Company’s Pet Project

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Barrels full of mechanically de-boned turkey meat stand in a refrigerated room at the Natural Balance Pet Foods Inc. factory in Pacoima.


It takes a lot of turkeys to feed the nation’s hungry pooches: more than 50,000 pounds of meat a week.


Then there are about 280,000 pounds of potatoes that go into the mixes each week. The company, which has 140 employees and an estimated $37 million in annual sales, has to secure next year’s batch from Idaho growers well in advance.


These mountains of meat and potatoes are signs that business is on the rebound after recalls from a disastrous pet food contamination scare that swept the nation earlier this year stunted Natural Balance’s growth.


Despite being hit hard by the tainted food, which left thousands of U.S. cats and dogs sick or dead because of contaminants that made their way into mass-market brands, the company’s biggest month ever was October, up 12 percent from August.


That’s thanks in part to the installation of an expensive new laboratory on the company’s property, an operation that lets Natural Balance post laboratory testing results for each bag of pet food produced. Consumers can log on to the Web site and see results specific to their bag of pet food.


Company President Joey Herrick founded the company with his wife, Linda, in 1988 with money from actor Dick Van Patten, who has long been the name and face of the company. The Herricks had wanted to start a pet food company that used natural ingredients.


Natural Balance now has 24 pet food formulas with ingredients such as lamb, duck, rice and, of course, turkey and potatoes.


There were two pet food problems. The first was the result of contamination by melamine, a toxic industrial chemical in plastics and resins. Melamine, which is not allowed in any food, including animal food, was traced to wheat gluten and protein products that came from China and several factories in the United States as well.


Natural Balance sidestepped the first problem and never had any wheat gluten in its foods, but the company was hit by a second wave of contamination a month later, which was the result of tainted rice protein.


The economic impact on the pet food market has been extensive. Menu Foods, the company hit hardest by the recalls, lost at least $45 million.


Natural Balance food is sold in more than 900 Petco outlets nationwide as well as thousands of other retailers. The recall of 3,000 bags of venison and brown-rice formula dog food and treats cost Natural Balance more than $2 million, partly in lost sales and partly because of the $600,000 to date in veterinary claims alone. Because it is a private company, it’s unclear what impact those costs will have on its earnings; the loss equals more than 5 percent of its estimated sales.



Contamination crisis

The bad news came on a Thursday in April: The company’s offices started receiving calls about pets that became ill after eating the food. By Friday morning, the company had fielded eight reports of sickness and Herrick knew something was seriously wrong. He called all the stores that stocked the company’s venison and brown rice food and told them to stop selling the product.


“As a company we were lucky in one respect: Our size enabled us to act quickly and pull all the food in fast,” Herrick said. “When we issued the recall, we knew exactly which batch it was from. But think about the kids who work in pet stores they’re going to go through the first four bags of food and if they don’t find the date they’re looking for, they’ll stop there. So we called it all back, instead of doing a date-specific recall. We didn’t want anyone to miss anything.”


Pet foods have long been self-regulated by manufacturers, though the recall has led to calls for oversight. The U.S. Senate held a hearing on the matter in April and introduced legislation to set standards.


Herrick decided the only way to restore consumer confidence was to show buyers chemical analysis results for each bag of food. So the company decided to build a lab at its headquarters.


The equipment alone cost $500,000, including a small, specialized $12,000 oven. Then Natural Balance had to hire a chemist, an assistant and a full-time worker to upload the results online. Herrick hired chemist Rome Ruvolo away from Golden State Foods Corp., a multimillion-dollar enterprise where he used to test McDonald’s sauces for the fast-food chain’s largest supplier.


The company also sends the in-house tests for outside verification, and tests the chemist by occasionally putting tainted samples in the lab’s testing batches.


“He’s never missed one,” Herrick said.


The company currently posts results for four types of contaminants. More will eventually be added.


Herrick acknowledges that he can’t test for everything, only for toxins that are suspected, which now include melamine.


“Chances are you are not going to be testing for the unknown or things that aren’t supposed to be there,” said David Kirkpatrick, a spokesman for the American Veterinary Medical Association. “There are protocols for testing for food contaminants and certain ingredients, but if we’re talking about something like melamine that shouldn’t be there and people have no clue they should be looking for it, that’s a tough one for the industry to handle.”


In August, Natural Balance was named as a co-defendant in a class-action lawsuit stemming from the recalls. The suit seeks damages of up to $5 million on behalf of pet owners whose animals were harmed.


The lawsuit states that Binzhou Futian Biological Technology of China shipped contaminated rice protein into San Francisco, and the protein went into pet foods including Natural Balance.


Herrick said that since the company continues to pay all claims submitted that were related to the recalls, he was surprised to be named in the complaint.


Although it’s a small producer when compared with the corporate giants of the pet food industry, such as Mars Inc.-owned Kal Kan Foods Inc. and Procter & Gamble Co.’s Iams brand, Herrick maintains Natural Balance is “the biggest of the little guys out there.”


The company has about 450,000 customers a year and sells 120,000 bags a month of its popular duck and potato dog food formula far less than Colgate-Palmolive subsidiary Hill’s Pet Nutrition and Science Diet brands, but edging closer to local premium-brand competitor Nutro Products Inc. (Mars Inc. agreed to buy Nutro earlier this year.)


Starting up the lab, using natural ingredients and having stringent oversight Natural Balance hired a former USDA inspector to run the food plant earlier this year does a lot to inspire customer loyalty and confidence.


“When you get this size, you do a lot of volume, but there’s still a big discrepancy between us and them,” Herrick said. “We want to break out, but not if it means changing the way we do business. We’ll never have that corporate feel.”


Natural Balance’s growth over the past seven years has been in the 40 percent to 60 percent range annually, though this year that has dropped to between 40 percent and 45 percent, a reflection of the recall.


“It wiped out all of our growth (up to that point in the year) and pulled us back to flat,” Herrick said. “It hurt us because we had been growing steadily up to that point.”

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