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The share price of Tesco (LSE:TSCO) stumbled coming out of the gate this morning, falling from yesterday’s close of 349.60 to 343.70 within just 35 minutes. It would appear that the market had another of its infamous knee-jerk reactions to headlines in nearly every publication this morning announcing that horse meat was discovered in some of Tesco’s Everyday Value frozen burgers. I would suggest that you keep your bet on the horse in the race rather that the horse meat in the burger. This problem won’t last furlong.
It probably hasn’t helped that David Cameron made a public statement that the incident is “completely unacceptable.” Completely unacceptable? With all due respect, Mr. Prime Minister, think how unacceptable it was to the horse!
Let’s listen to the voice of reason for just a minute of two. First of all, Tesco wasn’t the only supermarket where DNA evidence of also-rans was found in the frozen burgers. It’s just that Tesco makes for bolder headlines.
Secondly, it’s not Tesco’s fault. Grocers are retailers, i.e., they are distributors of products to consumers. Whilst some may have some intermittent product testing, the reality is that they depend upon the quality control and assurance processes of their suppliers. In this case the Food Service Authority of Ireland said that the burgers were processed in three different facilities.
Third, one has to wonder why the government monitoring is not conducted at the processing plants before the product leaves. Perhaps it is. But then the question becomes, “Why was the product allowed to leave the plant before the testing was done?” Let’s face it, this discovery was not made by some bloke eating dinner and chastising his wife because his burger tastes like horse meat. It was discovered in a lab where the product was found to be non-conforming after it was shipped. This is a system problem that needs to be resolved at the processing plants.
Fourth, the frozen patties also contained pork, although most reports all calling it pig meat. That’s probably because they don’t know what part(s) of the pig the meat came from. Well, you say, I’m not worried about the pork. May I remind you that your Jewish and Muslim neighbours would be, so the presence of the pork is even more problematic.
Fifth, the question of how the horse and the pork products got into the burgers. The pork is easy to explain. The plants in question also process pork products. The raises the concern about the line conversion sanitation procedures of the facilities. Either the procedures are inadequate or the employees are not following them to the letter. If this assumption is correct, then there may be a lot more to worry about than pigs and horses.
Finally, one must question how the horse meat got in there. Of course, there was the story about that one fellow who rode his horse to work, but took the bus home. And, of course, we might wonder why Danny Boy was scratched in the fifth race at Epsom, never to be seen again.
Here’s the bottom line: It is not Tesco’s fault. Do not make Tesco the scapegoat over the horse meat and pig meat. It’s like shooting the pizza delivery guy because you didn’t order anchovies.
It does appear that investors are getting back in the saddle as the day goes on. Tesco shares have regained ground going into the homestretch, running back up to 347.10 by 14:30.
There’s a reason you place your bets before the race. You put your money on your horse and you keep it on him come what may, all the way to the finish.
