Tesco Drops Silvercrest Foods After Horse Meat Investigation

Tesco Plc (TSCO), the U.K.’s largest supermarket chain, dropped frozen-burger supplier Silvercrest Foods after the discovery of horse DNA in frozen beef burgers.

Silvercrest, a unit of ABP Food Group, used meat that didn’t come from Tesco’s list of approved suppliers, Tim Smith, the retailer’s technical director, said in an e-mailed statement today. The meat wasn’t from the U.K. or Ireland, contrary to instructions, he said, adding that Tesco will test the DNA of meat products to avoid deviation from its standards.

Tesco won’t accept products from Silvercrest anymore as the “breach of trust is simply too great,” Smith said.

Tesco Chief Executive Officer Philip Clarke apologized to customers on Jan. 16 after Ireland’s food safety authority found horse DNA in the grocer’s frozen beef burgers. Other retailers that sold the products were Aldi, Lidl, Iceland Foods Ltd. and Dublin-based Dunnes Stores.

The losses for Tesco will be “a lot bigger” than 1 million pounds ($1.6 million), Smith told the U.K. Environment, Food and Rural Affairs Committee, which today held a hearing into the contamination of food products.

The investigation is still going on and “the impact of the losses we have incurred and those that have been incurred by the stores themselves are still being tabulated,” Smith told Members of Parliament in London.

DNA Testing

The new DNA testing program could cost the company “anything between 1 and 2 million pounds a year,” he said.

Tesco’s commitment to DNA testing will “reassure customers and draw a line under the incident,” Caroline Gulliver, an analyst at Espirito Santo, said in a note to investors.

A Tesco spokesman declined to comment on who would replace Silvercrest as a supplier. Irish Agriculture Minister Simon Coveney said Jan. 26 that raw material from Poland was the source of horse DNA in the foods Silvercrest had been shipping.

“We have learned an important lesson from this incident and we are determined to ensure that this never happens again,” Paul Finnerty, ABP Food Group CEO, said in an e-mailed statement, adding that they welcomed Tesco’s decision to continue sourcing fresh beef from other ABP companies.

ABP has changed management at the Silvercrest facility, which remains closed, and said that it aims to become an “industry leader” in comprehensive DNA testing procedures.

To contact the reporter on this story: Gabi Thesing in London at gthesing@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net