Kellogg Co. doesn't rule out making its own peanut butter after a recall that will cost the company about $70 million, Chief Executive Officer David Mackay said, Bloomberg reported.
Kellogg, the world's largest cereal maker, is studying its safety and testing procedures after distributing snacks with tainted ingredients from Peanut Corp. of America, Mackay said. The supplier's peanut paste has been tied to an outbreak of salmonella that killed eight people and sickened 575, according to the Centers for Disease Control and Prevention.
"We regret the situation's occurred," Mackay said today in an interview. "The question this does raise is, 'Do we and others need to do more?' We're working through that."
Costs to recall Kellogg products with peanut butter hurt the company's fourth-quarter earnings by 6 cents a share and will hurt 2009 earnings by another 6 cents, the Battle Creek, Michigan-based company said today in a statement. Kellogg is among 100 companies including Unilever Plc., Hershey Co. and Kroger Co. facing unexpected costs to get potentially harmful products away from consumers.
Mackay said the recall affects less than 1 percent of Kellogg's annual sales.
"It isn't big in the magnitude of the company, but given the unfortunate situation, it's clearly a massive issue for us and our customers," he said.
Kellogg rose 19 cents to $43.68 at 4:15 p.m. in New York Stock Exchange composite trading. The stock dropped 16 percent last year.
Even with recall costs of $34 million in the fourth quarter, Kellogg said profit rose on higher prices, and reiterated its 2009 full-year earnings forecast.