Food safety concerns are a major problem in the food manufacturing and processing industry. Errors that occur during the production of food without the manufacturers’ knowledge may expose the public to health risks. Therefore, it is of paramount importance that food recall procedures are in place to prevent hazards or injuries to the consumers (Charlebois, 2015). A food recall is generally defined as the post-discovery actions taken by a food manufacturer to ensure that a product; which may now have the potential to be a safety hazard to consumers, is taken from the distribution points and the consumers’ hands to avoid any further consumption or contact. These actions may be implemented after a complaint or a report issued from a wide range of sources such as consumers, manufacturers, government agencies as well as wholesalers and retailers on the food. Food businesses engage in these activities to ensure that any foods that are not safe are removed from the otherwise safe products. Food recalls are initiated through consultations between the importer and/or manufacturer and the Food Safety and Inspection Service (FSIS) along with other regulatory bodies such as the U.S. Food and Drug Administration (FDA) to mention a few. The food recall should be voluntary, but in cases where the company fails to recall the food products, the food safety and inspection service may seize the product as part of its mandate (Dey, 2013).
There are specific ways in which the food product may be discovered to be unsafe. One of the ways is when the manufacturing company or a distributor comes to realize the potential of a hazard. To add on this, the FSIS/FDA may conduct sample tests and discover adulterations or misbranding on the food product. The discovery may happen when FSIS regulators, together with a company’s quality control team, throughout the course of their normal routine mandates, uncover wrongly branded foods or unsafe food products. The fourth discovery occurs through epidemiological studies by local or state health departments or other agencies such as FDA making findings that a food product is unsafe, not wholesome or is wrongly branded. On learning of existence of potentially hazardous or wrongly branded foods, the FSIS undertakes a preliminary research to establish if there is need for a food recall. This body ensures that the population is not put at risk of any infection or contamination as a result of eating substandard food and food products.
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After the affirmation that there exists a wrongly branded or adulterated food product, the FSIS division on recall management convenes a meeting of the recall committee (Cartwright, 2013). This committee seats: FSIS experts such as technical experts, communication specialists, scientists, field inspection managers as well as enforcement experts. The committee carries out evaluations of the information available followed by recommendations on the food product to the company on the need to recall the food product. It is tasked with coming up with the necessary classification of the recall guided by product’s relative risk to health. The team does a thorough survey basing on various categories.
Class 1 recall happens when the food products have grievous impact on a larger population base. They are the most popular since they attract huge media attention evidenced by the large coverage by the media. The seriousness of this kind of recall is usually grave since conviction exists beyond any reasonable doubt that consumption of the product or exposure to it will lead to illness and/or death. An example of this is contamination of food with E.coli . Class 2 recall also has huge coverage by the media; however, consumption of the food product will lead to temporal illness or result in conditions that can be medically managed. It also applies where the likelihood of negative health outcomes is remote, for example, food poisoning with staphylococcus . Class 3 recall is used to identify situations where the consumption of the food product has a minimal likelihood of leading to any negative health outcome (WHO, 2016). An example of this is off taste in a food product. On classifying the type of recall, the Recall Committee communicates this information to the concerned food company.
Following the complaints, for a company to conduct a recall, the process can be voluntary or involuntary. The high levels of oversight by the regulatory bodies makes majority of cases to be viewed as involuntary. However, the opposite normally applies. Voluntary recalls happen when the company is the on the forefront of eliminating their products from the market due to concerns of food safety. According to the law, all companies have the mandate of pulling off their products from the market or else receive penalties and heavy fines or get their businesses close down altogether (Dey, 2013). On the other hand, an involuntary recall happens when the company rejects to remove their product from the market and commerce stream and defends it product as a means of clearly proving to the company that their product is wreaking havoc to the consumers. After establishing this, the company carries out the food recall.
To ensure an effective recall, the FSIS/FDA deploys its field personnel to carry out checks of effectiveness on the recalling company. This is by checking its efforts and diligence at notifying the consignees of the food to be recalled and on the need to get it out of the market. They also assess whether the consignees are acting in an agreeable manner. On determination that the recalling company has successfully contacted its consignees as well as making agreeable efforts to control and get the food back, the FSIS and other regulatory bodies appraises the company about the completion of the recall.
The FSIS has the mandate of notifying the public after determining the need for a food recall. They do this through issuing a “Recall Release” for classes one and two types of recalls. If a class three type of recall is needed, they issue a “Recall Notification Report (RNR)” to the public. The difference between the two is that the Recall Release is distributed to the media outlets in the regions where the product has been distributed while the Recall Release Notification is not released to the media. However, both contain extensively similar information. If deemed necessary, the FSIS may include pictures of the food products that have been recalled on their website as a component of its online posting of Recall Releases. Every time a class one recall is made, the FSIS comes up with a list of retailers to whom the food product had been dispatched. They provide the actual name, address of the retailer’s street, the cities where they did the business and the respective states. This is usually done over a three to ten day period after the recall date with periodic updates on the consignee list. In cases where the food products to be recalled had been purchased by means of programs of food distribution, the FSIS is mandated to notify the concerned body/agency which will withhold the food product (Carlson, 2013).
To bring the food recall to perspective, one example of food recall occurred in 2009. The Peanut Corporation in America carried out a huge recall on its food products that had salmonella contamination on one of its factories located in Brakely. The contamination caused about eight mortalities and over five thousand cases of illness were reported throughout forty-three states in the U.S.A. This involved a class one recall that hugely impacted the company. As a result, the company recalled over two thousand products that contained the Peanut Corporation’s contaminated products.This was a huge loss to the company both in terms of money and reputation.
A good instance of a class one recall that has happened in recent years is the August year 2010 recall. This recall involved Wright county Eggs Company (Aung, 2014). The recall began with the investigation of salmonella incidences that had become rampant in some restaurants located in Colorado, California and Minnesota states. The health workers sprang into action and investigated the cause of the several cases of salmonella. From their investigations, they unveiled that the shell eggs were the most probable source from which the people got infected. From these results, the Wright Company did a national; class one and voluntary recalling of all eggs that had been shipped between the months of May and August year 2010. This led to over five hundred million eggs that had been packed with different brands getting recalled in the entire nation.
Another example was the year 2009 recall of over 300,000 cookie-dough foods. This was as a result of a risk of E.coli contamination. As established, there were around sixty-five cases of E.coli in twenty-nine states and hence the company had to carry out a class one recall (Zhang, 2012). In addition, consumers received warnings to throw away the food product that they had purchased. This occurrence played a significant role in tainting Nestle Company’s image and hugely impacted on their finance. One of the largest recalls was the year 2008 recall by Kraft foods. They recalled over fifty thousand pounds of chicken breast products following detection of listeria bacteria in a single package. The following month, they recalled around two million more pounds of the food product that came from its contaminated plant. This listeria case had no incidences of illnesses or death hence the reputation was not badly damaged. However, the cost implication of this recall caused tremendous financial losses to the company.A different case involved the Wetsco Company that distributes fruits and nuts. The company was taken through the recall process after cases of salmonella infection were associated with its products. The product from this company was being sold world over and used as a key ingredient for a variety of foods. Due to its extent, it resulted in deaths of over seven hundred deaths.
Recalls usually impact heavily on the recalling companies. From statistics obtained by a joint study done by two marketing firms, the mean expense of conducting food recalls by a company ranges around $10M through directly incurring costs. In conducting a recall, the company goes through various unprecedented costs such as the costs of notifying the regulatory bodies, their partners in the supply chain as well as consumers. Product retrieval costs also hugely impact the company since it has to engage in reversing its logistics. The other biggest part of the expense is in the storing and destruction of the unsalable products. They pay labor costs that come with all these activities of recalling as well as in research to establish the root cause of the contamination. Additionally, the company has to incur the cost of litigation. This is without forgetting the significant damage that occurs to the brand name which implicates a reduction in sales.
From the above information, it is clear that all class one recalls have a huge bearing on the company’s finance in taking it towards the negative. In the case of Wright Company, the loss that they got from recalling over half a million eggs can be unimaginable. Without proper financial basis, the company could have faced extinction. In addition, its reputation was greatly affected with some citizens opting not to consume eggs altogether. From statistics by Harris poll, the consumer indication reflected that over 55% of them changed brands as a result of a recall, while 15% commented that the product that had been recalled could never feature again in their shopping basket. (Dey, 2013). This was evidenced in the 2010 study carried out by the Grocery supplier where around 75% of consumers ceased from consuming peanut butter and spinach. This came following the recall of large amounts of peanut butter and spinach. In the case involving maple leaf foods, the cost of recalling went up to thirty million with estimates of the total cost going over fifty milliondollars.
Serious damages come to the industry involved where the reputation is tarnished. A good example of this is the Wetsco Company that distributes fruits and nuts. It was taken through the recall process after cases of salmonella contraction had been associated with its products (Resende, 2010). The product from this company was sold and used worldwide as a key ingredient for a variety of foods. Due to its extent, it resulted in deaths of over seven hundred people. The cost to the industry was over one billion dollars. These cases of recalls lead to losing the confidence of consumers regarding the category of product as seen in the case of maple leaf in year 2006. This hugely impacted the shift of the market where it shifted towards the downside leading tolosses that significantly affected the economy. Moreover, the industries in the category may face long lasting disruptions in their access to the international market following recalls.
As discussed, food recalls are usually expensive on the recalling companies as well as the industry. It is therefore necessary for industries to come up with procedures of resolving the mess and coming back to business as soon as possible. Many manufacturers are usually interested in maintaining the business afloat despite being in a process of recall. To regain confidence on the consumer, the company needs to work hand in hand with the federal agencies to ensure a rapid cleanup of the contaminated products and a restoration with non-contaminated ones.This can be done through frequent updates on their websites on the entire process of recall and the progress made. The media can also be of great use.
In the wake of a product recall, companies may consider having a financial recoup plan. Even though majority of companies are usually prepared to handle a recall, most overlook the importance of investing in a plan of recovering the finances lost during the recall process. Therefore, companies can carry out an integration of procedures of cost recoup with the overall strategic plan for handling recalls. They can do this through inclusion of mocked drills of recalls as a means of coming up with the level of coordination and cooperation needed in the process of documenting the recovery.The company can also have a team that is focused on the broad recovery of the business. This should be done with incorporation of all representatives in the entire business. These can range from the marketing department, sales department, branding department and other key departments in the company. These will have the mandate of identifying all likely financial outcomes from the recall.
The next important step will be in appointment of a cost recovery leader who is well acquainted with legal skills of risk management and finance to spearhead the recovery undertakings. From his/ her experience, the recovery leader will use the knowledge and skills authoritatively and hence influencing everyone to work hard and deliver the needed results. Another major step in the financial recovery design is to have a clear statement and goal on what the company intends to achieve. This will be through knowing the risk tolerance capacity of the company as well as its capital structure. As a result, the stakeholders involved will be able to come up with good decisions on the best course of action (Zhao, 2013).Communication with insurer is another vital step in achieving recovery of the firm. The company should have a well-laid strategy for communicating with the insurance companies. This should be done in good time and in a consistent manner. Application of this will almost guarantee a favorable result with the insurance company.
The company should prepare an estimated amount that it needs to recover. This can be through preparation of an initial detailed approximation of the losses promptly in a time frame not exceeding forty-five days from the time of recall. This will go a long way in setting the expectations reasonably involving the recovery of the losses hence eliminating astonishments as the recall progresses.Maintenance of timely and detailed recording s of the losses will help get the company back to its feet. There is need for not downplaying the essentiality of documentation. On this,the company needs to have all needed documentation that all insurers require in extensive details, an account of the situation and the losses incurred prior to raising a claim. Engagement of outside service providers is another crucial element in the recovery of a company following recall. In boosting the already existing personnel in the company, the management should think seriously about the involvement of forensic accountants, brokers and lawyers who possess adequate experience in recovery of costs at the starting point of the recall. Incorporation of all these procedures will enable fast recovery of the company from lossesmade during the recall process.
Conclusion
The process of food recall is very essential in ensuring that consumers are protected from hazardous food products. With the many regulatory bodies in place, consumers will be more assured of their safety while purchasing and consuming foods. On their part, the food manufacturing companies need to understand the various food safety problems seen globally. They should also ensure close monitoring of any changes in their business, put into consideration the effects of transport on food. Moreover they should ensure protection of the consumer by working hand in hand with the authorities. Most importantly, constantly checking on their systems and plants in manufacturing various foods will ensure that they do not incur losses from the process of recalling their food products. However, since it’s impossible to achieve a perfect situation, companies may find themselves having to carry out recalls of various types. These can be class one, class two or class three kinds of recalls. These food recalls should be carried out voluntarily but in cases where the company fails to recall the food products, the food safety and inspection service and other regulatory bodies may seize the product as part of their mandate.
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