The difference between a product withdrawal and a recall

Ever considered the difference between a product withdrawal and a product recall? They sound similar but are in fact very different events. It’s important for food and beverage manufacturers to know the difference, particularly because it can affect your insurance coverage.

A product recall occurs when products are removed from the stream of commerce because of a significant health or safety threat.

For instance, one of Liberty International Underwriters’ clients was a distributor of spring rolls manufactured in China. During the production process vegetable oil was substituted with peanut oil. The client was not made aware of the substitution and the product label did not include peanut oil, a known allergen which can harm people. As a result, the product had to be recalled.

Once a food or beverage manufacturer becomes aware of a confirmed problem with one of their products, they must immediately notify Food Standards Australia New Zealand and contact supermarkets to have them recall the product from sale.

A product withdrawal
This occurs when a product is removed from sale because of quality-related factors which have no potential to injure consumers.

Examples include a cake with a missing ingredient, or a manufacturing error such as incorrect baking temperature affecting the look or taste of a product. It might be a product labelled with the wrong weight, or a drink that was meant to be fizzy turning out to be flat.

These are often factors that could impact the reputation of a product if it were sold to consumers, but wouldn’t cause injury or harm.

For instance, an experienced yoghurt manufacturer received a phone call from a retailer that stocked their product advising that the yoghurt had a faulty lid that wasn’t closing correctly. There was no likelihood of any consumers becoming ill, but the retailer chose to withdraw the product from their shelves. The yoghurt manufacturer was charged for the associated costs of the withdrawal.

Statistics on withdrawals aren’t collected, but Derham Daymond, the national liability manager at Crawford & Company, which manages insurance claims on behalf of insurance companies, says they are not unusual. “In my experience, I would say that withdrawals are at least as common – if not more common – than recalls,” he says.

Unlike a recall where there is no doubt about the need to stop selling a product because of a public health risk, sometimes a withdrawal is more subjective. In one recent instance, says Daymond, a supermarket chain declared that a food manufacture’s sausages had too much gristle, but the manufacturer disagreed.

In reality, supermarkets tend to have more power in these sorts or disagreements because they are a major customer who allocate shelf space, says Daymond. Also, supermarkets might take many lines of a manufacturer’s product, so it might not pay to disagree.

Why the difference is important
Product recalls or withdrawals occur for different reasons, but both can be very expensive.

The distinction becomes particularly important when it comes to insurance.

While insurance to help mitigate the costs of a recall is readily available, not many insurers also have coverage for withdrawals. This can leave food manufacturers vulnerable to the damage a withdrawal can do to their business.

However, Liberty’s Food & Beverage Insurance Policy is a recall cover specifically tailored for the food and beverage industry. Designed to address both product recalls and withdrawals, it protects manufacturers from the risk of contamination and also the need to withdraw their product due to a manufacturing error or quality control issue.

It’s worth talking to your insurance broker to make sure you have the cover your business needs.