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Pedigree dog food recall could cost a company $4 million
(CNNMoney.com) -- The dog food recall that has caused pet owners to worry about the safety of their dog's food isn't just affecting the companies involved in making the tnted product, it could cost one company upwards of $4 million, according to a study released Tuesday.
Researchers at Ohio State University examined the impact that the recalls of two popular dog foods have had on companies that make or distribute the food and found that it could cost the maker of Eukanuba some $2.8 million.
The report estimates that the recalls of two pet foods caused by tnted ingredients could cost the Pet Food Institute an additional $1.2 million.
The study -- which found that recalls hurt the companies that make, distribute or even promote the products -- suggests that the government needs to improve how it deals with recalls and that the industry needs to help fund the program.
"Until a strong recall program is in place, recalls will continue to have a negative effect on the companies involved, the pet food manufacturing community, and pet food consumers," sd the study, which was published in the Proceedings of the National Academy of Sciences.
Both studies are the first of their kind to look at recalls and the potential financial impact they have on the companies involved.
The Eukanuba recall is estimated to cost the pet food maker at least $4 million, according to the study, since Eukanuba is a product of E.J. Gallo, which makes all of its pet food products under its G-Labs brand.
The study did not directly look at the possible financial impact of the recalled G-Labs Pure Grn Lamb &, Rice dog food recall, but the pet food industry is expected to assume all of the cost of the recall.
The study also included a cost-benefit analysis, which suggested that government should consider changing the process by which recalls are conducted. The study also suggested that industry needs to do more to reduce recalls.
The researchers -- who worked for the U.S. Federal Trade Commission -- suggested that government and industry could help reduce recalls by having inspectors visit food companies regularly and that the companies should help fund this program, according to the study.
The study also suggested that regulators could better enforce recall requirements, the study sd.
Since the 2010 E.J. Gallo recall, the company has gone through three different owners.
In an interview earlier this month, an E.J. Gallo spokeswoman sd the pet food company had yet to see any impact from the recall. She sd the company had not been asked to pay back any money by any banks that loaned it money during the time of the recall.
An inspection of the company’s records since 2010 suggests that the recall has not had an impact on the company’s operations. E.J. Gallo’s latest annual report shows that the company spent more than $1 billion in 2013, which is more than its prior three annual reports combined.
In its 2014 annual report, the company wrote that it received $11.4 billion in revenues in 2014. Last year, it spent $10 billion on research and development, plus another $10.7 billion on marketing.
According to E.J. Gallo’s latest annual report, the company has assets of $9.4 billion.
E.J. Gallo makes pet food products under its own G-Labs brand and its G-Paws and G-Style brands.
The company’s 2013 annual report sd the company has sales and marketing expenses of $21.7 million. The company sd it expects to make a pretax profit of about $7.9 million in 2014.
Contact David Riley at 512-484-6234 or [email protected]