Greencore Group joins the horse meat controversy

Despite all of the media talk surrounding horse meat being found in the products of many beef ready meal products, so far it has had little effect on the share price of those selling the products. Tesco seems to have survived the initial fallout from the scandal, although it would seem the issue is far wider than first thought and could continue for some time as investigations get under way. Today, news emerged that Greencore Group is the latest to be hit and as a supplier it has arguably more to lose.

Greencore shares fell the most in more than 14 years today, dropping as much as 22 percent to 79.5 pence. The drop reduced the company’s market value by as much as 89 million pounds ($138 million) to 313 million pounds.

Separately, Tesco’s Clarke said in a blog on the grocer’s website that he has ordered a review of the company’s “approach to the supply chain.” Tesco will set a new benchmark for the testing of products, he said, adding that new processes won’t mean more expensive food for customers.

Shares of Tesco, Sainsbury and Morrison fell today, though “that may be due to the noise surrounding the horsemeat issue” rather than “many concerns that it’s going to really hurt long- term business,” according to Andrew Gwynn, a food retail analyst at Exane BNP Paribas in London.

http://www.bloomberg.com/news/2013-02-15/u-k-food-industry-chiefs-determined-to-restore-consumer-trust.html

I've been following Greencore for a while, through its recent bullish upward trend, and noted that Naked Trader Robbie Burns gave it a mention yesterday (he's bought it before and done well out of it), however I suspect that he was not up to date with events when he indicated he would buy big time if it got down to around 90p. It currently stands a little under that having fallen over 22% at one stage today.

The problem with this issue, other than the obvious health concerns, is that the suppliers of the products may well find that regardless of their previous reputation, buyers will simply cut them off because they need to be seen to be doing something and distancing themselves from suppliers of the "horse meat" products.

Greencore may well be a good company, but the share price might be more volatile until the whole issue is sorted out and this is one falling knife where you need to be really confident that the underlying bad news won't keep coming back. No one knows right now where it will end.