“Pink Slime” has been all over the news in the last week. What the beef industry calls “lean finely textured beef” (LFTB) and the media call “pink slime” is used as filler. LFTB is basically all the crap that is left over after all the good stuff (like my Capital Grille Steak) has been sold. They run these leftovers through a processor, treat it with ammonia, and use this as a filler in ground beef, hotdogs, lunch meat, beef sticks, pepperoni, frozen entrees, and meatballs. In fact over 850 million pounds of this filler are used every year. I viral uproar has begun over the use of LFTB.
Beef Products Inc, the maker of “pink slime”, has already shut down several processing plants which have affected over 650 jobs. Last week, Texas Governor Rick Perry, Kansas Governor Sam Brownback, and Iowa Governor Terry Branstad toured one of Beef Products facilities in Nebraska. Since the media uproar hundreds of school districts have demanded the product be discontinued in schools. Three of the largest US supermarket chains have stopped purchasing beef that uses LFTB. AFA Foods, one of the largest ground beef processors in the US, declared bankruptcy today citing “recent changes in the market” for its products.
Even Jim Cramer last week was in an outrage demanding that Whole Foods and other grocers tell consumers where their beef comes from and that “pink slime” isn’t in it.
So what company benefits from the ‘pink slime’ buzz?
Integrated Management Information (INMG) is the US leader in third party verification for the beef-livestock industry. Its core business is profitable, generating good free cash flow, and growing 20-30% per year.
Since the company does the bulk of beef verification in the United States, it makes perfect sense for the company to verify it for the consumer. The company recently developed and is starting to roll out their Where Food Comes From (WFCF) program for national food distributors and retailers. The WFCF logo is displayed on product packaging along with a QR Code that tells the consumer exactly where the beef came from. WFCF is providing an exponential growth opportunity for INMG. Retailers and distributors who carry products displaying the WFCF logo pay INMG by way of license fees, service fees, and most importantly per pound royalties.
The WFCF market opportunity just in the beef industry is $1 billion annually. In October 2011, INMG launched its first major WCFC initiative with Heinen’s, a leading grocer in Northern Ohio with 18 stores. The company is also looking to launch WFCF not only for beef, but also for pork and poultry. Adoption of anything “new” in the grocery business always takes time, but I wouldn’t be surprised to see Where Food Comes From coming to a grocer near you. [INMG Corporate Presentation]
Disclosures: LONG INMG
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