Cal-Maine Foods Inc (CALM) Left With Egg on Its Face

Page 1 of 2

Here’s something to get a little bit eggs-cited about: Cal-Maine Foods Inc (NASDAQ:CALM) agreed to settle a class action price-fixing lawsuit for about $28 million. The country’s largest fresh egg producer clucks that it did nothing wrong, but rather that it has agreed to put the matter behind it in the interests of its shareholders.

Cal-Maine Foods Inc (NASDAQ:CALM)

Under the apparent guise of giving their chickens better living conditions, Cal-Maine Foods Inc (NASDAQ:CALM) and other egg producers represented by the United Egg Producers trade group — which accounts for approximately 95% of all the egg-laying hens in the U.S. – allegedly hatched the idea to raise prices by killing off their flocks and limiting the supply of eggs. The supposed scheme succeeded by inflating prices by as much as 40% in 2008.

But the chickens came home to roost for the cartel when food service giant Sodexo squawked that the producers were a bunch of bad eggs. Having bought some $250 million worth of eggs from them over an eight-year period between 2002 to 2010, Sodexo weighed in with a lawsuit in 2011, followed later that year by other consumer goods companies, including Kraft Foods Group Inc (NASDAQ:KRFT), General Mills, Inc. (NYSE:GIS), and Kellogg Company (NYSE:K), which also had their feathers ruffled by the higher prices.

They contended that not only did the egg producers kill off their flocks and not replace the layers with new ones as quickly as they otherwise might, they were so cock-sure of themselves that if a producer tried to fly the coop they’d dissuade retailers like Wal-Mart Stores, Inc. (NYSE:WMT) and Albertsons from buying from them by withholding the UEP’s certification stamp, which is viewed as a stamp of quality.

For its part, Cal-Maine Foods Inc (NASDAQ:CALM) says those who ended up suing are giving a cock-and-bull story, as they were well aware and supportive of the industrywide animal welfare guidelines it was following. Moreover, it claims that the Agricultural Department was aware of the strategy it was pursuing as well.

The problem is that the number of commercial-size egg producers — those with flocks of 75,000 or more hens — has shrunk from 2,500 companies in 1987 to a little more than 200 by the time the complaint was filed. The price-fixing scheme also followed on the heels of the collapse of the Atkins Diet and other low-carb fads that saw egg producers profiting from the high-protein binge.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!