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The Los Angeles Times reports that AFA Foods Inc., a ground beef processor jointly owned by Earvin “Magic” Johnson and private equity group Yucaipa Cos., has filed for bankruptcy protection, citing negative publicity over the use of Lean Finely Textured Beef, more commonly known as Pink Slime, produced in its plants.

According to the story, AFA said it was “faced with an immediate and unanticipated liquidity crisis" and, the Times writes, “was unable to pay vendors last week without a loan, which banks refused to provide.”

Pink slime was only part of the problem, the story says; AFA was said to be “straining with too much capacity and heightened competition,” and was “struggling to post a profit.”

As the Times reports, the US Department of Agriculture (USDA) has approved the use of Lean Finely Textured Beef for decades, though it was a federal regulator who came up with the term “Pink Slime” when writing a memo decrying its use. More recently, the Times writes, “Celebrity chef Jamie Oliver has been virulent in his attacks on the trimmings, denouncing them as unappetizing and unhealthy. The negative publicity quickly reached a crescendo, resulting in ground beef containing the trimmings to be pulled from school cafeterias, supermarkets and even some fast-food restaurants.”

For example, Reuters reports that “Wendy's Co says it never has used so-called ‘pink slime’ in its hamburgers and ran ads in eight major daily newspapers around the United States on Friday to let diners know that.” Wendy’s is just the latest in a series of companies to go public with its position.

"This controversy has dramatically reduced the demand for all ground beef products," says Ron Allen, the company’s interim CEO. "Almost all retail grocery stores have succumbed to public pressure to reduce or eliminate the sale of products including BLBT, as well as public requests to prominently label products containing BLBT."
KC's View:
Except, of course, for the supermarkets that are saying that they have never used Pink Slime in their ground beef ... which suggests that they made a value judgement about the filler at some point, as opposed to deciding now to succumb to the power of negative publicity.

I feel bad for the the folks at AFA, and I’m fairly sure that there will be folks out there who will say that inaccurate reporting has unfairly victimized a good company and cost people their jobs. Except that clearly AFA was on the brink anyway ... the Pink Slime controversy may have just been the final nudge off the cliff.