While some companies are able to bounce back from issues with defective products, others never recover. Many people in Miami remember the widely-reported recall of numerous peanut butter and other nut butter products last fall because of an outbreak of Salmonella in the processing plant that made them. Now the New Mexico company behind the outbreak has filed for Chapter 7 bankruptcy and shut its doors.
The Salmonella outbreak in the fall of 2012 was traced to Sunland, Inc., the largest processor of organic peanut butter in the country. Sunland recalled over a hundred different types of organic peanut and other nut butters. More than 40 consumers in 20 states reported becoming ill after eating contaminated products. The plant, located in Portales, New Mexico, was closed down by the federal government for a time to deal with the outbreak. Although the plant reopened this March, it is now liquidating its assets and closing down for good.
News of the closure is difficult, not just for the approximately 100 employees of the plant, but for the city of Portales, where Sunland had been an important part of the business community. Portales' mayor noted that the company's demise is a blow to the city's funding and will in turn impact the level of services it can provide its citizens.
According to the company's press release about the Chapter 7 liquidation, it was never able to recover from the recall and the plant shutdown. The company cited continued financial problems and lack of liquidity. According to the bankruptcy documents, Sunland had assets of somewhere between $10 million and $50 million, but liabilities of up to $100 million. The filing says the company has between 1,000 and 5,000 creditors.
While we see drug makers, toy companies, auto manufacturers and many other types of businesses survive recalls, sometimes multiple ones, when a company makes essentially one type of product and that product is contaminated, it is more difficult to come back from the ensuing negative publicity. Nonetheless, when your business is making food and that food is contaminated, it is necessary for the U.S. Food and Drug Administration (FDA) and retailers to take whatever action they need to in order to protect consumers, regardless of the consequences.
Source: Albuquerque Journal, "Sunland ceases operations, files Chapter 7 bankruptcy" No author given, Oct. 09, 2013