Tainted peanut butter hurts range of companies

MILWAUKEE — To Betsy Sanders, the nationwide salmonella outbreak tied to peanut butter has been a hurricane. Her tiny cookie dough business is the debris.

Reimbursing customers for recalled products already has cost her Dough-To-Go Inc. business as much as $7,000, she says — a big chunk for a company that turned little profit last year. She also has 2,500 pounds of peanut butter that she can't use because it came from Peanut Corp. of America — the company that was the source of the outbreak and that has since filed for bankruptcy protection.

"We're the victim, too," said Sanders, who started the business off an idea her son had at age 12. "We've done nothing wrong and we're doing everything we can to make sure everyone's safe."

At least nine deaths could be tied to the outbreak, hundreds of people have been sick and thousands of products recalled. Companies from name brands such as Kellogg Co. down to small ones such as Dough-To-Go have been affected.

However, big companies have large public relations departments while smaller ones have limited budgets and fewer ways to cope.

The timing could hardly be worse, as the recession has already crimped consumer spending.

Sanders, who has run the Santa Clara, Calif.-based business for 26 years with her son, said she's worried about the half of her sales — $1.7 million last year — to school groups such as marching bands for fund-raisers.

The outbreak has already forced the maker of Detour energy bars, Forward Foods LLC, to file for Chapter 11 bankruptcy protection. The Minden, Nev.-based company plans to stay in business but needs money to pay to replace recalled products.

Meanwhile, even companies that didn't have to recall products still have plenty to worry about.

J.M. Smucker Co. makes Jif peanut butter in Lexington. The company says the Jif plant has not been tainted by salmonella, but Richard Smucker, chairman and co-chief executive, said last week that consumers are still worried. Smucker estimated those fears could hurt the company's 2009 profit by 5 cents to 7 cents a share.

Sales of peanut butter in jars have been tumbling, even though that category has generally not been involved in the recalls. During the four weeks that ended Jan. 24, about 33.8 million pounds of peanut butter in jars was sold — a 22 percent drop from the same period last year.

It's too soon to tell whether those kinds of declines are occurring because stores are pulling items off shelves or because shoppers aren't buying, said Todd Hale, senior vice president for consumer and shopper insights at Nielsen.

"Generally speaking, any time we have a scare like this, there are probably more manufacturers that are hurt than should be," he said.