Maruha Nichiro profit expected to plummet on malathion recall and its aftermath

Maruha Nichiro profit expected to plummet on malathion recall and its aftermath

A worker at Maruha Nichiro Holdings, the Japanese company at the centre of a recent food recall, has been arrested and the recall expanded in the wake of news the malathion contamination scare is believed to be the result of deliberate tampering.

At the end of December, Maruha Nichiro recalled 88 frozen food products produced by its Akurifuzu frozen food subsidiary in Japan's Gunma Prefecture. The recall was initiated after tests detected the pesticide malathion, which is commonly used in agricultural production, in products including frozen pizza. Malathion has a low toxicity level but can cause nausea and diarrhoea.

Last week, it emerged Japanese police have made at least one arrest in connection with the incident. In a statement, the company accused "employees who had been working in [the] Akurifuzu Gunma plant" of "mixing pesticides intentionally".

The company subsequently extended the huge nationwide recall to include all products produced at the facility with any date code.

Attention has now turned to the question of why the contamination was not detected earlier, Maruha Nichiro said. The company is also investigating why there was a "delay" of "about a month and a half" before the voluntary recall was initiated.

These failings have prompted some high-level executive departures at Maruha Nichiro and its subsidiary Akurifuzu. Maruha Nichiro president Toshio Hisayo and Akurifuzu president Hiroshi Tanabe will both stand down on 31 March, having taken a 50% pay cut until that date.

Other senior executives are facing lower pay as a result of the incident. Akurifuzu managing director Nagahiro Keisuke faces a 30% pay cut and demotion, while Maruha Nichiro EVP Shigeru Ito will have his January-March pay cut by 30%, EVP Michio Sakai will receive a 40% pay cut for the same period and MD Hiroshi Imamura's pay will be reduced by 20%.

Maruha Nichiro also lowered its full-year net income forecast to JPY4.5bn (US$44m), down from JPY7bn. The company said the move reflects the cost of the recall and the impact of lost consumer confidence in its frozen food brands. Earlier this month, the company's frozen food unit said it would reduce production levels at its other factories due to lower demand.

According to Japan's Health, Labour and Welfare Ministry, more than 2,800 people have reported sicknesses that could potentially be linked to consumption of products made at the Gunma plant.

Maruha Nichiro has "apologised deeply" for the "great deal of worry and inconvenience" caused "across the country".