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Product recalls could spell disaster

Food and drink manufacturers should beware of contamination risks

There can be few more potentially costly situations for food and drink manufacturers than facing a product recall – with both the company’s finances and its reputation at risk.

Products might be deemed unfit due to the presence of harmful substances, foreign bodies, or mislabelling of allergen details. The source of the problem could lie with processes within the business, with suppliers, or even through a deliberate act of sabotage by a disgruntled employee.

No business can be completely immune which makes it vital that steps are taken to prevent problems from arising as well as ensuring swift damage limitation methods are exercised.

How bad can it be?

In February 2016, global confectionary giant Mars announced a voluntary recall of a number of its products over fears they may contain pieces of plastic which presented a choking hazard.

Mars announced the recall after a customer found a piece of red plastic in a Snickers bar bought in Germany. The plastic was traced back to its factory in the Dutch town of Veghel, where it was determined that the piece came from a protective cover used in the manufacturing process.

Media reports quoting retail business analysts said the recall, which affected 55 countries, could end up costing the company tens of millions of dollars.

While it is problematic to identify any trends regarding incidents with food in the UK, figures from the Food Standards Agency (FSA) do show a significant increase in notified incidents over the past decade. In its Annual Report of Incidents 2015, the FSA says 1,514 incidents were notified and investigated throughout the 12-month period. The frequency of reported incidents has increased over the last nine years.

The four largest contributors to the total number of recorded incidents in 2015 were pathogenic micro-organisms (18%), allergens (14%), chemical contamination (other) (12%), and residues of veterinary medicinal products (8%).

The FSA may issue a food alert to local authorities, who enforce food law, although only a small proportion of food incidents will lead to a food alert – an incident which might require enforcement action, product recalls, and publicity informing the public of a withdrawal.

In 2015, the agency along with Food Standards Scotland (FSS),  issued a total of 145 new alerts and information notices – incidents which might require enforcement action, product recalls, and withdrawal publicity. More than half were allergy alerts after undeclared allergens were detected or incorrect allergen labelling was discovered.

Potential costs of a product recall

NFU Mutual food and drink manufacturing expert Darren Seward said: “The cost to a company dealing with a product recall will vary depending on the scale and nature of the incident. However, some of the potential costs might include the logistics of tracing and recovering the products in question, reimbursement of retailers and/or consumers, and legal costs.

“Furthermore, there can be lost income during the business interruption period, contamination clean-up costs, and the damage to a brand which might lead to reductions in future sales.

“And while all of this is taking place competitors could be stealing a march on a business and taking over market share.”

How to reduce the impact of product recalls

It may be impossible to eradicate all risks but there are ways a manufacturer can be more able to deal with an emergency:

• Ensure customer complaints are monitored and thoroughly investigated – particularly on social media where problems can escalate if criticism is not addressed quickly.

• Have systems in place that effectively allow product materials to be tracked through the supply chain allowing the source of the problem to be identified. Always use trusted sources of raw materials and ingredients.

• Maintain regular communications with suppliers and retailers in order to identify as soon as a problem arises and to react quickly to resolve issues.

Darren Seward added: “Should a contamination or defect be discovered, a manufacturer should have a crisis management plan already in place. Time is of the essence.

“Affected batches should be identified and withdrawn. Distributors and retailers should be notified and insurers should be told of the circumstances in case there may be a claim.

“Businesses also have a legal obligation to inform their local authority and the Food Standards Agency which will give advice on what action to take.”