Posted by: Ian Rowley on January 31, 2008
With governments around the world tightening anti-smoking legislation and health conscious Japanese smoking less than they once did, Japan Tobacco’s plans to bolster its $2.7 billion a year food biz sound like a safe bet on paper. Yet, just months after inking a $1 billion deal to acquire Katokichi, Japan’s largest frozen foods producer, a delivery of pesticide-contaminated frozen dumplings sent JT’s stock price tumbling today to its lowest level since March 2007 and cooked up a slew of bad publicity.
According to reports in Japan, two of JT Food’s gyoza dumpling products imported from Chinese supplier Tianyang Food have been found to be tainted with a phosphorus-based insecticide, causing at least 10 cases of food poisoning. The victims included five members of one family, who suffered bouts of diarrhea and vomiting after eating the dumplings, which contained traces of an organophosphate called methamidophos. The family were admitted to hospital after their five-year-old lost consciousness.
Today, as the local media weighed in, Japan’s health ministry announced the names of 19 firms, including JT, which imported products other than dumplings from Tianyang Food and urged firms to stop selling their products. Health minister Yoichi Masuzoe called the issue a “life threatening matter.”
Aside from the embarrassment factor, the scare is doubly bad for JT. Its frozen food biz taps China for about 20% of its products. Meanwhile, Katokichi, which JT bought with Nissin Foods and will integrate into its business in April, also relies on China for similar chunk of its supplies.
For all that, the cynic in me suspects that if any company is in a good position to handle the fallout from a poisoning scare—or even future lawsuits—it’s probably JT, whose tobacco business ranks behind only Phillip Morris and British American Tobacco. After all, its mainstay products, cigarette brands such as Camel and Mild Seven, have been doing much the same for decades.