Economic Incentives in Mandatory vs' Voluntary Meat Food Safety Standards Beef Sector Case Study

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Economic Incentives in Mandatory vs. Voluntary
Meat Food Safety Standards Beef Sector Case
Study

• Gary M. Weber, Ph.D., President
• G.M. Weber Associates, LLC Consulting
• special thanks to Dr. Dell Allen, Cargill,
  retired Gregg Doud and others at the
• NCBA for data and slides used in this presentation

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Beef Demand was falling for years-adding to
economic signals to address consumer issues
1993 E. coli O157H7 declared an
adulterant 1996 - BSE a human health threat
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Issues overtaking the beef industry threatening
the Business and Consumer Marketing Climates
Managing issues means before you see it here
you have been working on the issue, dealing with
the risks and developing a action plan for some
time.
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Milestones in the E. coli O157H7Crisis

• In 1993 the Jack-In-The-Box outbreak in the
  Pacific Northwest brought the problem into
  national focus.
• For the first time, a pathogen on fresh beef was
  declared an adulterant and a zero tolerance
  policy was established by the USDA.
• USDA began testing for the organism in ground in
  plants and at retail. If found, USDA demanded
  complete product recalls.
• USDA developed ever more sensitive tests while
  industry struggled to develop and put in place
  interventions to reduce risk.
• Since 1993 millions of pounds of ground beef have
  been condemned and companies such as Hudson
  Foods, Beef America, Topps have been put out of
  business.

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Beef Producers Supported the Debate and
Development of Pathogen Reduction/Hazard
Analysis Critical Control Points Systems

• PR/ HACCP Final Rule
• (9 CFR Chapter III)
• July 1996

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They Declared War Against E. coli O157H7

• Protecting Public Health and the Business Climate
  for the Beef Industry and Their Partners

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Prevalence of E. coli O157H7 in Ground Beef1
1 Results of raw ground beef products analyzed
for E. coli O157H7 in federal plants. In
1998 FSIS increased sample size from 25 g to
375g. In July 1999 FSIS changed to a more
sensitive analytical method.
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Prevalence of E. coli O157H7 in Ground Beef
Percent Positives
Results of raw ground beef products analyzed for
E. coli O157H7 in federal plants. 2007 Data as
of 10/9/2007.
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Areas of control

• Intervention steps become easier to implement as
  the hourglass narrows
• Primarily at packing plants
• Then pre-harvest or When pre-harvest?

35 95
2,700 85
800,000
280,000,000
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Plant Size 1000 2000 3000 5000 head
head head head Hide on Wash 2.40 2.16
1.84 1.60 Steam Past. .24 .22
.18 .16 Pre-Evis Cab. .06 .05
.05 .04 Pot Wash Cab. .09 .08
.07 .06 Head Cabinet .02 .01
.01 .01 Total 2.81 2.52 2.15
1.87 Depreciation 2.88 2.59 2.21
1.92 Chem. Cost 2.35 2.35 2.35
2.35 Total/Head 8.04 7.47 6.71 6.14
Source Dell Allen, Cargill, retired
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Human Illnesses Attributed to E. coli
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Incidence of Foodborne Illness 1996-2006 E. coli
O157
National Health Objective 1.0
Incidence per 100,000 Population
Preliminary FoodNet Data on the Incidence of
Infection with Pathogens Transmitted Commonly
Through Food --- 10 states, 2006
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Reasons Consumers Report forEating Less Beef
2003-2005
Percent of consumers citing reasons for eating
less beef
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• Consumers may not react to recalls
• as they once did - Litigation is always a risk
• This is an economic stimulus as
• is Brand Equity risk
• Tyson has issued 2 unrelated ground beef
  recalls (hamburger recalls) in 2007.  The first
  one was on March 2 and involved 16,743 pounds of
  ground beef.  The second was on June 8 and
  involved 40,440 pounds of ground beef shipped to
  Wal-Mart stores in Alabama, Arkansas, Colorado,
  Kansas, Kentucky, Louisiana, Missouri,
  Mississippi, New Mexico, Oklahoma, Tennessee and
  Texas. 
• Pritzker Ruohonen Associates, P.A., a
  leading food poisoning litigation law firm, is
  republishing it here as a public service.  The
  firm has recovered millions of dollars for food
  poisoning victims, including a recent settlement
  for 6,425,000. 

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Beef Demand Responding to Increased Consumer
Confidence on all Issues
Demand Has Increased Significantly Since 1998
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U.S. consumer expenditures on beef
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The Challenge of E. coli O157H7 Remains2007
Recalls and Illnesses

• June 3, 2007 - United Food Group, LLC, a Vernon,
  Calif., establishment, voluntarily recalling
  approximately 75,000 pounds of ground beef
  products because they may be contaminated.
• June 9, 2007 - Tyson Fresh Meats Inc. recalled
  more than 40,000 pounds of ground beef shipped to
  Wal-Mart stores in 12 states after samples tested
  at a Sherman, Texas, plant showed signs of E.
  coli contamination.
• June 11, 2007 - United Food Group recall expands
  to over 5 million pounds, says illnesses were
  reported in five states - three in California,
  four in Arizona, two in Colorado, one in Wyoming,
  and one in Utah.
• October 4, 2007 - Topps Meat Company E.
  coli-related recall, fifth largest food recall in
  history, company has ceased operation.
• November 3, 2007 - Cargill Meat Solutions Corp.
  of Wyalusing, Pennsylvania " ... is voluntarily
  recalling approximately 1,084,384 million pounds
  of ground beef products

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The Challenge of E. coli O157H7 Remains

• November 3, 2007 - Cargill Meat Solutions Corp.
  of Wyalusing, Pennsylvania " ... is voluntarily
  recalling approximately 1,084,384 million pounds
  of ground beef products
• Estimated cost of the recall in product value
  alone is 2,949, 524
• Cost of the state of the art interventions in
  the plant 13,466/day or 2,962,520/year
• Companies understand the interventions are cost
  effective-there are times they are not
  enough-more needs to be done.

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Pre-Harvest Interventions Have Been Under
Development for Many YearsWhat can be done to
stimulate their development, approval and
adoption?

• Probiotics and Competitive Exclusion Products
  (FDA)
• Neomycin Sulfate (FDA)
• Sodium Chlorate (FDA)
• Vaccines (USDA-APHIS-CVB)

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Toward the right mix of Mandatory vs.
Voluntary Standards Observations

• Industry has many incentives to do the right
  things
• Mandatory standards usually result from crisis
  and are implicitly needed as a result!
• Risk analysis, science and regulatory (agency)
  hurdles are often rate limiting in finding
  solutions
• Who should bear the cost of regulations/interventi
  ons is sometimes difficult to determine
• The best solution is for industry and
  government to work together to find solutions
• There will never will be zero risk

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Thank you safe travels!