Costco Dumping $2.6 of Peanut Butter in New Mexico Landfill: It's "Unmerchantable"

Posted on 28 Mar 2014 13:48 by EricT

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Costco is set to have over a million dollars of peanut butter dumped in a New Mexico landfill, but not, apparently, because there is something unhealthy or unsafe about the product, except because it does not meat Costco's quality standards. The peanut butter was manufactured by Sunland Inc. of Portales, New Mexico, once the nation's largest producer of organic peanut butter, making peanut butter for brands such as Trader Joe's, Kroger, and, of course, Costco.1

The road to the peanut butter dump started as far back as October, when Sunland filed for bankruptcy after Costco terminated a deal it had with the company. Costco also sought to take possession of $20 million of peanuts it had in storage at Sunland, although Sunland said that Costco owed them $4 million for shelled and bagged peanuts that had been previously delivered to Costco. Before this, in 2012, a Salmonella outbreak which infected 42 people in 20 states was linked to peanut butter manufactured by Sunland. The first product to be recalled was Trader Joe's Organic Valencia Peanut Butter, soon expanding to dozens of other brands, all manufactured by Sunland. This caused the FDA to temporarily suspend Sunland's federal registration and forcing the plant to shut down for almost four months at the end of 2012 and beginning of 2013. At this time, Costco had agreed to front Sunland the cash needed to allow them to continue buying peanuts, but Costco unilaterally terminated the deal 10 months later on October 4, leading to the bankruptcy filing on October 8, 2014. Read more about the financial details in Food Safety News.2

Now, Sunland is left with 950,000 jars of peanut butter made with Costco's peanuts, worth an estimated $2.6 million. Costco had originally agreed to allow Sunland to sell it the peanut butter, having done extensive testing on the product. However, after Costco received 8 loads, they rejected it, citing "leaky peanut oil" and calling it "not merchantable."

According to the Associated Press, the bankruptcy trustee, Clark Coll, claims that "all parties agreed there's nothing wrong with the peanut butter from a health and safety issue," but, regardless, Costco refused any other solution, including donating the peanut butter to food banks, or re-branding it to sell to institutions like prisons, insisting on destruction. So, now, 25 tons of the peanut butter is being hauled to the Curry County landfill in Clovis. Costco has refused to comment on the issue.1

References
1. Clausing, Jeri. "Million Jars of Peanut Butter Dumped in New Mexico." News from The Associated Press. Associated Press, 28 Mar. 2014. Web. 28 Mar. 2014. <http://hosted.ap.org/dynamic/stories/U/US_PEANUT_BUTTER_DUMPED?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT>.
2. Flynn, Dan. "Costco Played Major Role in Bankruptcy of Nation’s Largest Organic Peanut Butter Maker." Food Safety News. N.p., 20 Dec. 2013. Web. 28 Mar. 2014. <http://www.foodsafetynews.com/2013/12/costco-played-major-role-in-bankruptcy-of-nations-largest-organic-peanut-butter-maker/>.

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