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June 6, 2016

Managing the Risks of Product Recall

By David Duvall

The number of product recalls—especially in the food industry—has increased significantly in just these past few years. The need for recall and contamination coverage has never been greater.

Just this year, there have already been dozens of recalls on products including pistachios, macadamia nuts, sprouts and fresh cut cantaloupe. Public data analysis reveals that the number of food recalls in the United States has nearly doubled since 2002. The costs resulting from recalls are significant, with more than half of the companies having paid $10 million or more.

Larger retailers now have contractual language that hold producers responsible for all costs involved, and any recall is at their discretion. These food processors and manufacturers are paying for expenses associated with removing the product from the marketplace. The shipping, storage and customer notification costs can add up quickly. Recalls can also result in a temporary production stop due to inspections or time needed to clean the facility—both of which would significantly impact revenue. Most importantly, a more critical consequence could be damage to the brand’s reputation. A product recall can negatively impact a customer’s perception of the company and result in a dip in stock price or loss of customer loyalty and trust.

Any organization involved with food—whether it be growing, packing or processing—should have a qualified professional develop a written food safety plan. Creating plans, revising processes and updating quality control can help detect problems before they occur. These written plans, which should include a proactive social media plan to help rebuild customer trust, are an essential part of a product recall defense strategy. Beyond that, staff training on these plans would help employees recognize potentially dangerous food safety situations and empower them to shut down processes immediately to help reduce product recalls.

Recalls, contaminations and defects can have disastrous effects on even the most conscientious organizations. Unexpected expenses associated with product withdrawal, communication and rehabilitation costs can be catastrophic and detrimentally impact an organization. However, if there are appropriate processes in place, companies can avoid total market loss. Western Growers is developing products that can protect members from these types of damages that result from recall. Additionally, we provide crisis response and crisis management support and can help companies develop appropriate processes that would best mitigate the risks of product recall.

Please contact us for further information.