When Good Candy Goes Bad

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It was a typical Valentine's Day for companies cashing in on the theme.

• Papa John's (Nasdaq: PZZA) sent out heart-shaped pizzas, because nothing says love like a steaming pie topped with ham and onions.
• Time Warner's (NYSE: TWX) AOL took a page out of the Google (Nasdaq: GOOG) playbook by tweaking its logo seasonally. The O in AOL was a heart. Either that or it was red to indicate the steep revenue shortfall at AOL this past quarter.
• Sherwood Brands (OTC BB: SHDB.PK) issued a recall of Pokemon-themed Valentine's Day lollipops after at least two of the Chinese-made suckers were found to contain metal fragments. No one was hurt, but it's yet another knock on Sherwood. The shares are down to penny-stock status, a sharp fall from when I warmed to the stock six years ago.

What's that? Another recall of Chinese-manufactured goods? After a rocky 2007 with recalls of toxic toys, dog food, and toothpaste, we now have to deal with potentially hazardous candy.

Trendy grocer Trader Joe's isn't leaving anything to chance. Earlier this week, it announced that it will phase out some Chinese-made foodstuffs because of customer concerns about product safety. It may not seem fair -- given that other food scares like ConAgra's (NYSE: CAG) battles with salmonella-infected pot pies and peanut butter were manufactured closer to home -- but it's hard to argue with patron perceptions. 

Keep in mind that we don't have the whole story here. The metal fragments initially appear to have been baked into the treats, but further tests will have to reveal whether the products were tampered with after they left China.

Whether this episode will affect other lollipop makers remains to be seen. Tootsie Roll (NYSE: TR) is a company that relies heavily on its Charms Blow Pop and Tootsie Roll Pop confections. Will parents gravitate toward rival brands -- the way they did when ConAgra's Peter Pan was pulled or when Mattel (NYSE: MAT) found itself rattling off one recall too many -- or is the stigma so strong that it will temporarily hit an entire product category no matter where the items originate?