Horse meat scandal wipes £300m off Tesco's market value

http://www.guardian.co.uk/business/marketforceslive/2013/jan/16/horse-meat-tesco-market-value-shares

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Nearly £300m has been wiped off the value of <strong>Tesco</strong> after a number of its burgers were found to contain horse meat.

The products were made at two plants in Ireland and one in the UK and were sold by a number of retailers including Tesco.

The news comes at a bad time for Tesco which is attempting to convince customers about the quality of its products and services after losing market share to rivals. It has admitted the management took its eye off the UK stores during its push for overseas expansion.

The Food Safety Authority of Ireland said there was no risk to public health from the contaminated burgers, which were also sold by Lidl , Iceland and Aldi.

But the bad publicity has helped push Tesco 3.6p lower to 346p, a 1% fall in a FTSE 100 which is down just 0.5%. Analyst

Caroline Gulliver at Espirito Santo said:

<blockquote>The news is likely to, at least temporarily, reduce consumers' trust in the quality of Tesco's products which is unhelpful at a time when Tesco is trying to rebuild customers' trust in the quality underpinning Tesco own label and EveryDay Value products.<br /><br />Tesco has launched a PR offensive to counter headlines that its frozen Everyday Value Beef Burgers contain 29% horse meat (as one sample was found to have). Tesco has withdrawn all products from the supplier in question and apologized to customers for any distress saying that "We will not tolerate any compromise in the quality of the food we sell. The presence of illegal meat in our products is extremely serious. Our customers have the right to expect that food they buy is produced to the highest standards… we apologise sincerely for any distress." </blockquote>

She pointed out that Tesco Finest Aberdeen Angus frozen beef burgers are half price at £1.50 for two and Birds Eye frozen beef burgers have 30% off, though both promotions were already in place. She added:

<blockquote>We rate Tesco a sell as we think its turnaround is still in its early stages. Given the high level of price and quality competition in the market, we believe Tesco may struggle to sufficiently grow UK like for like sales without further margin investment, whilst at the same time the Eastern European consumer environment is deteriorating.</blockquote>

But Hartmann Capital trader Basil Petrides told Reuters he believed the horse meat story was "one of those five minute scandals" and said any share price sell-off could prove a good buying opportunity.