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Food Irradiation Firm's Sales Slow to Take Off

November 01, 2002|Melinda Fulmer | Times Staff Writer

Tainted deli meat. Contaminated hamburger. Bacteria-laden cantaloupe.

Consumers might have thought the onslaught of deadly food scares this past year would have sparked sales for SureBeam Corp., the nation's largest irradiation company. But as investors know, the company has been caught in a difficult waiting game -- and the losses are piling up.

The trouble for SureBeam is that it's depending on the federal government to approve wider use of its germ-zapping equipment by food processors beyond hamburger and on retailers to embrace the controversial technology. And while it was waiting, its third-quarter business stalled.

The San Diego-based company said Thursday that its loss widened in the three-month period ended Sept. 30 to $11 million, or 16 cents a share, from $7.7 million, or 14 cents, a year earlier. Revenue plunged more than 50% to $7 million from $14.5 million. The loss was in line with analysts' estimates.

"We had thought initially that" SureBeam's irradiation technology would be more widely accepted "much sooner," said Leonard Teitelbaum of Merrill Lynch Global Securities.

Still, he and other analysts say they expect the company to become profitable soon.

In October, the U.S. Department of Agriculture approved use of irradiation on imported produce, and the company said it is finalizing negotiations to sell its equipment to a number of foreign fruit producers and countries, which could help generate some $40 million in annual revenue.

"The issuance of this rule is the first step in building an international business," said Larry Oberkfell, SureBeam's president and chief executive. "We are going to work hard to move SureBeam's business forward."

SureBeam also is expected to get a huge boost in the next few years if the Food and Drug Administration approves irradiation for use on a whole host of processed, precooked foods such as cold cuts and hot dogs. In addition, the USDA said recently that irradiation could be an option for participants in the federal school lunch program to use on meat.

However, the prospect of so much irradiated food coming to market has some microbiologists and consumer groups up in arms. Public Citizen intends to petition the government to block wider use of irradiation.

Although the federal government considers the technology safe, some microbiologists say there hasn't been enough independent research done to determine whether the chemical byproducts created during the irradiation process are harmful.

"It creates a false sense of security that [all the germs are] dead," said Mansour Samadpour, a microbiologist and assistant professor at the University of Washington. That, he said, may have consumers thinking they can eat rare meat or be lax in how they handle it.

Irradiation kills pathogens, pests and food-spoilage microorganisms by exposing them to controlled levels of ionizing radiation, such as gamma rays, electrons or X-rays. The radiation passes through packaging, blasting germs and pests. It also delays mold and other spoilage, extending the food's shelf life.

Though some Northeast supermarket chains have started to sell irradiated ground beef, it is not yet available in much of the country, including California.

But analysts say it won't be long before many people in Southern California have access to irradiated food. SureBeam recently clinched a deal with an Imperial Valley slaughterhouse to test meat at SureBeam's Vernon plant.

"We don't really care about their revenues or earnings this quarter," said Stephen Levenson of Gerard Klauer Mattison. "What's important is they are signing up customers and supermarkets are rolling the product out. Consumers are asking for it, rather than having it forced down their throats."

SureBeam stock fell 49 cents to close at $4.35 on Nasdaq.

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