Bloomberg News

Horse Meat Scandal May Lead to Higher Prices, Rules

February 13, 2013

The discovery of horse meat in beef products may spur “a blizzard” of European regulations for the food industry, as agriculture ministers meet tomorrow in Brussels and British cattle prices climb to records.

Ireland, which holds the European Union’s six-month rotating presidency, will convene an informal meeting of relevant agriculture ministers and the EU Commissioner for Health and Consumer Policy Tonio Borg at 6 p.m. tomorrow in the Belgian capital. France, the EU’s largest beef producer, will push for compulsory labeling of the origin of meat in processed food, Agriculture Minister Stephane Le Foll said yesterday.

Supermarkets in the U.K., France, Ireland and Germany removed frozen beef burgers and lasagnas from shelves and France has threatened sanctions for negligence and fraud. Catherine Brown, the head of the U.K.’s Food Standard Agency, called on retailers to also test pork and chicken products for cross contamination, according to the Telegraph newspaper.

“This is going to run and run now as it spreads across Europe,” said Bryan Roberts, director of retail at market researcher Kantar Retail in London. “For now, it’s contained to beef and supermarkets, but it will be really worrying if it starts hitting food services in hospitals and schools. We’ve seen a political response now with the horse meat summit and while that is good for consumers, the industry will no doubt be hit with a blizzard of red tape now.”

Higher Quality

While there’s no evidence yet that consumer beef demand has slowed in the U.K., customers probably will spend more on higher quality cuts at meat counters or buy from independent butchers, said Nick Allen, the executive director of the Agriculture & Horticulture Development Board’s beef and lamb unit, known as Eblex. Buyers may also look for products that have been inspected by third parties to guarantee quality and origin, such as the Red Tractor Assurance certification program.

“This may increase demand for U.K. meat and may have upward pressure on prices,” Allen said. “At the moment, on the cheaper end of the supply chain, processors sometimes buy meat from four, five, six different countries and stick it together. Consumers in this country now are going to say ‘no’ to that. They’ll want to hear where it’s coming from, and they won’t want to hear it’s a blend of different countries.”

British Beef

British retail prices for sirloin steak climbed to 20.71 pounds ($32) a kilogram as of Feb. 2, the highest since January 2004, according to EBLEX data. The price of standard minced beef was 4.77 pounds a kilogram, also the highest on record and 11 percent more than at the same time last year. British spot- market steer prices rose to a record 3.865 pounds a kilogram ($2.75 a pound) in the week ended Jan. 5.

Tesco Plc, Wal-Mart Stores Inc.’s Asda and Aldi have removed some ranges of frozen beef burgers from their shelves in the past month as concern has escalated over tainted meat. A line of lasagnas produced by Findus Group Ltd. was found to contain more than 60 percent horse meat, and Tesco said yesterday that tests found the same percentage of the meat in some spaghetti Bolognese products.

“The potential Europe-wide scale of the issue was highlighted last night when the complexity of the supply chain was revealed,” John Kershaw, an analyst at Exane BNP Paribas said in a note today, referring to a BBC report that France’s Comigel, which supplied the mislabeled Findus and Tesco lasagna and spaghetti Bolognese, distributes to 28 countries.

Food Labels

The prepared meals sold by Findus were manufactured at a Luxembourg factory owned by Comigel, France’s consumer and anti- fraud office said Feb. 9. Comigel’s supplier was Spanghero SAS. It bought the frozen meat from a Cypriot trader that sub- contracted a Dutch trader who sourced the meat from a slaughterhouse and a meat packer in Romania, according to the regulator. Romania’s Agriculture Minister Daniel Constantin said there’s no indication that the meat was mislabeled in Romania.

Labels on processed food are only required by the EU to indicate the type of meat used, while fresh meat must specify country of origin, France’s Le Foll said.

EU countries are individually responsible for verifying what is sold in their markets, including whether food is correctly labeled, EU spokesman Frederic Vincent said yesterday. The European Commission, the bloc’s executive arm, can only take measures when food-safety is at risk, he said.

U.K. Environment Secretary Owen Paterson said today he favors introducing random testing for meat imports rather than relying on certification of meat in its country of origin.

“Too much is taken on trust within the current system,” Paterson told lawmakers in the House of Commons in London today.

More needs to be done by “all operators to reduce the complexity of the supply chain and increase its integrity,” Kershaw said. “Ultimately, it likely points to higher basic food prices across all stores.”

To contact the reporters on this story: Gabi Thesing in London at gthesing@bloomberg.net; Whitney McFerron in London at wmcferron1@bloomberg.net

To contact the editors responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net; Celeste Perri at cperri@bloomberg.net


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