‘Managed Exit’ from Frozen Berries Market for Patties

Patties Foods is getting out of the frozen berries business, and probably none too soon as far as shareholders are concerned. The Australian company, based in Bairnsdale, Victoria, has reached an agreement to sell its Creative Gourmet brand to Entyce Food Ingredients. The deal, reportedly worth $1.8 million, is expected to close in early 2016.

A costly recall of Creative Gourmet and Nanna’s brands of frozen berry products from retail stores in the first quarter of 2015, triggered by a Hepatitis A scare in February, contributed greatly to an 88% plunge in profits for Patties Foods for the fiscal year ending on June 30. The bottom line showed net profit of $2.1 million, down from $16.7 million in 2014.

Patties Creative Gourmet photo

Five months later, the frozen berries category was still underperforming relative to prior year sales, even though microbiological testing of Creative Gourmet and Nanna’s samples showed no link to Hepatitis A viral infection.

“It (sales) is recovering slowly, but it is going to be a long, slow haul,” said Managing Director Stephen Chaur. The company’s stock value, which dropped 6.5% to $1.29 a share at the time of the recall, closed at $1.15 on December 8.

So the time has come for what Chairman Mark Smith calls a “managed exit” from the category in which Patties Foods had previously been the market leader. Berries at one time accounted for 13% of sales for the diversified frozen food company, which is primarily engaged in producing and marketing meat pies, sausage rolls, pasties, snacks, cakes, crumbles and other desserts.

The outbreak of 31 cases of Hepatitis A, believed to be connected to consumption of frozen berries sourced from China, led to a call for review of the nation’s system for inspecting imported food products. The common denominator of multiple cases reported in Queensland, Victoria and New South Wales appeared to be the consumption of mixed berries.

Since the recall in Australia, no traces of Hepatitis A or E.coli have been found in either the Nanna’s or Creative Gourmet berry ranges, which the company says are now “amongst the most rigorously microbiologically tested” frozen berries sold in the country.

FSL Foods Recalls Berries in New Zealand
Meanwhile, just last Friday in New Zealand, FSL Foods extended a recall of frozen berries it sourced from China’s Shandong Province that are believed to be linked to four cases of Hepatitis A. In addition to 1-kilogram and 500-gram plastic bags of Fruzio brand IQF mixed berries containing strawberries and blackberries, the Nelson-based company is also recalling 1-kg mono bags of strawberries and blackberries, as well as its three-berry combination of blackberries, strawberries and blueberries.

“Our investigation is still ongoing, and we are not able to rule out further recalls,” said Peter Thompson, director of New Zealand’s Ministry for Primary Industries (MPI). “We understand that this has been difficult for FSL Foods, and would to again thank them for their full cooperation in this recall.”

The products, which have “use by” dates ranging from September 8 to November 17, 2018, were distributed to Pak’n Save, New World, Four Square and Gilmours retail stores throughout the nation. As most of the fruit was sold into the market some time ago, it has likely already been consumed.

"We have no idea how it's happened. We are talking about a very small subset of many hundreds of tons of fruit that we deal with every year,” said FSL Foods owner Mike Glover. "We've dealt with the supply chain for the last seven or eight years and we've probably been supplied in the region of 3,000 tons over that period of time, or three million units."