Managing food recalls: a manufacturer’s guide

A product recall is a high impact event for any food business. It can be extremely costly and the reputational damage to a food business can be serious and long lasting if not managed correctly, report Michael Lincoln and Martin Stone.

What are the main causes for product recalls in Australia?
According to Food Standards Australia New Zealand (FSANZ) there are approximately five recalls per month in Australia and this figure has been steady over a number of years.

Approximately one-third of recalls are due to microbiological issues, one-third from labelling issues and one-third caused by physical and chemical contamination.

Looking at these sectors individually sheds more light on the risks:

  • Microbiological issues: nearly half of micro-based recalls are due to the presence of listeria (47 percent), followed by salmonella (20 percent) and then E. coli (12 percent);
  • Labelling issues: 90 percent of labelling recalls are due to undeclared allergens including peanut, gluten, milk and egg
  • Physical contamination: foreign matter recalls commonly involve metal (37 percent), plastics (27 percent) and glass (18 percent).

The risks that cause these recalls are present in almost every food manufacturing business and it is clear that no-one is immune from the threat of a product recall. An objective of all food businesses must therefore be risk minimisation and preparedness.

What are the key factors involved in risk minimisation?
The short answer is documented systems and actual procedures. Systems-wise, food businesses should have a robust food safety risk management program in place which needs to be constantly reviewed and tested to ensure it reflects the risk profile and activities of the business. As a minimum, the program should specially consider each of the causal factors in recalls and those specific to the industry itself.

Importantly, the actual procedures that occur within the business need to be critically evaluated. Significant failures in the food industry resulting in a recall rarely come from a problem with the food safety manual, they result from actual procedures that occur in the facility. HACCP often reviews businesses with lovely documented systems but the actual procedures in the facility fall way short of best practise or even basic common sense. The key here is to spend more time on the production floor and actively hunt down those practises that bring risk into your business. Eliminate these and you will effectively reduce risk.

What about preparedness?
Conducting routine mock recalls is a great way to test your ability to respond to a real life situation. Again, the tip here is critical evaluation. Really test your system to see if it all holds together. A surprising number of recalls occur when a number of factors contribute negatively to the effectiveness of a recall. For example, “the coder was not working that day”, “the logistics manager was on holidays”, “the retention samples were lost”, “it was from a new supplier” are comments we hear all the time when investigating a recall.

Use some of these ‘curved ball’ factors when you conduct your mock recall and see what happens. Does the effectiveness of your product recall hinge on one person or procedure in your business? Is there a back-up plan in place?

On the financial side, recall insurance can make sound business sense. This product is appropriate for many businesses and forms a vital part of their preparedness programme.

What should a company do if it finds itself in a recall scenario?
Firstly, don’t panic. The key activities in the early part of a recall are containment / stock disposition and information gathering. Focusing on these and doing it well will minimise impact. Identifying potentially affected stock rapidly and halting logistics quickly can make the difference between a consumer recall and a trade withdrawal. Accurate information is vital to decision making – any assumptions in this process will reduce the effectiveness of the overall recall.

Accuracy in determining the problem significance is also critical and again, assumptions have no place. We have seen numerous examples of product recalls being triggered on the basis of potentially false positive results, for example. The opposite could also be true with potentially disastrous results for consumer safety. Whilst it is wise to always err on the side of consumer safety, there is nothing better than being able to make decisions based on sound, repeatable data.

Let me give an example of a friend who was recently making an assessment of laboratory capabilities for his company. A single sample was divided into four parts and sent to four individual laboratories. Three significantly different results were returned (only two of the four labs found the same results). One of the results could have triggered a product recall if taken on its own. The outcome here was that at least two of the results were likely wrong, maybe three, maybe all.  The implications in a product recall scenario are obvious.

Finally, the regulators including FSANZ and State Recall Co-ordinators are a huge resource for the food manufacturer when enacting a recall. The recall co-ordinators provide guidance and help the manufacturer to navigate their way through the formalities. Their advice is invaluable but note, the depth of their assistance is limited by the strength of the information provided by the manufacturer.

What costs are associated with recalls?
The cost of these incidents can be startling. We often see recall costs from retailers costing over $100,000, and it is not uncommon to see the total cost of a recall exceeding $500,000. Only recently we had a client with a turnover of less than $15m have a recall cost in excess of $1m.  A recall is rarely a cheap experience and can easily cause long term financial pain.

We are also seeing an increase in clients who contract manufacture to third parties being lumped with significant bills for loss of sales and extra expenses from the third parties following a recall. These types of bills can be multiples of what the client's costs are.

A food recall is a potentially costly and devastating event for a food business, with serious implications for consumer health. However, the risk and impact of a food recall can be significantly reduced through the use of critically evaluated systems, being appropriately prepared and taking the right to mitigate the effects if one of your products is pulled from the shelves.

 

Michael Lincoln is National Underwriting Manager, Crisis Management at Liberty International Underwriters www.liuaustralia.com.au

Martin Stone is director at HACCP Australia. www.haccp.com.au

For promotional purposes only. The information contained herein should not be considered legal advice or loss control or prevention advice. This information is intended to provide general information only. You should not act on the basis of information contained within this communication without first obtaining specific professional advice.  Insurance coverage is subject to the terms and conditions of the policies as issued. Whether or to what extent a particular loss is covered depends on the facts and circumstances of the loss and the terms and conditions of the policy as issued and the risks involved. This information is current as at 7 January 2013.

 

Leave a Reply

Your email address will not be published. Required fields are marked *