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Food and beverage – are you product recall ready?

Food and beverage recalls in Europe increased by 2.9% in quarter one of 2023. The industry is feeling pressure from several areas, but what can be done to alleviate these pressures?

Food and beverage recalls in Europe increased by 2.9% in the first quarter of 2023 , a figure above the 5-year quarterly average. The leading cause was contamination, constituting 486 events - or 42.1% - of all food and beverage recalls.

Industry issues

The food and beverage industry is weathering significant pressure from several areas. Food inflation is prompting companies to seek new or alternative suppliers and or ingredients. Companies also face increasing regulatory and consumer pressure to reduce their environmental impact and be more transparent about their actions to be eco-friendly. Additionally, businesses are increasingly at risk of regulatory action for failing to warn consumers about allergens. 

Despite best efforts, unsafe products can still circumvent quality management controls and enter the marketplace. The process of retrieving these dangerous or non-compliant goods is labelled a recall.

Recalls represent a real threat to organisations through loss of sales, damage to public health, erosion of customer confidence, and reputation impairment. The strategies listed below should be considered for reducing the negative impacts of a potential incident. Organisations demonstrating honesty and integrity in their recall responses can more quickly recover from an event and even enhance their reputations.

Developing a core recall framework

There are four common issues that periodically impede organisations dealing with product recalls. Process and governance, information management, stakeholder management, and resourcing are topics that all parties would benefit from regularly discussing.

  1. Process and governance
    Roles and responsibilities for addressing product quality  ̶ including the decision to action recalls  ̶ should be both structured and suitably adaptable to handle complex situations as they arise. Common weaknesses include poor clarity of crisis response duties, inefficient cross-functional cooperation, and delays to decision-making. Delays in particular can make organisations appear apathetic to both affected customers and the media.
  2. Information management
    Traceability of affected products, along with locating relevant technical and procedural documentation, needs to occur quickly. Reliable recording of key decisions, performance tracking, and cost metrics are also essential for businesses to understand a recall event’s financial cost. Poor performance can result in regulators and shareholders becoming unsatisfied that all affected product is located and accounted for. Difficulty in managing costs or scope of remediation efforts can also complicate loss recovery from insurers.
  3. Stakeholder management
    Transparent and consistent communication, both internally and externally, is vital for effectively mitigating reputational damage. The perception of dishonesty and inconsistency within organisations can undermine stakeholder confidence, potentially exacerbating crises beyond the original product issue. It is imperative that robust stakeholder management plans are in place. 
  4. Resourcing
    Upon discovery of fault, it is essential that resources are mobilised rapidly to assess the cause and scope of issue. This helps facilitate a swift design and implementation of a technical solution. Identification and engagement of experts, with relevant experience, in short timeframes can also enhance the effectiveness of responses. However, increasing customer-facing resources to negate the inevitable surge in demand can pose difficulties and therefore requires advanced planning.

The role of insurance in recalls

Insurance coverage for food and beverage product recalls is becoming more common with many organisations purchasing polices to supplement their risk management programmes. It is designed for companies involved in the manufacturing, processing, distribution, and packaging of consumable products. 

As a crisis class of insurance, this coverage aims to protect companies’ balance sheets against financial losses resulting from a contamination event. It also provides policyholders with access to consultants for pre-incident work to help mitigate future losses and to dedicated product recall claims advocates and claims team when the worst happens. New carriers continue to offer additional capacity as policy wording develops in response to new exposures and case law.

Next steps

Against a dynamic economic and regulatory backdrop, organisations need to put recall frameworks and processes in place. This will protect customers, sales, and ultimately reputation. These frameworks should be tested with suppliers, retailers, and other partners to ensure each stakeholder understands their roles and responsibilities to enable a swift removal of dangerous products and return to business as usual.

Meet the authors

Kelvyn Sampson

Kelvyn Sampson

Retail, Food, Beverage & Leisure Industry Practice Leader, UK

  • United Kingdom

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Hugh Waggett

Advisory Quality and Recall Leader, Marsh Advisory

Frederick Taylor­

Frederick Taylor

Product Recall Broker