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When a school lunch supplier repackaged moldy applesauce into canned goods and fruit cups, it drew a sharp warning from federal health regulators last month -- and general disgust from almost everyone else.

“I was appalled that there were actually human beings that were OK with this,” said Kantha Shelke, a food scientist and spokeswoman for the Institute of Food Technologists. “This is a case of unsafe food. They are trying to salvage that to make a buck.”

But even as Food and Drug Administration officials prepare to re-inspect Snokist Growers of Yakima, Wash., to ensure that the applesauce maker keeps toxin-tainted fruit off store shelves, federal officials and industry experts acknowledge that Snokist is not alone in “reworking” faulty food.

Turning imperfect, mislabeled or outright contaminated foods into edible -- and profitable -- goods is so common that virtually all producers do it, at least to some extent, sources say.

“Any food can be reconditioned,” said Jay Cole, a former federal inspector who now works as a senior consultant with The FDA Group, a firm that specializes in helping manufacturers comply with industry regulations.

“It’s how people do their business,” added Shelke, founder of Corvus Blue, a Chicago-based packaged goods consulting firm.

It may be something benign, such as misshapen pieces of pasta that are re-ground into semolina, or something unexpected, like a batch of mislabeled blueberry ice cream mixed in with chocolate to avoid waste.

It might be something unappetizing, such as insect parts sifted out of cocoa beans or live bugs irradiated -- and left behind -- in dried fruits like dates and figs.

Or it could be something alarming, such as the salmonella Tennessee bacteria detected last year in huge lots of hydrolyzed vegetable protein, or HVP, a flavor enhancer used in foods from gravy mix and snack foods to dairy products, spices and soups.

Some 177 products were recalled in 2010, but bulk HVP products from Basic Food Flavors Inc. of Las Vegas, Nev., were allowed to be reconditioned by heat-treating the foods to kill the salmonella, according to the FDA. The reprocessed foods were then distributed and sold.

No question, FDA regulations do permit foods to be reconditioned, said William Correll, the agency’s acting director of compliance. That leeway can avoid both waste and expense, he explained.

“Some things can be adulterated and fixed, and you’re not throwing out food that would otherwise be OK,” Correll said.

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That’s why chocolate ice cream becomes the catch-all when other flavors aren’t quite right, said Shelke. If a producer accidentally botches a batch of blueberry, small amounts of the mistaken treat can be mixed into future bins of chocolate, where the dark color and rich flavor mask any error.

The key, however, is that the process must render the food safe for consumption.

That’s why Snokist Growers drew such a strong warning. In the case of the moldy applesauce, there are a couple of problems, Correll said. Mold is tricky because when contamination is extensive, it’s not enough to simply remove the obviously tainted parts and then zap the food with heat.

Snokist officials claim that their heat process kills patulin, the most common toxin produced by mold in apples, and renders the food commercially sterile. But FDA officials counter that the firm’s thermal process is not adequate to ensure that other heat-stable mycotoxins are eradicated from the food.

“Mold is not an easily reconditionable product,” Correll said. “It’s not OK to take moldy tomatoes and make them into tomato paste.”

Not that some food firms don’t try. It’s no secret that the FDA allows certain levels of expected contaminants to remain in foods, simply because a zero-tolerance standard would be impossible to meet, officials said.

The agency’s “defect action levels” are used to define the point at which food becomes adulterated and subject to enforcement. Below that level, however, some unappetizing substances make it through.

The FDA allows, for instance, an average of 225 insect fragments or 4.5 rodent hairs per 8 ounces of macaroni or noodle products. An average of 20 or more maggots of any size is permitted per 3.5 ounces of drained canned mushrooms, or per half-ounce of dried mushrooms. When it comes to mold, an average count of 15 percent is OK for canned cranberry sauce.

Because such levels are permitted, some food producers propose to combine faulty and sound products to lower the overall level. An apple-juice maker might ask to mix juice with high counts of mold with a batch with low counts, for instance. But, Correll said, that’s not allowed.

“Dilution is not the solution,” he said.

Similarly, companies that propose to eliminate a serious contaminant without addressing the source are turned down. He recalled a seafood firm with faulty bathroom practices that led to canned crab contaminated with fecal E. coli bacteria. Heat-treating would have eradicated the bugs -- but not the problem, Correll said.

“If food is adulterated in an unacceptable way, reconditioning won’t fix it,” he said. “You can’t cook the poop out of it.”

FDA officials couldn’t provide an estimate of the number of reconditioning requests received from food firms each year. But in 2009, the agency started a new Reportable Food Registry, which requires notification of hazards to human health. At least 2,240 reports were logged in the registry’s first year, including the salmonella-tainted vegetable protein.

Many producers faced with faulty food simply want to minimize their losses without harming public health, said Peter Quinter and Jennifer Diaz, lawyers with the Florida firm Becker & Poliakoff, which represents importers of foreign food.

Such firms want to avoid having product refused, so they go to great expense to salvage products such as insect-infested rice for future consumption, Diaz said. Grain products can be sifted, re-inspected, repackaged – and sent on to grocery stores.

“Taking the ick factor away is that the product is no longer contaminated,” she added.

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