It's All in the Name

Two nationwide recalls on ground beef and turkey meats that are suspected of having food borne bacteria concentrated in the Midwest and Northeast in late 2002 placed food safety in the centerfold of the consumer concerns. These massive recalls are fractions of the increasing number of product recalls over the years. Despite the these troubling concerns regarding poultry and meat products, authorities have been taking steps to increasing food safety; in fact, recalls show that regulators are more tedious in scrutinizing the quality as well as the cleanliness of the food products. Through consumer concerns and large buyers, there is more pressure for suppliers to use market mechanisms such as product branding and stricter safety requirements and regulations. This boils down to the issue of whether branded products are safer compared to unbranded meets. The answer would be yes due to market mechanisms that large industries are obligated to apply. Ultimately, if you are interested in investing your money in the food industry, buying stocks from companies such as Oscar Mayer and Tyson Foods are the best way to get your money’s worth and the safest way to keep it.

Consumers want safe food as much as they want food that looks appealing and is convenient to prepare. However, unlike fat content, consumers cannot accurately measure food safety. For example, many consumers who experience food-related illnesses believe their illness is due to an air-borne virus or bacteria from some other non-edible source. Even if consumers connect an illness with a particular food they may not know which companies to avoid because many meat products only have store packaging. Although consumers could stop purchasing meat or poultry from a particular store, consumers know that this action does not likely punish the supplier. Stores often have many suppliers of meat and poultry, making it even harder to pinpoint who’s responsible.

Food suppliers recognize that some consumers will pay premiums for branded products because they are perceived to be of better quality. Oscar Mayer in luncheon meats, Tyson Foods in poultry, and Smithfield Farms in pork are companies that have developed branded products connoting better quality. The downside for these companies is that the brand may also be used to more readily identify the company as the source of a illness. Producers of branded products invest a lot of money into promoting product quality and will see that investment evaporate if a serious food safety issue occurs. Bil Mar foods, producer of Ball Park hotdogs, spent more than $100 million during 1998-2000 to improve food safety and convince consumers of its products' safety