The world’s leading meat manufacturer and packager Tyson Foods Inc. (TSN - Analyst Report) expressed concerns about a fall in beef demand amidst the pink-slime controversy.
Pink slime, created from low quality beef trimmings, is an industrial byproduct and is usually treated with ammonia gas to qualify it for food health standards.
Critics argue that several cheap ground beef and frozen-marketed hamburger patties contain pink slime as an additive. Although the food watchdogs certify that they meet the food standards, some critics argue that the addition of the pink slime is not disclosed on the labels as soy and oatmeal added to beef have been.
Since the additives have not been disclosed on the labels, the ground beef, containing pink slime, have been routinely included in school lunches and other cafeteria.
The "lean, finely textured beef,” as referred to by the meat industry, seem to be extremely unpopular as a lot of consumers, schools and grocers are shying away from the product.
Moreover, the US Department of Agriculture recently ruled that school districts may stop using government meat that contains pink slime. This sparked the controversy even more.
Many food stores like McDonald’s Corp (MCD - Analyst Report), Kroger Co.(KR - Analyst Report), Safeway Inc. and Food Lion stopped purchasing ground beef with the controversial meat filler.
Moreover, Beef Products Inc., renowned maker of pink slime in Lubbock, Texas, suspended three of four plants on the onset of the controversy of the cons of eating pink slime.
The confusion regarding the effect of pink slime has reduced the consumption of ground meat to a considerable extent. Tyson's management has forecasted that there will be a 2% to 3% reduction in supply, which in turn will drive up costs for consumers.
Currently Tyson holds a Zacks #3 Rank which implies a short term Hold rating.