AFA Foods files for bankruptcy citing 'pink slime'
April 2, 2012 at 3:39 PM CDT - Updated June 26 at 9:11 PM
By CANDICE CHOI AP Food Industry Writer
NEW YORK (AP) - Beef products company AFA Foods said Monday that it is filing for Chapter 11 bankruptcy protection and selling its assets after the public outcry over the beef filler known as "pink slime" derailed its efforts to save its already struggling business.
A spokesman for the company said in an email that the company does not rely on boneless lean beef trimmings and uses it only based on customer specifications. But he said the controversy over the ammonia-treated meat filler has dramatically reduced demand for all ground beef products.
AFA Foods, based in King of Prussia, Pa., processes more than 500 million pounds of ground beef products a year. It distributes to retailers including Wal-Mart Stores Inc., Safeway Inc. and BJ's Wholesale Club. Food-service customers include Burger King, Jack in the Box and Wendy's.
AFA also sells products under the brand names Moran's, Stone River Ranch and Miller Quality Meats.
In the affidavit filed as part of the bankruptcy, interim CEO Ron Allen noted that the company has struggled for the past two years in a competitive industry marked by overcapacity and thin profit margins. He said AFA's profits have suffered because of decreasing retail demand, costly customer demands for product testing and growing competition from different types of meat.
AFA Foods had been pursuing a turnaround strategy to increase sales to retail customers, but Allen said that the "unfounded public outcry" over the use pink slime, known in the industry as lean, finely textured beef strained those efforts.
AFA Foods said it secured $56 million in financing from its lenders to fund operations and expects to continue serving customers throughout the process.
The outcry over lean finely textured beef has real consequences for other businesses. Last week, the governors of three states toured a plant of Beef Products Inc., the main processor of cheap lean beef, and criticized the media for scaring consumers with a moniker coined by critics.
BPI suspended operations at its plants in Texas, Kansas and Iowa last week because of the controversy, affecting 650 jobs.
The politicians who toured the plant - Texas Gov. Rick Perry, Brownback, Iowa Gov. Terry Branstad, Nebraska Lt. Gov. Rick Sheehy and South Dakota Lt. Gov. Matt Michels - agreed with the industry view that the beef has been unfairly maligned and mislabeled and issued a joint statement earlier saying the product is safe.
Critics say the "pink slime," a term coined by a federal microbiologist who was grossed out by the product, is an unappetizing example of industrialized food production.