I have been following the volatile stock movements in Chipotle (CMG) share price in 2015. It makes me think about how public companies can reduce their exposure to loss of valuation, customer base and revenue.
There are practical solutions in the market place and I expect companies like Chipotle to implement layers of safety so they can avoid the store closings and legal reprisals they experienced during this year as a result of selling tainted food. One of these layers of safety could come from BioLargo (BLGO) who offer an inexpensive water purification system with high potential for application in the Food Service sector.
Chipotle share prices are down nearly 20% for the year, and the trouble for shareholders started in October when they closed multiple stores in Seattle as a result of food-borne illness caused by contaminated product. This sent share prices down from $750 to the current $550, losing the company about $5 billion in value.
The high priority of food safety constantly drives the Food Service industry to search for new tools to reduce the incidence of food-borne illness. The percentage of food that is recalled due to pathogens may be very small, but the volume of the food supply is so large that even when a rare incident of contamination does strike, it can be devastating — to companies as well as to consumers.
In spite of diligent food safety efforts, more than 48 million people suffer from food-borne illness each year, according to the Centers for Disease Control. Robert Scharff, a professor of Consumer Science at Ohio State University, estimates the total annual health-related costs of food-borne illness to be $77 billion. Food safety is therefore an area of great interest and is becoming big business.
Another example of a catastrophic recall took place in 2011, when Cargill voluntarily recalled 36 million pounds of turkey due to Salmonella contamination. Details of how the Salmonella contaminated the turkey aren’t entirely known, but new measures by have been implemented by Cargill. These include additional pathogen reduction steps throughout the production process, enhanced process control monitoring systems to ensure that the company’s food safety program is generating the best results, an increase in the number and frequency of tests for Salmonella contamination, and the use of high pressure processing to further reduce risk of Salmonella contamination.
Pathogen reduction is an essential part of managing a food business. Still, in spite of the Hazard Analysis & Critical Control Points (HACCP) management system and other food safety procedures, large volumes of food are still occasionally susceptible to cross-contamination from smaller batches of contaminated foods when they are processed in or on the same equipment.
The most commonly used FDA-approved method to reduce cross contamination is to add chlorine or other disinfectants to processing water and/or to equipment surfaces. The principal factors that influence efficacy are disinfectant concentration, contact time, temperature and pH. Altering these four elements to achieve maximum efficacy and safety is useful, but is not always an effective solution and requires continual oversight. Chlorine related products are also high caustic and very corrosive making their continued use expensive and making the work environment for workers less friendly.
High-pressure processing and UV radiation are both proving to be strong additional tools for managing pathogens, and these methods have the advantage that they do not add any toxic chemicals to food. However, UV can cause undesirable discoloration of meats, and the elevated costs of both of these systems must be taken into consideration before they are adopted for in any given food processing context. If these new systems add too much to a company’s operating costs, and their competitors make no changes and continue to use the old standard disinfection methods, the competitor will likely have a cost advantage.
Researchers at University of Alberta’s Department of Agricultural, Food and Nutritional Science validated unprecedented effectiveness of BioLargo’s Advanced Oxidation System (AOS) Filter, an electrochemical water purification unit, in the disinfection of highly concentrated bacterial contaminants in sample water, including Listeria monocytogenes and Salmonella. Although these results are relevant to many industries, food safety was the primary concern of this recent work.
Professor Lynn McMullen evaluated the results and commented: “The AOS Filter technology could be highly efficient in solving food safety problems and may be applied to improve food quality with the potential to improve storage life. The potential applications of the BioLargo AOS Filter in the food industry could be endless — from primary commodities to finished food products.”
McMullen further explained: “At the foundation of the AOS Filter is its efficiency in generating a highly oxidative state. The data supports its potential to accomplish high-level disinfection that can be useful in multiple markets including food processing and agriculture production. Extremely high levels of performance [disinfection] were achieved during testing, and we are excited to expand the work with BioLargo (BLGO) to other applications targeting food safety concerns.”
The AOS Filter uses molecular iodine, which has long been known to be a powerful and safe disinfectant, and proven carbon filtration technology in order to achieve its disinfection results. Depending on the application, the iodine could be added to the water as a nutrient or, if preferred, it can be removed in the treatment process to eliminate the delivery of residual iodine.
In early experiments aimed at removing toxic organic contaminants from production water generated from oil sands recovery, the AOS Filter decontaminated the water better and faster than ever seen before — while using only one-twentieth of the energy required by the closest competing technology. While energy-consumption results from disinfection studies have not been publicized, we believe the costs will continue to remain very low as the technology progresses toward commercialization.
Water scarcity is a growing issue that is driving many industries to recycle and reuse water whenever possible. The food industry is no exception. BioLargo’s science team recognized that its AOS Filter has the potential to reduce water requirements of the food processing industry by recycling and reusing water purified by the AOS system. By comparison, current methods involve the addition of chemicals to a constant flow of freshwater and subsequent release of contaminated water back into the sanitation systems. The AOS Filter’s extremely powerful disinfection capabilites make it possible to recycle and reuse water economically.
UV radiation and high pressure processing are additional measures that can effectively reduce pathogens in food, but their costs may be prohibitive. BioLargo’s (BLGO) AOS Filter, on the other hand, appears to not only yield unprecedented disinfection results, but its overall costs might remain comparatively low especially if it eliminates the need for costly chlorine-based systems while it reduces corrosion and helps processers extend the useful life of filter membranes and equipment used in its systems. Food processors would likely be happy to be able to eliminate hazardous chemical systems, particularly if the new solution is more cost-effective.
BioLargo (BLGO) intends to expand its focus to include commercial opportunities for its AOS Filter in the agriculture and food processing industries. The filter should be a major advance in the disinfection of water used in chill wash tanks used in poultry processing, Clean-In-Process systems for poultry processing, and produce washing systems. We believe it will also be a cost-effective solution for the disinfection of potentially contaminated water fed to livestock and a multitude of other applications in food processing. BioLargo has already received commitments for number of financial grants to support its first commercial pilot organizing with a leading poultry processor in Edmonton, Canada.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer