Corn-Recall Cost Could Reach Into the Hundreds of Millions 

SARAH LUECK, AMY MERRICK, JOEL MILLMAN and STEPHEN D. MOORE / Wall Street  Journal 3nov00

The recall of StarLink genetically modified corn could cost companies all along the food chain hundreds of millions of dollars as they attempt to find, retrieve and replace products that used the corn.

From Aventis SA, which markets StarLink, to food processors and grocery stores, the impact of the recall is sweeping, covering nearly 300 products and requiring increased testing. Already, the first lawsuits have been filed by consumers claiming allergic reactions to the corn, which is approved only for animal feed and industrial purposes. But some companies are reaping big benefits from the StarLink corn flap.

Biotech-Corn Problems Lead to Recall of 300 Products, Disrupt Farm Belt (Nov. 2) Corn Rises as Worries Ease Over StarLink in Exports (Nov. 1) Federal Officials Blame Aventis for Biotech Corn Found in Food (Oct. 27) Regulators Are Urged to Permit Bioengineered Corn to Be in Food (Oct. 26)

French pharmaceutical concern Aventis estimates that it will spend from $100 million to $1 billion on the 25 cents-per-bushel "service fee" to buy the StarLink crop back from growers. "But it's still not clear how that cost will be divided between Aventis, the seed companies who licensed the StarLink technology and insurers for everybody involved," said Gerhard Waitz, a company spokesman.

Aventis officials expect legal wrangling over responsibility for unauthorized uses of StarLink corn. Government officials have said Aventis failed to make sure that the corn was grown with buffers that would prevent cross-pollination and other restrictions that were conditions of StarLink's approval. Aventis officials insist that seed companies licensed to incorporate the corn into their own products were responsible for notifying farmers about the restrictions. "We did everything we had to do -- and after growers licensed the technology, they had to see that things were properly handled in the next stages of distribution," said one Aventis official.

The U.S. subsidiaries of Mexico's largest corn miller, Gruma SA, already have spent millions of dollars on an extensive recall of tortilla chips, tortillas and taco shells produced by Mission Foods from corn flour produced by a sister company, Azteca Milling.

Peter Pitts, a Mission spokesman, said that since the recall began, Mission's entire sales force of more than 200 has worked full time on the recall effort. To date, from five million to six million pounds of Mission products have been either destroyed or placed in storage. Mr. Pitts added that Mission may spend as much as $10 million this year correcting any problems that have risen in connection with the StarLink episode.

The flap cost Azteca at least one big customer: Bimbo Bakeries USA, a subsidiary of Mexico's largest bread company, Grupo Bimbo SA, which stopped buying Azteca corn flour in late September. Azteca, a joint venture between Gruma and Archer-Daniels-Midland Co. of Decatur, Ill., had been Bimbo's exclusive supplier of corn flour for three tortilla plants in Ohio, Texas and California. A Bimbo official said it is now buying flour from Grupo Minsa SA, which also has U.S. operations.

Frito-Lay, a unit of PepsiCo Inc. and the biggest maker of corn snacks, said its own growers supply the majority of its corn. The small amount bought on the open market is tested for StarLink by suppliers at the company's request, said a spokeswoman. Tricon Global Restaurants Inc. said October same-store sales fell 12% at its Taco Bell chain, partly because of the StarLink recall. Taco Bell licenses its name to a type of Kraft Foods taco shell, a recalled product sold in supermarkets.

For other food concerns and grocery stores, costs could reach the tens of millions, said Gene Grabowski, a spokesman for the Grocery Manufacturers of America in Washington, D.C. Physically removing products from store shelves and shipping them back to plants should account for the bulk of those expenses, he said.

For grain elevators and exporters such as Cargill Inc., ConAgra Foods Inc. and Continental Grain Co., the recall represents lost market opportunities, said Randy Gordon, a spokesman for the National Grain and Feed Association.

Whatever the recall costs, Cargill says it doesn't plan to pay it quietly. "We are going to be holding Aventis responsible, and we are going to be filing claims," spokeswoman Bonnie Raquet said.

The Food and Drug Administration is investigating several reports of allergic reactions, but hasn't confirmed StarLink was the culprit. Officials have called such risks "remote."

But that doesn't rule out lawsuits from people who believe StarLink made them sick. In Chicago, two people are suing Aventis and Azteca, claiming they got hives, stomachaches and other allergy symptoms after eating Kraft taco shells.

The companies that sell tests for detecting StarLink may be among the few that benefit from the recall. Strategic Diagnostics Inc., Newark, Del., sold 400,000 such tests by Oct. 20 to clients including ADM and Azteca, said Arthur Koch, chief financial officer. EnviroLogix Inc. of Portland, Maine, which sells similar tests, has been fielding many calls from the food industry and government agencies, said Dean Layton, vice president of marketing and sales.

-- Betsy McKay in Atlanta contributed to this article.

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