Millions of caged eggs sold as free range in NZ

Those free range eggs you bought at Countdown may not have been free range at all.

A Newsroom investigation has revealed that millions of free range eggs sold at Countdown before this year were likely to have been laid by caged hens.

They were packaged as Palace Poultry brand free range eggs laid at a South Auckland farm, but Newsroom’s Morgan Tait and Melanie Reid reveal a large quantity are from caged egg suppliers.

The Serious Fraud Office is investigating.

In pale yellow cartons, with rustic-style labels, Palace Poultry free-range eggs stand out from the other packaged brands on the shelves of Countdown supermarkets.

Palace Poultry eggs command plenty of shelf space and at up to $3 cheaper per dozen than competing brands they are a popular buy for cost-conscious consumers looking to make an ethical choice.

Stocked in about 70 Countdown stores in the upper North Island, the small print on the Palace Poultry cartons says the eggs are “produced, graded and distributed by Ararimu Free Range Poultry” in Steels Road, Ararimu, South Auckland.

However, a Newsroom investigation has found more than half of the eggs in the pale yellow cartons were not produced at the Palace Poultry farm in Ararimu.

Instead, it would appear Countdown customers have been buying caged eggs in free range cartons.

An average of about 13,000 dozen size 7 Palace Poultry eggs were sold at Countdown stores each week in the two years to May, according to official Aztec Countdown Scan Sales Data.

Based on this volume Palace Poultry would have earned an extra $14,000 per week, according to conservative estimates from industry sources.

The Serious Fraud Office would not “confirm or deny” it was involved, but as Newsroom began its own investigation those involved confirmed the SFO was looking into the case.

Newsroom’s investigation found Palace Poultry did not have enough hens to lay as many free range eggs as it was selling, and purchased the shortfall from egg wholesaler Eco Foods Ltd in nearby Bombay.

Surveillance photos and information from Eco Foods staff shows the eggs being collected were caged eggs.

Caged eggs being collected from Eco Foods, as captured by surveillance footage.

A key player at Palace Poultry, Aaron Fletcher, told Newsroom he had just under 30,000 free-range laying hens at the Ararimu farm - the only farm the business has.

This was confirmed by an independent analysis of the volume of feed delivered to the farm.

Industry standards indicate that many hens could produce just under 6,000 dozen size 7 eggs a week.

So how was Palace Poultry supplying 7000 dozen more size 7 eggs to Countdown stores every week?

Surveillance photos obtained by Newsroom show Aaron Fletcher driving a white truck to egg wholesaler Eco Foods in nearby Bombay.

The surveillance photos show over a period of five days in May last year, Fletcher collected between 12 and 18 pallets of caged eggs from Eco Foods.

Each pallet contained 720 dozen eggs, meaning Fletcher was collecting between 8640 and 12,960 dozen caged eggs.

Eco Foods is owned by Robert and Carola Hehewerth and also sells yoghurt, coffee and crisps to food retailers.

It buys eggs from a range of producers, with 75 per cent of its stock caged eggs and 25 per cent free range.

The images show Fletcher loading plastic-wrapped blue pallets of pink egg cartons into the truck.

The four edges of each pallet were protected by brown cardboard, the word “FRAGILE” printed in large lettering.

This is the distinctive packaging of size 7 eggs produced by Hessell’s, a large-scale caged egg farm in Foxton.

Its size 7 eggs are packaged onto pink trays, its size 6 into blue trays and its size 5 into green trays - a coding system widely used in the caged egg industry.

Free range eggs are usually sold as mixed grade.

The surveillance shows once Fletcher picked up the eggs, he would drive the cargo back to the Ararimu farm, and not leave with them again.

With a concealed camera, Newsroom visited Fletcher at the Ararimu farm and asked him if he was buying caged eggs from Eco Foods, he said:

“We are picking them up from a free range egg supplier who supplies us nothing but free range eggs and has supplied nothing but free range eggs since as long as my father has run this business.”

Newsroom also visited Eco Foods with a concealed camera. Hehewerth was overseas so we spoke to the egg storeroom manager, identified only as Tom.

Tom said he had worked there for eight years but had never heard of Fletcher or Palace Poultry.

We showed Tom one of the surveillance photos. It was an image of himself dealing with Aaron Fletcher as he picked up some pallets of the caged eggs from Eco Foods.

Surveillance footage shows Fletcher meeting with Eco Foods store manager, known only as "Tom".

When he saw the image, Tom was shocked.

“That’s Stu from TK Produce,” he said. “He only buys caged eggs. He’s never bought free range.”

Aaron Fletcher, whose middle name is Stewart, is the son of Terry Fletcher who, along with wife Susan, co-owns the Ararimu farm named on Palace Poultry’s packaging.

They have a range of business and property interests throughout the North Island.

There is no registered entity under the name Palace Poultry or Ararimu Free Range Ltd, but Howard Fletcher Ltd of which Terry Fletcher is a director and shareholder is also linked to the Ararimu address.

There is no record of a company ever being registered as TK Produce in New Zealand, but Terry Fletcher used to be a director and shareholder of Produce Supplies No 2 Limited.

When asked if Fletcher had ever picked up free range eggs, Tom laughed.

“No. No, no, no.”

He said “Stu” was a “big money” buyer of caged eggs.

What sort of money?

“Big money.”

Eco Foods would not have had enough free range eggs to supply Fletcher in the quantities he was purchasing, Tom said.

“We don’t have that amount of free range eggs, we have never had that amount of free range eggs.”

Tom also mentioned that “Stu” had not collected any eggs since the end of last year.

“The Serious Fraud Office came in here. After that, Robert [Eco Foods’ owner] cancelled all [Fletcher’s] orders.”

The Countdown sales figures from the last week of December show Palace Poultry’s sales dropped to just 5000 dozen of the size 7 eggs.

Fletcher said he had stopped buying from Eco Foods for different reasons.

Initially, he said he had “heard a rumour” about the SFO. After further questioning he said the SFO had given him a list of people he was not allowed to speak with.

He said one of those people was Hehewerth.

Palace Poultry eggs on the shelf at Countdown.

“Once the investigation kicked up … what do we do? We are like well could he be supplying us caged eggs instead of free range like he’s telling us? We have to stop and find out what’s going on it’s as simple as that, we stopped straight away.”

When those claims were put to Tom, he said that all invoices stated exactly what products were collected.

“At one stage we were actually marking, we had to mark it on the dockets,” he said. “They were ‘caged eggs’ [written on the invoices].”

Robert Hehewerth returned from overseas at the weekend, and Newsroom was able to speak to him late Sunday.

He confirmed everything his staff members had said.

“I don’t know Aaron or Terry Fletcher, I had never heard that name before. He had done this through a company called TK Produce Suppliers and they just had a staff member with a truck called Stu.”

Hehewerth said he had dealt with TK Produce for about seven years, and that “Stu” had told him the business was a produce distributor for stores in the North and South Islands that supplemented its other stock with caged eggs.

There was “absolutely no way” Fletcher could have thought the eggs were free range, he said.

“I have documentation for every caged egg we have ever bought that shows it was sold as a caged egg,” he said.

A further issue is what responsibility Countdown’s owner Progressive Foods has for ensuring the products on its shelves are authentic.

New Zealand law does not currently have one uniform legislation that regulates the free range egg industry. Instead, the operation falls under several different laws that regulate farming, food safety and advertising claims.

The Animal Welfare Act 2012 sets out the minimum standards for the farming environments for hens, which is then policed by the Ministry of Primary Industries.

The Food Standards Authority Australia New Zealand (FSANZ) sets trans-tasman requirements for health and nutrition claims.

There are regulatory bodies, like SPCA’s Blue Tick program, but membership is voluntary and each body also has different standards.

It is an offence to mislead consumers, so producers with fake claims on their labelling can be prosecuted under the Fair Trading Act.

A 2015 Victoria University paper on the regulation of the industry found “there are many flaws in the system”.

The author found: “Egg producers are profiting from the free-range confusion. The result of the ad hoc approach to regulation is an industry of deception where deceiving consumers through misleading or untrue label claims is common.”

As the demand for free range eggs grows, swift action was needed to protect consumers, the paper found.

“Consumers deserve certainty over what they are buying, especially given that free range eggs are offered at a premium price.

“Reform is desperately needed to protect consumers and uphold the legitimacy of the free-range label.”

In 2014, egg farmer John Garnett was found to have sold close to 2.5 million caged eggs falsely labelled as free range to 38 unsuspecting clients.

He pleaded guilty to 20 charges of criminal deception brought against him by the Commerce Commission and was sentenced to 12 months' home detention and 200 hours of community service.

Follow our coverage as this story unfolds. Newsroom will look further at these - and other - allegations and hear from key industry and political stakeholders.

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