Cost of listeria outbreak: Greenyard estimates €30 million impact

18 Jul 2018 --- Frozen vegetable maker Greenyard estimates the financial impact of the listeria outbreak that has led to huge product recalls and concerns over the potentially deadly disease, is in the region of €30 million (US$35.1 million). After insurance, Greenyard says this includes estimated costs for the product, transport, handling, storage, destruction, subcontracting, lower cost absorption of the factory and loss of margin. The estimate comes as the fruit and vegetable giant halts production as its Hungarian vegetable plant while an in-depth investigation continues to probe the listeria contamination.

Over the past few weeks, food safety authorities have issued recalls on frozen vegetables over potential contamination concerns. This involves the recall of frozen products that were produced at the Baja plant in Hungary, between 13 August 2016 and 20 June 2018.

The recall was initiated following a decision by the Hungarian Food Safety Agency and after an investigation by the European Food Safety Authority (EFSA) regarding the outbreak.

Greenyard has now issued an up-to-date status of the recall and it’s financial implications, promising to keep the market informed as soon as further information becomes available. 

“The process of recalling the relevant products from our customers and consumers is ongoing, with products being returned and destroyed,” it says. “We have closed our plant in Hungary and have been conducting an in-depth review of the plant and intending to identify the root cause of the contamination in full cooperation with the respective authorities and dialogue with the customers. We believe to be making good progress in finding the root cause and are awaiting further test outcomes.”

“We will not restart production in our Hungarian facility until we are fully satisfied with the results of these tests, for which we are working in continuous cooperation and consultation with the local authorities and following the European guidelines. We take all possible steps to ensure that the contamination is resolved in full.”

Greenyard, in cooperation some its customers, is sourcing alternative supplies to ensure supplies continue and is talking with all its stakeholders, including customers, bankers, suppliers, growers to keep them informed.

“Although it is not possible at this point to give an accurate assessment of the aggregate potential financial impact of the outbreak and recall for Greenyard, we can already report the following initial estimates in respect of the recall that is currently ongoing and we will update the market regularly,” Greenyard continues. 

“After insurance, Greenyard estimates that the financial impact of the recall amounts to approximately €30 million (including estimated costs for the product, transport, handling, storage, destruction, subcontracting, lower cost absorption of the factory and loss of margin).”

“We estimate one-third of that amount to have a balance sheet impact (impairment) and two third to have a cash impact. At this point, more than 80 percent of the recall amount is expected to constitute non-recurring items.”

Greenyard also says that it is insured for its general and product liability with a well-known international insurer. It does not have a view yet on “potential claims for physical damages or product damages.”

“We are taking all possible actions to address any other potential direct and indirect impact on Greenyard and its stakeholders. We are in close communication with our customers to make sure that they experience the least possible inconvenience caused by this recall initiative.”

“Greenyard understands that questions have been raised and we underline that we take the matter very seriously. We have taken all necessary measures to preserve food safety and we are committed to informing the market as the matter evolves and more information becomes available.”

A spokesperson for Greenyard tells FoodIngredientsFirst: “We are currently working on finding the root cause and are working together with internal and external experts as well as the authorities. We will send out an update as soon as there is more information to share.”

Earlier this month, supermarkets in the UK recalled bags of frozen vegetables over fears they could contain the potentially deadly bacteria. The Food Standards Agency (FSA) said the vegetables may contain Listeria monocytogenes which can cause listeriosis, a rare illness responsible for the death of two people in the UK last year. Peas, beans, spinach and sorrel, have also been recalled and retailers including Tesco, Sainsbury’s, Lidl, Aldi, Waitrose and Iceland are all affected.

Listeria monocytogenes can cause listeriosis. Symptoms caused by this organism can be similar to flu and include high temperature, muscle ache or pain, chills, feeling or being sick and diarrhea.

Some people are more vulnerable to listeria infections, including pregnant women and their unborn babies, infants less than one-month-old and people aged over 65 years, as well as people with weakened immune systems.

By Gaynor Selby