Consumer goods group Tiger Brands should settle a class action to avoid lengthy litigation that could damage its reputation, analysts said this week.
This comes after the lodging on Monday of a class-action lawsuit to establish the company's liability in the deaths of 218 people and the impact on many hundreds more, who became ill after they ate processed meat made at its facilities.
Lulama Qongqo, a consumer analyst at Mergence Investment Managers, said: "I think that it could potentially be cheaper for them to settle out of court. The longer it takes, the higher the risk of them once again bringing an injustice to their brand.
"I definitely think that if they settle out of court and don't fight tooth and nail like everything we've seen, they might be able to then demonstrate that, well, 'we're not just cold-hearted as the public thought we were and we actually do care about the people who eat our products'."
Tiger Brands' share price has lost more than 36% since March last year when the ST6 listeria strand was found at its Enterprise factory in Polokwane. On Wednesday its share price dropped 2.7% after the company said it had received the summons.
Tiger Brands did not respond to questions from Business Times, but in a statement on Sens said it intended to defend the class action. It added that its insurers had advised it that its product liability policy does not include cover for exemplary or punitive damages, should such an award be made by the court, and in addition, should an award be made for constitutional damages, the product liability policy will not cover that portion of the award.
An analyst, who declined to be named, said: "A settlement is probably in the best interest of Tiger Brands in order to halt the continued bad publicity and the distraction it might have on management."
However, a court case may be in the public's interest so people can understand exactly what happened and to prevent similar disasters in future.
On Monday, Richard Spoor Attorneys filed a summons at the Johannesburg high court, asking the court to find Tiger Brands liable for harm as a result of its production and distribution of contaminated ready-to-eat meat products. If liability is established, then the second step would be to determine the damages.
In response to whether the law firm is willing to settle out of court, Catherine Marcus, a lawyer at Richard Spoor Attorneys, said: "We want Tiger [Brands] to do good on the harm that they caused. We want it to be wrapped up as quickly as possible for our clients. So the ball is in Tiger's court."
Tiger Brands has 10 days to respond...