The irradiation of meat was always going to be a touchy subject with consumers but it now appears that this infant market may disappear even before it has a chance to prove itself because of a mundane dispute among accountants. David Robertson analyses the collapse of SureBeam.
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SureBeam, a San Diego-based company that led the world in irradiation technology, filed for Chapter 7 bankruptcy in January and it is now in the process of liquidation. As the only significant supplier of irradiated meat in North America, its collapse has left the few supermarkets that stocked its products with empty shelves.
Unless the liquidator finds a buyer willing to restart the company’s facilities in Sioux City and Chicago, irradiated beef may disappear from the meat market altogether.
Irradiated beef was originally touted as a simple treatment that would improve food safety. A blast of gamma rays, X rays or a concentrated beam of electrical energy will kill pathogens including E.coli, the major cause of food poisoning from beef.
Meat normally has to be cooked to an internal temperature of 160ºC to kill E.coli bacteria, so irradiation was considered a good option for consumers who liked their beef raw, very rare or cooked without a temperature gauge (at a BBQ for example).
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By GlobalDataConsumers wary
But the concept of irradiating meat has not proved a winner with consumers. There does appear to be a hard core that have been won over by the technology, but for most it is simply a step too far.
“There is no question that irradiation is a safe process,” says Janet Riley, senior vice president of the American Meat Institute. “However, it is clear from research that consumers need to understand the benefits of irradiated products. Once they do, they seek them out and are even willing to pay more for them. I have young children and therefore believe that irradiated products are a good choice for me and my family.”
E.coli is particularly dangerous to young children and it kills a handful every year. But consumer and environmental groups believe that irradiated meat is an unnecessary, and potentially dangerous, addition to the market.
Could irradiation prompt hygiene shortcuts?
Patricia Lovera of Washington DC-based Public Citizen believes that consumers get little benefit from irradiation and that most of the gains are made by the meat industry. “We believe there are too many unanswered questions about the impact irradiation has on the chemical composition of the food, and about the health effects of eating the new chemicals caused by irradiation, especially in the long term,” she says.
“Some of the chemicals created by irradiation, called alkylcyclobutanones (ACBs), have been linked to genetic damage in rat and human cells and cancer promotion in rats.
“We are also concerned that rather than preventing the contamination of meat with faeces (the source of E.coli) and other contaminants, the meat industry is pushing for irradiation as a “quick fix” that will zap the problem at the end of the line.”
EU sceptical
At the moment consumers are erring on the side of caution and only a small number of supermarkets stock irradiated beef in the US. In Europe only spices and seasonings can be irradiated and a Bill that would have allowed chicken and shrimp to be treated in this way was rejected by the European Parliament two years ago.
The liquidation of SureBeam, therefore, has had a significant impact on this fledgling sector. Some of the pro-irradiation retailers are now unable to get supplies and SureBeam’s rivals lack the capacity to make up the difference.
Simple accounting dispute sank SureBeam
But for all the controversy surrounding irradiation, it was not this “hot” issue that sank SureBeam. It was something far more mundane: a dispute among accountants. The company was originally spun out of the defence contractor Titan Corporation in March 2001 as a by-product of its military research and development. SureBeam raised US$67m from investors and listed itself on the Nasdaq exchange for high tech stocks.
Since then SureBeam has failed to turn a profit, although this is not uncommon with new technology enterprises.
The company’s real problems began last year when its chief executive Larry Oberkvell left. While the board searched for a replacement (recovery specialist Terrance J Bruggeman was eventually hired last September) the company also decided to ditch KPMG as its auditor because the accounting fees were too high.
Deloitte & Touche was hired instead, but after the firm reviewed SureBeam’s accounts it disputed the way two transactions with foreign customers had been recorded on the books.
SureBeam then fired Deloitte but the fuss delayed the company’s filing of accounts to US regulators. This, combined with a falling share price and eventual delisting from Nasdaq, scared off investors and foreign customers and the company’s funds began to evaporate.
Titan also refused to forgive a US$25m debt and SureBeam’s management decided last month that it was time to give up.
End of the road for irradiated meat?
This has temporarily thrown the irradiated meat business into the deep freeze. It is possible that rival companies will replace SureBeam or that Titan or another company will take over the assets, but it is also possible that the irradiated meat business could die out altogether.
This would please environmentalists and consumer groups but the meat industry has high hopes for the technology and is unlikely to let it fade away. As Patricia Lovera of Public Citizen cautiously notes: “SureBeam’s bankruptcy changes the industry, but it hasn’t wiped it out.” Yet.
