Pink Slime Forces AFA Food into Chapter 11 Bankruptcy

At this time last year, many of us had never heard of it, but pink slime has recently oozed its way across media outlets. The fallout over pink slime has hurt some meat producers where it hurts – in the pocketbook. One beef producing company, AFA Foods Inc., filed for Chapter 11 protection because the outcry over beef trimmings has hurt its bottom line.

The term “pink slime” refers to boneless lean beef trimmings treated with ammonia, and the type of beef has long been considered safe to eat under USDA guidelines. Recently, boneless lean beef trimmings acquired the moniker of “pink slime” as critics began to attack the meat as unhealthy and unappetizing. Some fast food restaurants such as McDonald’s and Burger King have stopped using the meat, and schools and supermarkets have also pulled the type of beef.

With major purchasers of boneless lean beef trimmings now refusing to purchase the product, many meat producers have been negatively affected. AFA Beef Products Inc. was forced to close three of its four processing plants. A debt extension plan that was in the works before the public outcry over pink slime began was not sufficient to aid the company after the media frenzy hit.

 According to the company’s bankruptcy filing, the outrage over pink slime reduced the overall demand for beef products to the extent the company could not hold out until the spring barbeque season began. AFA may not be alone. Tyson Foods Inc. echoed AFA’s sentiments that demand for ground beef products will slump because of the fallout over lean beef trimmings.

Unfortunately, certain industries or businesses can be subject to sway of public opinion. If the market turns against a business, a bankruptcy attorney can help a business restructure through the Chapter 11 process while helping a company repair or maintain its reputation.

 Source: Los Angeles Times, “AFA Food Blames ‘Pink Slime’ Controversy for Bankruptcy Filing,” Tiffany Hsu, April 2, 2012

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