Is cost cutting in the food industry posing a risk to food safety?
That was a question posed to General Mills CEO Ken Powell during a recent earnings conference call by Eric Katzman, a stock analyst at Deutsche Bank.
With sales growth being squeezed across the packaged food business, General Mills and a host of other companies have significantly cut costs to maintain profit margins.
"I've heard from a number of other CEOS, both currently in the industry and formerly in the industry, who are getting more concerned about the pressure to cut costs and the risks to food safety and quality," Katzman said.
"You guys (General Mills) have done a very good job over time but even you had a recall earlier." In October, General Mills recalled 1.8 million boxes of gluten-free Cheerios and Honey Nut Cheerios because they accidently contained wheat.
Powell replied that the company is "very focused on product safety and product quality. It's central to our mission. . . Consumer trust is job one for us."
Indeed, recalls are expensive while large outbreaks of foodborne illness can batter a company's reputation.
Recalls made in conjunction with the U.S. Food and Drug Administration have been rising in recent years. In the FDA's fiscal year ending Sept. 30, there were 3,265 food and cosmetic related recalls, up from 2,549 and 1,777 in the two previous fiscal years.
