Menu Foods Income Funds is still feeling the effects from the massive pet food recalls that started in March of this year.
The company has lost yet another major contract with its largest customer, believed to be Procter & Gamble by analysts.
Cincinnati-based Procter & Gamble sold the Menu Foods products under the Iams and Eukanuba brand names.
Menu Foods said that it received “verbal notice” on Tuesday from the unnamed customer that it plans to end its agreement to buy “loaf” products from the company as of October 1.
The unnamed customer’s purchases of those products made up nearly 10.8 percent of Menu Food’s sales volume in 2006.
In June, Menu Foods said the same customer would no longer buy its “cuts and gravy” product, which made up about 11 percent of last year’s sales.
“Menu Foods is disappointed in the reaction of this customer to the pet food recall. The intentional tainting of product inputs from a third party supplier in China was a fraudulent act that victimized many pet food manufacturers, customers and consumers,” Paul Henderson, Menu’s president and chief executive, said in a statement.
Menu Foods stated that the company has acted decisively and has been working with their customers and the entire pet food industry throughout all of the pet food recalls. Henderson said it is unfortunate that the unnamed customer has chosen to stop working with Menu Foods.
On Tuesday afternoon, shares of Menu Foods were down 35 cents.
A Cormark Securities Inc. analyst, Aleem Israel, said he expected Procter & Gamble to drop their second contract with Menu Foods.
He said Menu Foods is not to blame for the recall because it received tainted products for a supplier. He added that it is unfortunate that “Procter & Gamble is using them [Menu Foods] as a scapegoat to rebuild their own brand equity and rebuild consumer confidence in their product”.
Source: CanadaEast.com, Globeandmail.com