© Oren Rozen
BY PAUL SHATTOCK
FOOD AND DRINK SECTOR SPECIALIST, NFU MUTUAL
It’s very exciting to hear the plans released from the Department for Environment, Food and Rural Affairs. With a rise in interest in British-manufactured food, this is a great time for producers to break into new markets and to increase sales on existing exports. With new markets come new challenges, and it’s important that manufacturers have robust risk management strategies in place to prevent large-scale hitches from hindering new business relationships.
Aside from major disasters such as fire, and public or employee liability matters, there are few more potentially costly situations for food and drink manufacturers than facing a product recall. While recalls can be required for most types of products, food and drink manufacturers are particularly vulnerable to risks that might compromise their products – such as mislabeling and contamination.
Research from NFU Mutual released in May this year showed that following a product recall, 17% of people would not buy a product again, with younger age brackets even more heavily influenced by product recalls with 23% of 18-24 year olds losing trust in a brand.
With both the company’s finances and its reputation at risk, when dealing with overseas markets the last thing any manufacturer needs is a product recall concern amplified to a global scale. 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, plus 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.
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Affected batches should be identified and withdrawn.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.
Tips on reducing the impact on 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:
© FoodBev Media Ltd 2020