Contingencies

9 Months Ended

Jan. 31, 2023

Contingency [Abstract]

Contingencies

We, like other food manufacturers, are from time to time subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business. We are currently a defendant in a variety of such legal proceedings, including certain lawsuits related to the alleged price-fixing of shelf stable tuna products prior to 2011 by a business previously owned by, but divested prior to our acquisition of, Big Heart Pet Brands, the significant majority of which were settled and paid during 2019 and 2020. While we cannot predict with certainty the ultimate results of these proceedings or potential settlements associated with these or other matters, we have accrued losses for certain contingent liabilities that we have determined are probable and reasonably estimable at January 31, 2023. Based on the information known to date, with the exception of the matters discussed below, we do not believe the final outcome of these proceedings would have a material adverse effect on our financial position, results of operations, or cash flows.

In addition to the legal proceedings discussed above, in May 2011, we were named a defendant in Council for Education and Research on Toxics (“CERT”) v. Brad Barry LLC, et al., which alleged that we, in addition to nearly eighty other defendants (collectively the “Defendants”) who manufacture, package, distribute, or sell packaged coffee, failed to provide warnings for our coffee products of exposure to the chemical acrylamide as required under California Health and Safety Code Section 25249.5, the California Safe Drinking Water and Toxic Enforcement Act of 1986 (better known as “Proposition 65”). In August 2020, the trial court granted the Defendants’ motion for summary judgment based on a 2019 regulation clarifying that cancer warnings are not required for coffee under Proposition 65. CERT appealed the ruling in November 2020 to the California Court of Appeals for the Second Appellate District, which affirmed the trial court's decision. CERT then petitioned for further appeal to the California Supreme Court, which was denied on February 15, 2023. The California Supreme Court will send the case back to the trial court to affirm judgement in favor of the Defendants thereby effectively concluding this litigation.

We are also defendants in a series of putative class action lawsuits that were originally filed in federal courts in California, Florida, Illinois, Missouri, New York, Texas, and Washington D.C., but have been transferred to the United States District Court for the Western District of Missouri for coordinated pre-trial proceedings. The plaintiffs assert claims arising under

various state laws for false advertising, consumer protection, deceptive and unfair trade practices, and similar statutes. Their claims are premised on allegations that we have misrepresented the number of servings that can be made from various canisters of Folgers coffee on the packaging for those products.

The outcome and the financial impact of these cases, if any, cannot be predicted at this time. Accordingly, no loss contingency has been recorded for these matters as of January 31, 2023, and the likelihood of loss is not considered probable or estimable. However, if we are required to pay significant damages, our business and financial results could be adversely impacted, and sales of those products could suffer not only in these locations but elsewhere.

Product Recall: In May 2022, we initiated a voluntary recall of select Jif peanut butter products produced at our Lexington, Kentucky, facility and sold primarily in the U.S., due to potential salmonella contamination. At that time, we also suspended the manufacturing of these products at our Lexington facility and temporarily paused shipments from our Memphis, Tennessee, facility. No other products produced at our other facilities were affected by this recall. In June 2022, we resumed manufacturing and shipping at our Lexington facility, as well as shipping from our Memphis facility. We partnered with retailers to restock Jif peanut butter products during the first quarter of 2023 and anticipate a return to normal levels by the end of 2023. During the three and nine months ended January 31, 2023, approximately $20.0 and $110.0 of direct costs were recognized, respectively, net of insurance recoveries, related to customer returns, fees, unsaleable inventory, and other product recall-related costs, primarily within our U.S. Retail Consumer Foods segment. The majority of the direct costs were incurred through the third quarter of 2023, and additional direct costs are expected to be minimal during the remainder of 2023.

Further, we are a defendant in five putative class action lawsuits as a result of our voluntary recall of select Jif peanut butter products. The plaintiffs assert causes of action for negligence, breach of warranties, fraudulent concealment, unjust enrichment, and, in some of the lawsuits, violations of state consumer protection and deceptive trade practices laws. Their claims are premised on allegations that we engaged in business practices designed to mislead the public regarding the safety of Jif peanut butter for human consumption due to the alleged presence of salmonella. The cases are pending and consolidated in the United States District Court for the Northern District of Ohio. Additionally, the U.S. Food and Drug Administration (the “FDA”) issued a warning letter on January 24, 2023, following an inspection of our Lexington facility completed in June 2022, identifying concerns regarding certain practices and controls at the facility. We have responded to the warning letter with a detailed explanation of our food safety plan and extensive verification activities to prevent contamination in Jif peanut butter products but the FDA or other agencies may nonetheless conclude that certain practices or controls were not in compliance with the Federal Food, Drug, and Cosmetic Act or other laws. Any potential regulatory action could result in the imposition of injunctive terms and monetary payments that could have a material adverse effect on our business, reputation, brand, results of operations, and financial performance, as well as affect pending consumer litigation associated with the voluntary recall of Jif peanut butter products. The outcome and financial impact, if any, of the ongoing consumer litigation or potential regulatory action associated with the Jif voluntary recall cannot be predicted at this time. Accordingly, no loss contingency has been recorded for these matters as of January 31, 2023, and the likelihood of loss is not considered probable or estimable.