The share price of South Africa's biggest food producer, Tiger Brands, fell by 8% on Wednesday after it announced that it was recalling its Purity Essentials baby powder products as a precautionary measure, after traces of asbestos were detected in test samples.
The share price of the firm, which has a market cap of roughly R30 billion, fell to a low of R149.57 on the statement, but recovered later in the day.
Products forming part of this recall included the 100g, 200g and 400g pack sizes of Purity Essentials baby powder, the company said.
“The batch of raw material with the detected trace levels of asbestos does not meet the company’s strict quality and safety standards. Matters of quality and safety are an absolute priority for Tiger Brands. In the best interest of consumers and as a precautionary measure, the company made the decision to initiate a product recall of the affected products after consultation with the National Consumer Commission,” the company said in a statement.
The latest transgression by Tiger Brands comes as it is still locked in stop-start court proceedings relating to a class action lawsuit brought against the company following an outbreak of listeriosis between January 2017 and September 2018 that saw more than 1050 people fall ill, with 218 being killed from the foodborne bacterial illness.
Tiger Brands told Business Report on Wednesday that the decision to recall the products was in the best interest of consumers.
The company said that it had been initiated after consultation with the National Consumer Commission (NCC) as a precautionary measure in the best interests of consumer safety.
Anthony Clark, an independent analyst at Small Talk Daily told Business Report that Tiger Brands does not have the best reputation in the market for quality control.
“Tiger Brands is not unique in the baby powder situation, with Johnson & Johnson, the synonymous owner of varying baby product brands also facing a massive class action lawsuit against them in America, relating to their baby powder product,” Clark said.
“We all know that back in the day, certain ingredients were seen as fairly harmless, until medical testing proved otherwise. Johnson & Johnson had agreed to change the formulation of its baby powder, switching to a cornstarch-based baby powder portfolio.”
In August, Johnson & Johnson announced it would stop selling its talc-based baby powder worldwide starting next year in what it called a “commercial decision” aimed at ensuring long-term growth.
The company discontinued sales of such products in the US and Canada just over two years ago, citing declining demand for the baby powder after thousands of consumer lawsuits were filed against the firm alleging that the powder contained carcinogens.
Activist shareholders had previously pushed the company to stop selling the talc-based powder products internationally.
Johnson & Johnson, however, said that it remained “firmly behind” the view that its talc-based goods are safe, do not cause cancer and do not contain asbestos.
Asbestos exposure has been linked to lung cancer, but there is debate over whether the material can cause ovarian cancer. Johnson & Johnson has lost court cases involving claims that its talc-based powders cause the latter.
Clark said many global companies surely must have changed their formulation some time ago, which leads to the question, if Tiger Brands had seen the Johnson & Johnson news, why did it not check or change the formulation that it uses?
“If the Johnson & Johnson lawsuit has been making headlines for some time now, many global producers of baby powder must have changed their formulation some time ago, which leads to the question, if Tiger Brands had seen the news about Johnson and Johnson, why did it not check or change its own formulation of baby powder? It needs to be questioned as to the underlying quality control and management controls,” Clark told Business Report.
“If they were aware of what was going on globally with the formulation of talcum powder and its potential carcinogenic scenarios, why did they not change their own formula? That is the big question mark,” Clark said.
Tiger Brands, however, said that asbestos is not used in baby powder.
“Talc is a clay mineral that occurs naturally and is obtained from mining deposits. Pharmaceutical-grade talc powder is used as raw material in the production of finished baby powder. In a powdered form, talc absorbs moisture, a characteristic that is useful in keeping skin dry. Talc does not routinely contain asbestos, but talc and asbestos may be found close to each other in nature when mined,” Tiger Brands said when responding to questions posed to the company by Business Report.
“As Tiger Brands, we advocate for zero percent asbestos in cosmetic products in line with our industry commitment through our long-standing membership of the Cosmetic, Toiletry and Fragrance Association of South Africa (CTFA),” Tiger Brands said.
‘Tiger Brands isn’t the most upright citizen in the market’
“Tiger Brands is not known for being the most upright citizen in the market place given that it is fighting tooth and nail against the listeriosis class action case, which has dragged on for years now and might take several more to reach a settlement,” Clark said.
He added, “If Tiger Brands was a good corporate citizen they would do the right thing and try and settle this quickly, but history to date has shown that Tiger Brands is more confrontational instead of being more consumer-focused.”
Tiger Brands said that it is working with its retail and wholesale customers to remove all affected baby powder products from store shelves.
The company also encouraged consumers to return their Purity Essentials baby powder products to their nearest supermarket, wholesaler or pharmacy outlet that stocks the product for a cash refund or coupon from September 8.
Tiger Brands Listeria case
In February, a court in South Africa overturned a previous decision to make companies divulge information in relation to the deadly listeria outbreak.
The Supreme Court of Appeal ruling reversed a Gauteng High Court verdict on whether subpoenas issued against third parties were relevant to the class action.
The Supreme Court of Appeal judgment allowed for the next step in the legal process.
Tiger Brands subpoenaed other meat producers and laboratories to see if, during the period that they are accused of distributing contaminated food, others might have done so as well. This might have diluted the harm for which they may be liable.
Class action proceedings were filed against Tiger Brands by Richard Spoor Attorneys to get compensation for victims.
Richard Spoor Attorneys is representing people affected by the outbreak and Marler Clark LLC of Seattle is serving as a consultant.
The first stage would determine whether Tiger Brands is liable while a second case would determine damages.
Richard Spoor said in the past 18 months the case had stalled while Tiger Brands “engaged in a fishing expedition”.
“Tiger’s strategy of delay and blame sharing has cost the victims dearly. Many, including infants with severe brain injuries, who require medical care and counselling to cope with their loss or disability, have been denied it and have endured great hardship as a result,” he said.
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