How To Plan for a Food Recall: Expect Surprises

The number and size of food recalls are rising in North America. Regulatory agencies are more likely to force recalls early, before many people are at risk.

Together, these trends makes it more likely that your company will participate in a recall sooner or later.

Your food company doesn’t even have to be at fault.

You could easily find your brand in an ugly news story that threatens its survival.

The best advice for food companies is to confront the risk head on rather than trying to minimize or ignore it.

This is part 3 of a three-part series about food recalls. It shares ideas for how you can protect your company from their worst damage.

Part 1 of the series tells the story of a devastating food recall in 2017.

Part 2 offers suggestions for how to reduce the devastating cost of food recalls.

Get plenty of insurance

That’s the advice of Bill Marler, managing partner at Marler Clark law firm in Seattle. He is among the top attorneys in the world who represent people harmed by tainted food.

Marler tells the story of when the Jack in the Box fast food chain [pdf] was involved in an E. coli outbreak in 1992 and ‘93.

About six months before the outbreak, they had added a new board member from the insurance industry.

He told his peers they needed about four times more insurance coverage than they had. So they increased their coverage to $100 million.

It kicked in just in time.

As It happened, the company spent all of the $100 million coverage on liability costs resulting from the outbreak.

If it weren’t for the added protection, the company would have gone bankrupt, Marler says.

Many small companies are especially vulnerable because they don’t have enough insurance, Marler notes.

Is your company underinsured?

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Don’t expect your suppliers’ insurance to cover your risk

Mike Resch is executive VP and general counsel for Amy’s Kitchen [pdf} a family-owned, privately held food company in Petaluma, California.

Executives in food companies, he says, often hope the insurance their suppliers carry will be enough to cover costs of a product recall and related litigation.

But suppliers’ insurance carriers are often slow to process claims. Or they try to raise barriers to limit their own liability.

Food companies should have their own recall insurance.

Food companies should have their own recall insurance, he advises, even if their suppliers appear to be well insured.

Suppliers’ insurance may not be enough, especially for very big recalls that involve a lot of customers.

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Indemnifications may not protect retailers

What if your company is a food retailer, not a manufacturer? Your contracts with suppliers probably include indemnifications clauses.

Do those provisions offer enough protection to retailers?

Possibly not.

Indemnification clauses say that if your company is sued because you’ve sold a supplier’s tainted product, the supplier will come to your legal defense.

If suppliers don’t carry enough insurance to cover claims, plaintiffs often sue retailers.

That protection can easily fall far short of your needs, Marler says.

If a small supplier and its suppliers all go bankrupt like falling dominoes, their legal defense won’t be worth much.

If suppliers didn’t have enough insurance to cover claims, the plaintiffs often come after retailers for the balance.

That’s what happened with the soy nut butter E. coli contamination covered in Part 1 of this series, Marler says.

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Research food recall insurance

For more about recall insurance, check with your insurance broker. Or look into Swiss Re and Ace Westchester, an affiliate of Chubb.

Both organizations underwrite recall insurance policies, and both provide useful information on the topic.

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Build a relationship with your own attorney

Companies that successfully manage outbreaks and recalls have an ongoing relationship with a lawyer who understands recalls, Marler says. This attorney’s role is to “advise clients how to protect themselves.”

The lawyer should understand compliance issues. He or she should also understand details such as document retention policy, he says.

But most companies try to save money by bringing in a lawyer only when something goes wrong, Marler notes. Then when they see they need help, they call their insurance adjuster.

Don’t rely on the lawyers of your insurance carrier. Their job is to protect the insurer, not you.

Food companies may get the false impression that the lawyer for their insurance carrier will help protect them. But the carrier’s lawyer is there to protect the insurance company, not the food company.  

Legal services are the wrong place for companies to try to save money, Marler says. Companies need their own lawyer to help them with recalls.

The ones that try to save money on legal fees are the companies “I absolutely rip apart and leave their bones,” Marler says.

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Create a food safety and recall plan

The Food Safety Modernization Act (FSMA) of 2012 requires food producers in the United States to prepare preventive plans to help ensure food safety.

The preventive plans may require both a supply chain program and a recall plan.

In certain cases, manufacturers must ensure that they receive raw materials and other ingredients only from approved suppliers.

U.S. food producers must create recall plans.

The law also defines when a manufacturer must have a written plan for recalling defective products. The recall plan must include procedures to:

  • Notify consignees
  • Notify the public when necessary
  • Conduct effectiveness checks
  • Dispose of recalled product.

Canada is developing similar requirements. The Safe Food for Canadians Regulations (SFCR) may go into effect as early as 2018.

They will require domestic food businesses and importers to develop a preventive control plan (or PCP).

Canada will soon require recall plans, too.

You can read about the elements of a PCP for domestic producers here. A draft guide for importers appears here

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Practice your recall processes and procedures

Inmar, a provider of recall management services, offers 10 product recall best practices. They recommend that food companies participate in “mock recalls.”

A mock recall is like a fire drill for food safety. It enables a food company to rehearse how a real recall would work.

With the right systems and processes, mock recalls don’t turn your company upside down.

The experts suggest that you practice mock recalls often enough that your team remembers what to do.

Have a systems and processes in place so you can practice mock recalls without turning your company on its head.

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Be ready to act fast

The slower your recall, the more the public and your company are exposed to risk.

So get your products off the market as quickly and efficiently as possible.

Slower recalls may expose your company to higher liability costs.

When public safety is at risk, speed of execution can rescue your reputation.

Attorney Bill Marler says companies often hurt themselves by waffling before a recall:

...if you negotiate with the [government] agency for a couple of days, those are two more days that people could be out there consuming your product.

That opens the door not just for compensatory damages, but for punitive damages for failing to act to protect the public when you know that your product is potentially tainted.

So, the bottom line from my perspective is, the minute – the second – that you think your product is tainted, you should be recalling it and you should have a recall "SWAT team" and plan right off the bat.

It should be completely second nature as to how to do it, who to contact, how to get to your customers, what kinds of calls to make. Have the whole thing pre-planned.

And be on it quick, primarily because you don't want to sicken any more of your customers, because especially those that you sicken after the recall announcement, it puts you at risk of being hit with punitive damages, which are not covered by insurance.

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Make important decisions before you’re in the hot seat

U.S. law may not require you to share what you consider to be supplier confidential information (SCI).

But you can damage your brand more by withholding some confidential information than by releasing it.

Remember the soy nut butter E coli. outbreak discussed in Part 1? Critics blasted the brand for not releasing the names of retailers who had bought the recalled products.

The critics said the brand endangered the safety of its customers in order to protect its commercial interests.

Your brand may find it impossible to rebuild trust after such an accusation.

So before you’re in the heat of a recall, have the internal debate about what information you’ll disclose.

Know in advance which sensitive information you’ll be willing to disclose.

Have appropriate agreements in place. Let everyone know how you would handle a recall and what information you will be authorized to provide, both to government authorities and to the general public. 

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Have efficient ways to gather key information

Do you have an efficient way to trace the sources of every ingredient used in each production lot? Can you track the size of each lot?

Can you list the names and locations of all the retailers where you’ve sold each product, by lot and quantity?

Maintain a current list of customers and all their shipping locations. Be able to produce it fast for regulatory agencies.

Having the right systems in place can help you understand the likely sources of problems. Good systems can also help you determine the scope of a recall.

Good systems save time and money by helping to determine the scope or a recall.

With food contamination, it can be hard to see patterns.

It may be that not everyone who eats a tainted product gets sick.

Some batches may have been more contaminated than others. A single batch may have had spotty or irregular contamination.

Not all samples from a batch may shown evidence of contamination.

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Good traceability systems can help

Let’s go back to Mike Resch [pdf], executive vice president and administration and general counsel for Amy’s Kitchen. The 30-year-old company manufactures and markets vegetarian convenience foods.

...we’ve got a very complex manufacturing program that involves many different control points because we produce numerous products for people with food sensitivities. We’ve also got hundreds of SKUs.

So for us... traceability is a critical focus.

We may have one ingredient flowing through to many different finished goods, so assessing the scope and extent of possible exposure to a potential contaminant is an urgent and demanding task.

...just notifying all the different people and entities who have to be notified in a recall action can be a challenge. But it’s a challenge made more doable if a robust traceability system is in place.

With good systems to trace products and ingredients, you may be able to limit your liability and lawsuits that follow.

Detailed traceability helps contain business risk.

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Expect to be in the spotlight

Mislabeling is the main cause of most food recalls.

If mislabeling is the only factor that triggers your recall, you may be able to avoid intense media attention. You will fare better if there’s no real public health or safety issue involved. It will also help if your company appears to have things under good control.

But if public health is at risk, you must be ready for the worst.

Have a PR plan in place to reduce damage to your company’s reputation.

Make the right staff and resources available to communicate with all the appropriate parties. Include regulators, public health agencies, the media, and your legal counsel.

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Think how you’ll manage communications

David Margulies leads a PR firm that offers crisis communication services. He offers these tips for firms engaged in product recalls.

Choose your PR firm carefully. All PR firms say they do crisis communications. Be aware of which firms are doing this kind of work in your industry. Choose one with experience in your industry. Ask your suppliers for ideas about who might be able to help.

  • Make your PR firm part of your crisis communications plan. You may consider involving them not only in executing your plan, but also in preparing it.
  • Don’t get angry if the press wants to cover your recall. They’re doing their job.
  • Don’t get stuck in a state of denial. If you have a problem, come forward immediately. If you don’t do so, you may be crucified later.
  • Think about all the parties that will have to know about the recall. Don’t let your customers learn about it by reading an article in the newspaper.

Besides your big customers, you also have a myriad of small ones. How will you communicate with all of them?

You don’t want to offer consumers a full return or refund, only to have your retailer customers decline.

Have these things worked out in advance. Think about the crucial role of your route drivers in communicating with smaller customers. They will be asked a ton of questions. So make sure they’re prepared with good answers.

You want to achieve consistency of communications across your organization. For people answering the phones at a call center, prepare and Q&A. Have ready answers for predictable questions.

David Margulies offers three more tips:

  • Identify one spokesperson to communicate with the media. Then make it clear that no one else in your company will speak with them. You don’t want different people saying different things.
  • Your CEO may not be your most effective spokesperson. In a big recall, your CEO is likely to be busy with priorities such as communications with key customers, working with your recall team, liaison with regulatory agencies, etc.
  • Identify backups for all the people you’ve listed on your primary recall team. A recall may occur at times when key members of your staff are on vacation.

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Plan to keep your messaging under tight control

You’ll never be in control of external communications. But you can control the way your company responds.

Various professionals offer this advice:

  • Be aware of the importance of social media. Monitor what’s being said about your company. Correct inaccuracies with facts. But don’t let yourself get involved in fights with trolls.
  • In communicating with the media, stick narrowly to the truth. If you say things that are inaccurate, someone will expose you. If you say “We’ve never had a problem like this,” someone in social media will remind you that you had a similar issue 15 years ago.
  • Don’t set yourself up as the subject of a story that seems to be getting worse. Ever-expanding recalls that involve more products or a broader geographic scope. It’s best if you can quickly identify and isolate the source of the problem and its extent or scope. Then communicate it all at once. Escalating stories make it appear that you’re not in control. 
  • Provide a toll-free number that people can call with questions. Depending on the scope of your recall, it may make sense to hire a call center service to manage the call volume.

Have copies of recall plans from your partners, suppliers, and vendors.

The longer your recall story is active in the media, the more it will damage to your brand.

Get your brand out of the spotlight fast. Execute your recall well.

If your recall appears to be slow or ineffective, the public will judge you more harshly.

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Consider how you’ll handle reverse logistics and product destruction

The logistics of recalling a product are different from those of distributing it. You may distribute cases and full pallet loads, but you’ll probably receive returns as eaches.

How will your supply chain handle returns? How will you dispose of tainted product so it doesn’t get back into circulation, and it doesn’t harm the environment?

It may make sense to hire a company that offers product removal and destruction services. 

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Top priority after the recall: Regain trust

After the recall has ended and regulators are satisfied, you must begin the hard work of repairing damage to your brand.

Rebuilding trust may be the hardest part.

The process will be easier if you’ve made it clear that public health and safety are your main concerns.

If lawsuits follow, they may keep your recall in the news for years.

Put your company in a better position to limit damage and to reduce negative press.

With enough insurance coverage, you can survive the legal fallout from a big recall.

If you have reasonable processes and systems to protect public health, popular opinion will forgive you.

Your brand is more likely to recover fully.

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How Generix Group can help

We offer systems for warehouse management, manufacturing execution, and product traceability.

We think our traceability capabilities are unusually strong. They are tightly integrated across our warehouse management and our manufacturing execution systems. 

Generix Group is preparing a pair of annotated guides to essential resources for food recalls and food safety. To receive your copy when the guides are ready, please share your name and email address. You can request a guide to recall resources in Canada or in the United States.   

You can also download the single resource that’s likely to be most helpful [pdf] for food brands that sell in the United States. This free document, The Food Recall Manual, comes from the University of Florida.

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Dig deeper: Resources and suggested reading

Food Logistics. “Mock Recalls Are the Real Deal.” August 23, 2013.

Food Logistics. “Recalls on the Rise.” November 1, 2006.

Food Logistics. “Anatomy of a Recall.” November 1, 2006.

Food Logistics. “Food Modernization Action Calls for Written Recall Procedures.” June 24, 2014.

Schneider, Keith R. Goodrich Schneider, Renée. Archer, Douglas L. Danyluck, Michelle D. Baker, George L. Thomas, Chris. The  Food Recall Manual (Version 2). IFAS Extension, University of Florida. February 2018. 

Sowinski, Lara L. “A Holistic Approach to Recalls: Managing Reputational Risk, Media, Logistics Costs and More.” Food Logistics. October 18, 2012.

Sowinski, Lara L.  “Product Recalls and Reverse Logistics.” Food Logistics. October 10, 2013. 

Stericycle Expert Solutions. “5 Keys to Effective Recall Preparation.” 2016.

Stericycle Expert Solutions. “5 Common Mistakes Businesses Make During a Recall.” February 26, 2014.

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