The nation’s largest organic peanut butter company and the first food business to ever lose its federal registration during an outbreak of foodborne illness now finds itself in Chapter 7 bankruptcy. Sunland, Inc.’s financial meltdown has left the remote eastern New Mexico town of Portales in mourning over the loss of jobs and a market for the region’s Valencia peanuts.
The U.S. Bankruptcy Judge for New Mexico, David T. Thuma, has already named a trustee and set 2 p.m. on Nov. 12 in the Chaves County Magistrate Court in Roswell, NM, as the time and date for the creditors’ meeting. More than 1,000 creditors are on the invitation list. Clarke C. Coll, who was named trustee, is also based in Roswell.
It was just 13 months ago that the organic peanut butter recalls began, including such well-known brands as Trader Joe’s, Justin’s and Newman’s, over contamination from a rare strain of Salmonella Bredeney that, from first reports, sent four of the 29 people in 18 states it had infected to hospitals.
When the outbreak ended, 42 people in 20 states had been sickened by the Salmonella strain linked to the organic peanut butter processor. There were no deaths, but 28 percent of those sickened required hospitalization, and 61 percent were children younger than 10. Some litigation involving victims was settled before the bankruptcy was filed.
Companies Sunland used to manufacture for, such as Trader Joe’s, are now found among the company’s many creditors. Together, they are owed close to $100 million, an amount far greater than the company’s assets of $10 million to $50 million.
The recall associated with the outbreak originally involved only Trader Joe’s Valencia Creamy Salted Peanut Butter, but it soon expanded to more than 100 brands of peanut and nut butters manufactured by Sunland. Its brands were sold both in the U.S. by such national retailers as Kroger, Costco and others, and internationally. Then, one month into the recall, the U.S. Food and Drug Administration (FDA) suspended the company’s registration under the Food Safety Modernization Act (FSMA).
It was the first time in history that FDA used new authority granted to the agency under the FSMA, which had been signed into law 20 months earlier. No registration meant that Sunland had to shut down as its products could not be sold through interstate or intrastate commerce without it. The closure lasted almost six months.
At the time, FDA spokesmen said the action was taken because Sunland had a history of Salmonella contamination, involving as many as nine strains, that it was not solving. The agency’s judgment was based on both Sunland’s own testing and FDA’s September 2012 inspection of the plant.
Filing the bankruptcy put 100 people out of work, meaning the loss of the second-largest employer in Portales after Wal-Mart. While the local state employment service is holding “rapid response” workshops for the unemployed workers, Portales Mayor Sharon King is hopeful that another company will buy the Sunland plant and put people back to work making organic peanut butter.
Sunland, Inc., was incorporated in the State of New Mexico 25 years ago, and, since 1992, has had 2 million common shares and 500,000 preferred non-voting shares outstanding. No single owner holds more than 10 percent, according to an ownership statement filed with the bankruptcy court.
The New Mexico-Texas border region’s climate is perfect for growing Valencia peanuts, according to the New Mexico State University College of Agriculture. About 90 percent of the nation’s Valencia peanuts are grown in that area.
