Home Knowledge Product Recall: Major Threat to Profitability for the Food and Beverage Industry

Product Recall: Major Threat to Profitability for the Food and Beverage Industry

December 8, 2016

Increasingly stringent global food and beverage regulations are requiringtighter food safety controls to be implemented by food business operators toensure effective public consumer health protection. In the event of a productrecall, having a robust plan in place ensures that the impact to business isminimised.

Food and beverage recall relates to any food safety incident that requiresconsumers to be notified of the safety issues, whether or not the product isactually required to be removed from consumers. According to the 2015 annualreport of the Food Safety Authority of Ireland (FSAI), there were 67 publishedalerts during 2015, comprising 31 food alerts and 36 food allergen alerts.The alerts dealt with a range of matters including undeclared allergens,misbranded products and microbiological contamination.

At a European level, one of the largest food product recalls of 2016involved confectionary giant Mars which recalled millions of its snack sizedbars and sweets after plastic was found in one of its products. Despite thefact that the product involved had been manufactured at a factory in theNetherlands, it was necessary to recall it not just in the Netherlands, but inover 50 countries including Ireland, Britain, France and Germany. This ledto significant related costs for the company.

A product recall survey conducted in the UK in 2015 indicated thatone-fifth of UK food and beverage companies were operating without a productrecall plan. A lack of an effective product recall plan can leave businessesexposed to potential financial loss and serious reputational damage as well ascause significant health issues to the consumer.

Methods to minimise and effectively deal with a food and beverage productrecall include: 

1. Simulated product recalls and stafftraining

Stafftraining is critical at every level of the operational process. Companiesshould invest in a quality program that evaluates and updates its recallimplementation capabilities. From there, organisations can evaluate and improvestrategy to protect against recalls, reduce recall operational costs, andprotect the business brand.

2. Traceability and supply chain knowledge

When a recall occurs food business operators needto have a robust and tested traceability system in place. Having a globalsupply chain raises the possibility of legal enforcement in several differentcountries leading to associated litigation costs. To deal with this, all foodproducers should have an accurate, detailed, transparent and up to datetraceability system in place so as to be in a position to identify from whomand to whom a product (including ingredients) has been supplied.

3. Business communicationsstrategy

An effective and well-thought-out crisiscommunication plan, which alerts both the public and relevant authorities tothe product recall, should be in place to minimise reputation and brandingdamage to a company. Bearing in mind the speed at which publicity can spread onsocial media and elsewhere, companies should be in a position to act quicklyshould a food safety issue arise. Communications should be co-ordinated andtargeted and should put the needs of customers first.

4. Understand your insurance policy

Productrecall insurance can reimburse insureds for financial losses they sustain dueto a product causing or having the potential to cause bodily injury or propertydamage. Companies should clearly understand their policy coverage to ensure allrelevant matters are insured in the event of a recall. 

Contributed by CliodhnaMcDonough

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