beef, pork and prepared food products, as well as related allied products worldwide

6. The Wendy's Company (Nasdaq:WEN): Operates as a quick-service hamburger company in the United States

7. Whole Foods Market, Inc. (Nasdaq:WFM): Engages in the ownership and operation of natural and organic food supermarkets

8. Wal-Mart Stores Inc. (NYSE:WMT): Operates retail stores in various formats worldwide

9. Yum! Brands, Inc. (NYSE:YUM): Operates as a quick service restaurant company in the United States and internationally.

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Disclosure: Kapitall's Rebecca Lipman does not own any of the shares mentioned above.

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