We reviewed a potential opportunity with a US-based pet food company.
We liked this company for its long-term growth potential and fair valuations, and considered investing in it in several of our Concentrated Growth portfolios. Before deciding whether to invest, however, we wanted to review the company’s approach to ensuring quality in its operations.
In 2014, the company faced a lawsuit alleging false advertising. The company’s advertising centered around a theme called “True Promise” which stated that the company’s products are “formulated with the finest natural ingredients”. The claim cited that certain pet food produced by the company contained poultry by-product meal and artificial preservatives.The claim also cited that certain of the company’s “grain-free” products contained grain.
On May 6, 2015, the company admitted in court that a “substantial” and “material” portion of its pet food indeed contained poultry by-product meal, contrary to how the products were advertised. To settle, the company paid $32 million into a settlement fund.
The principles of food safety applies to pets, too: The Food and Drug Administration (FDA) requires that all pet foods be safe to eat, produced under sanitary conditions, contain no harmful substances, and, importantly in this case, be truthfully labeled.