The Hidden Cost of Product Recalls

In 2016, various high profile recalls and minor scale recalls threatened the public safety of consumers across North America. Although it’s impossible to eliminate human error, and thus recalls entirely, it is paramount to understand the direct economic impact of recalls and related risks. Likewise, there are extensive efforts made by regulatory agencies to support food manufacturers as a supplement to the efforts your company should be making to ensure you remain off the recall lists in 2017.

Recall Quick Facts 

  • According to the Centers for Disease Control and Prevention, nearly 50M people (1 out of 6) are sickened each year due to food-borne illness in the US alone.
  • The average recall in the food industry will run a company nearly $10M in direct costs, according to the 2010 Deloitte report, “Recall Execution Effectiveness: Collaborative Approaches to Improving Consumer Safety and Confidence,” on behalf of the Food Marketing Institute (FMI), the Grocery Manufacturers Association (GMA) and GS1 U.S.
    • This does not include litigation costs, business interruption costs, or damaged reputation and associated lost sales costs.
    • A 2011 GMA report titled, “Capturing Recall Costs: Measuring and Recovering the Losses” surveyed 36 companies and found, “For companies that have faced a recall in the past five years, 77% of respondents estimated the financial impact to be up to $30M; 23% reported even higher costs.”
  • The number of recalls per year has been steadily increasing.
    • As an example, according to the United States Department of Agriculture Food Safety and Inspection Service website, there were 53 recalls in 2005 involving beef, poultry, and pork products. This number nearly tripled, reaching 150 total recalls in 2015.
    • This does not necessarily mean food has become increasingly less safe, but would indicate health officials and government agencies have increased inspections, improved tracking and thus improved their ability to pinpoint outbreaks.
    • Technological advancements in pathogen detection methods, in addition to an increase in percentage of imported food in the US food supply chain, have also impacted the increase in recalls.

Possible Reasons for Recalls
Improper or ineffective Good Manufacturing Practices (GMPs) are often the underlying reason for a vast majority of food recalls. The FDA has defined GMP-related issues as any problem that could be avoided through the use of preventive measures, including employee training, proper equipment sanitation and maintenance of processing equipment. When effective and thorough GMPs are not established or followed, the risk for some of the major causes of recalls increases dramatically. These causes may include: contamination during processing, ineffective sanitation and mishandling during transportation.

Don’t React, Prevent!
Food manufacturers must understand current and emerging regulations in order to be prepared for the increased scrutiny of food regulatory agencies. The new Food Safety and Modernization Act (FSMA) has now redirected the focus from “recall response” to “recall prevention.” Companies must proactively implement supplier verification programs, preventative food processing control plans and environmental monitoring systems, which when reviewed and evaluated will benefit the company as a whole. Effective employee training coupled with continual best practice adherence and improvement, such as enhanced environmental testing programs, are essential to ensure the integrity of the product and thus minimize the risk of costly recalls in the future.

However, implementing new programs and processes alone may still lead to food safety shortfalls. For true effectiveness, companies must use the data they receive from enhanced programs and manage this against the data used to mitigate and reduce future problems.

If you are looking for a data management program to help you provide this specific capability, explore the features of our EnviroMap environmental monitoring tool today.

Meet the Author

Seth Keller
Associate Product Manager – Microbiology, Mérieux NutriSciences

Seth Keller is the Associate Product Manager for Microbiology at MerieuxNutriSciences. His current focus is on the development of analytical offerings in GMO, in addition to reviewing and implementing new microbiological methods. Seth received a Bachelors degree in Molecular and Cellular Biology from the University of Illinois Urbana-Champaign in 2011. In his free time, he enjoys playing golf, working out, cooking, spending time with his friends, and rooting for all Chicago teams, specifically the Cubs and Blackhawks.

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