Is there a future in irradiation?

The recent losses posted by US irradiation specialist Food Technology Services have bought into question the future of the industry.

Losses of more than $150,000 (€152,642) in the quarter ending 30 June and falling share prices may be just the tip of the iceberg.

Food Technology Service reduces the threat of food-borne illness by exposing food and packaging to a radioactive substance called Cobalt 60. Gamma rays from the substance pass through food without leaving any trace of radioactive material. The company suffered through nine years of financial losses, until in a surprise, it showed a profit in early 2001 and stayed profitable for more than a year.

However, it fell into the red last quarter. Food Technology lost $150,586, compared with an after-tax profit of $588 in the second quarter of 2001. Sales for the past quarter fell 18 per cent to $253,206 from $308,955 last year. The company lost 1.4 cents per share of stock; there are 10.5 million shares outstanding.

Food Technology's stock has fared poorly of late. Traded under the symbol VIFL, it closed at 60 cents per share last week, down 59 per cent since 31 December 2001, when it closed at $1.45 per share. That compares with the Standard & Poor's 500, which is down 19 per cent for the year. Last October, during the anthrax scare, Food Technology stock hit $5.05 per share.

Food Technology CEO Richard Hunter could not be reached for comment last week. In a prepared statement, he said the company's revenues fell last quarter because a major customer did not need Food Technology's services. That customer - which Hunter did not name - should start using Food Technology again in early 2003, he said.

Consumers and retailers have been slow to accept irradiated food, so Food Technology launched its own line of irradiated beef, poultry and eggs in May. It ships the products through the mail to consumers. The company targets people with weak immune systems, who might be more susceptible to food-borne bacteria.

Whether irradiated food ever takes off appears to be up in the air.

A leading food irradiation company is Surebeam of San Diego. It has irradiated food for some of America's biggest meat companies and sold some irradiators to foreign companies. But, like Food Technology, Surebeam is losing money. In its recent quarterly earnings report, Surebeam posted a loss of $5.1 million on sales of $10.8 million. It expects continued losses through at least 2003.

Surebeam uses a type of irradiation called electron-beam, or e-beam, irradiation.

Surebeam summed up its challenges in its earnings report: "The market for electronically-irradiated food is at an early stage of development and has developed slower than we had originally expected. As of 30 June 2002, 10 food processors were selling food electronically irradiated by us, and the volume of food being processed is still a very small percentage of the market of ground beef. To date, no market has developed for chicken."​

While it is hard to find irradiated food in Florida, Minnesota has emerged as the epicentre of the industry. There, the Dairy Queen restaurant chain sells irradiated hamburgers in 50 stores. The chain has no plans yet to roll it out beyond Minnesota, where Dairy Queen's parent company, International Dairy Queen, is based.

"So far, we've gotten very good feedback from our franchisees as well as our consumers,"​ said Dean Peters, an International Dairy Queen spokesman.

Other Minnesota-based companies offering irradiated meat include: Huisken Meats, a meat processor offering irradiated beef in a few thousand grocery stores across the country; and Excel, a meat processor owned by Cargill.

Excel originally irradiated frozen beef patties, but found a bigger market for irradiated fresh ground beef. So, it is now offering only fresh ground beef and shipping it to a New York grocery chain, said Mark Klein, director of communications for Excel.

A market emerged in Minnesota because several prominent Minnesotans publicly supported it, including the former Minnesota health commissioner and the head of the Minneapolis-based SuperValu grocery chain, Klein said.

"Like any new product, they start off slow and build momentum, with consumers ultimately deciding if there's a place in the market," Klein said.