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Across the globe, the number and magnitude of product recalls has increased significantly in recent years. Many would have seen the ads on social media posts or news stories calling for the likes of milky vegan pies, metal-spiked muffin splits, poisonous fish, and more recently, mice infested.

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Can You Afford The True Cost of a Product Recall?

Can You Afford The True Cost of a Product Recall?

Posted by Simeon Prestidge on 15 September 2020 9:55:45 AM


Across the globe, the number and magnitude of product recalls has increased significantly in recent years. Many would have seen the ads on social media posts or news stories calling for the likes of milky vegan pies, metal-spiked muffin splits, poisonous fish, and more recently, mice infested baby food, to be returned to the suppliers.

If you had an inkling they’d been coming through far more frequently of late, you’re on the money. Data sourced from MPI’s website shows the rate of food and beverage recalls jumped by 276% over the last few years, from an average of 21.7 per year between 2000 and 2016, to 81.7 from 2017 to 2019. That averages to more than 1.5 every week, and that rate has increased yet again so far in 2020. These statistics represent only publicly announced consumer-level recalls. There are many more trade level recalls and withdrawals that do not become public knowledge. 

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While this increase shows the system is working, and is a good thing for consumers, it shows the increased risk to all NZ food manufacturers of a food product recall, and its associated costs.

When you think about the cost of a recall, you probably automatically focus on the costs to pull the affected product from shelves and reimburse customers. Yes, this can be an expensive undertaking. But the true, comprehensive cost of a recall involves immensely more than these obvious financial tolls.

Do you fully understand the price to be paid when your organisation is up against a food recall?

The recall process in the food manufacturing industry is a highly expensive one, averaging more than $10 million in costs to cover activities below:

  • Pausing production to carry out recall response initiatives
  • Alerting necessary parties within and outside the organisation, including regulatory agencies and relevant retailers
  • Managing the logistics of removing affected or mislabelled products
  • Examining the source of the recall, including issues with suppliers, equipment, processes or contamination prevention plans
  • Remediating the identified problems to prevent similar occurrences
  • Planning for expanded human resources to handle recall tasks in addition to routine operations

And that $10M is before we even look at the possibility of litigation costs, decreased sales, decontamination, reputational damage or brand crisis management, which can add up to millions—even billions— of dollars more. The public has become much more informed and aware of food safety events, and a single breach of trust could result in resounding long-term losses to your brand. This makes it critical to understand the true costs you endure when faced with a food recall.

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It’s something that’s front of mind for Murray McPhail, chairman of Leaderbrand, one of the country’s largest suppliers of vegetables and salad to the domestic market. In 2017, Leaderbrand was involved in the recall of a batch of 32 salad products after identifying the presence of listeria. “It very nearly bankrupted our business,” said McPhail. The voluntary recall, which ultimately cost the company more than $7 million, triggered an overhaul of Leaderbrand’s testing process. 

In another example just last month, August 2020, supermarket chain Woolworths NZ was forced to recall a range of squeezable baby food pouches from its stores nationwide after holes were found in about 30 individual packets in its Auckland and Napier supermarkets. The recall followed the discovery of a mice infestation at two of Woolworth NZ’s Auckland distribution centres, says New Zealand Food Safety director of compliance Gary Orr. “Mice must be kept away from food because they can contaminate the food and packaging with harmful microbes from their saliva, urine and droppings. Any food contamination is serious, but for babies, it can be particularly significant".

Vermin and pests, like mice, are a common contaminant in the food industry, and should be kept out at the door. 

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Installing a traditional door to the external of your building, or leaving your dock loading area unsealed, without taking into account the risk of vermin and pest ingress is a common mistake. Vermin proof seals should be a top priority at any food manufacturers facility.

If they manage to get inside, having automatically closing doors or dividing screens hindering access for rodents around the facility will greatly increase your pest control abilities. By segmenting your facility and keeping important areas consistently sealed you can create multiple controlled zones and make pest control much easier.

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High speed doors are very effective for keeping secure food areas open for the minimum amount of time possible and firmly sealed for the rest of it.

Having worked with the big and the small food manufactures up and down the country to mitigate risks of vermin contamination, we have the know-how to help mitigate the risk of a food recall at your facility

Can you really afford a product recall? Is it worth the risk?

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