8 February 2013 Last updated at 11:12 ET

Horsemeat scandal: The business impact

 

By Matthew Wall Business reporter, BBC News

Findus Beef Lasagne was withdrawn from sale after 100% horsemeat was found in some products

The latest scandal surrounding horsemeat in processed food could be "disastrous" for the meat processing industry, retail analysts are warning.

Lost contracts with supermarkets "will undoubtedly cost them millions of pounds", Neil Saunders of retail analyst Conlumino told the BBC.

"The loss of supply contracts could be disastrous for food suppliers."

The Food Standards Agency now wants the industry to test all its processed beef products.

The British Meat Processors Association, whose members produce 80% of meat sold in the UK, said: "It's too early to say what the impact will be on our industry. The BMPA is co-operating with the FSA [Food Standards Agency] to establish the facts, and to deal effectively with the issues."

One supplier, meat processor Silvercrest, based in County Monaghan, Ireland, lost supply contracts with Tesco, Aldi and Co-operative supermarkets after the Food Safety Authority of Ireland (FSAI) found horse and pig DNA in burgers it supplied.

"It wouldn't surprise me if there were redundancies," said Mr Saunders.

A spokesperson for ABP Food Group, which owns Silvercrest, said: "We feel it would be inappropriate to comment at this stage."

Testing regime

In a statement issued on Friday, the FSA said: "In addition to the widespread testing we are doing, we've instructed the industry to urgently carry out its own tests on processed beef products to see whether horsemeat is present."

But this new testing regime could cost the industry millions of pounds.

Giving evidence to the Environment, Food & Rural Affairs select committee on 30 January, Tim Smith, Tesco's group technical director revealed that the supermarket's new DNA testing regime, introduced following the discovery of horsemeat in its value burgers, would cost it "£1m to £2m a year".

Meanwhile, Tesco's sales loss would be "a lot bigger than a million pounds" as a result of the scandal, he said.

But Richard Dodd of the British Retail Consortium, which represents 80% of the UK retail industry, told the BBC: "What we're hearing from our members is that this [horsemeat] issue is not having an impact. People are clear that it isn't a health issue, so it's not producing a change in customer shopping habits."

And Conlumino's Neil Saunders agrees that the supermarkets are unlikely to be affected much by the scandal, since they can claim compensation from their suppliers.

"While it is highly likely that sales will have deteriorated in some food lines, such as value burgers, other categories may have benefitted, meaning that there is little net loss overall," he said.

Traditional High Street butchers might even be benefiting from the horsemeat scandal, says Richard Stevenson, technical manager of the National Federation of Meat and Food Traders.

"Our members are telling us that they're all getting more business since the Tesco burger issue, because most butchers know exactly where their meat has come from. You could argue that this issue has arisen as a direct result of the cheap food policy adopted by supermarkets."

Findus, which had to withdraw its beef lasagne ready meals after some samples were found to contain 100% horsemeat, said on Friday that it had tested all its other beef products and found no evidence of contamination.