Another beef scandal hits Japan

The company is pondering withdrawal from the meat business

Japanese food giant Snow Brand, already in the dock over a meat subsidy scam, has been caught up in a second beef-related scandal.

The company said on Monday that it had falsely labeled beef produced on Japan's northern island of Hokkaido, where mad cow disease has been discovered, as beef from the southern city Kumamoto.

The revelation follows reports last week that Snow Brand misleadingly labelled Australian beef as domestic in order to cash in on a government scheme to support the flagging beef market by buying up unsold meat.

The Japanese ministry of agriculture, which has already launched criminal proceedings against Snow Brand over last week's allegations, said on Monday it would start an investigation into the latest case too.

Consumer safety fears

Snow Brand said two of its employees sent between 20 and 30 kilograms of mislabeled beef to retailers in Kansai in late September, when consumers were shunning Hokkaido beef due to fears over mad cow disease.

Mad cow disease, or bovine spongiform encephalopathy (BSE), was first discovered in Japan last September. It is believed to have spread to Japan in imports of European animal feed.

Eating beef from infected animals is believed to cause the fatal brain-wasting condition Creutzfeld-Jakob Disease in humans.

CJD is thought to have killed more than 100 people in Europe so far, and some epidemiologists fear that the final death toll may be far higher.

Fears over CJD have hit Japanese beef sales hard, leading the government to help ailing beef farmers by buying up unsold stocks.

Shares and earnings take a hit

The labelling scandals look set to be highly damaging for Snow Brand Food, which said on Monday that it will have to "sharply" downgrade its earnings forecast.

The company has previously said that it it on track to rack up a full-year group loss of 2.63bn yen.

Snow Brand added that it plans to suspend production and sales of beef, and may also stop dealing in chicken and pork as well.

Beef accounts for around one-fifth of the company's profits.

The news has dismayed investors, who wiped 7.6% off the company's share price on Monday.

The revelations have also come as a blow to Snow Brand Food's parent company Snow Brand Milk, still recovering from a contamination incident two years ago which poisoned 10,000 consumers.

Shares in Snow Brand Milk were marked 5% lower on Monday.