Nightmare Food Recall: How E. coli Destroyed a Small Brand

Nightmare Food Recall: How E. coli Destroyed a Small Brand

After a brief absence, the E. coli bacterium is back in the mainstream North American news media. It reappeared in headlines in April and May, with the recall of contaminated romaine lettuce.

This time, E. coli is blamed for sickening at least 197 people in 35 states, with five deaths. And 60 people in five states are sick with Salmonella contamination, apparently from sliced melons. 

The news media report the most attention-grabbing elements of food recalls. In contrast, this article provides both a food-industry perspective and a human context that’s often missing from consumer news coverage.

We follow a recent recall far beyond the point where the mainstream media stopped covering it.

We tell the story here in concentrated form so you can digest it all in one place.

Here’s what happened. A small food brand found itself at the center of one of the biggest E. coli outbreaks in the United States in 2017.

The recall quickly bankrupted the food company. The U.S. Food and Drug Administration (FDA) pulled the registration of a key supplier, preventing them from shipping.

Retailers who sold the recalled products face multimillion-dollar lawsuits. If they don’t settle the suits, they could be defending themselves in court for years.

The recall bankrupted a brand, shuttered a supplier, and changed the lives of people who got sick. It also generated about $75 million in legal claims.

Some of the people who ate the recalled food products are unlikely ever return to their former lives.

The 2017 recall story is timely again because it offers helpful lessons for food brands.

This is the first in a three-part series that we hope offers practical insights for brands, manufacturers, and retailers of all sizes.

Part 1 tells the story of what happened during the 2017 “nightmare recall.”

Part 2 explores the fallout and implications for the parties involved. It shares recommendations for how other food brands can avoid similar outcomes.

Part 3 suggests ways to plan and prepare for food recalls.

Rising number of food recalls masks positive trends

The number of food recalls has increased steadily in the United States since the mid 1990s. At the same time, the number of confirmed infections has fallen for most foodborne pathogens.

The U.S. Centers for Disease Control and Prevention (CDC) reports the trend from 1996 to 2012. They found that overall incidence of infection by six key foodborne pathogens decreased by 22%.

Together, these trends speak to the benefits of increased vigilance, better prevention, and improved food safety.

The rising number of food recalls exposes more companies to brand damage and potentially huge costs

But the industry’s successes may desensitize some to rising risks.

Superficial media coverage may make it easy to underestimate the stakes for both brands and consumers.

Unless your company has recently experienced a food recall, you may be tempted think “It’s not likely to happen here.” Or “We’re not like those guys in the news. We’ve got everything under control.”

If you’ve never been in the vortex of a safety-related food recall, it’s hard to imagine the stress they can put on your company and your people.

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Why this story?

We tell the story of this recall for four reasons:

  • The stakes were high. It involved “dangerous or defective products that predictably could cause serious health problems or death.” That’s how the FDA defines a Class One food recall.
  • The facts of the case are public and well documented.
  • We don’t have a dog in this hunt. We have no relationship with any of the parties involved in the recall.
  • Our coverage isn’t likely to cause further distress for either of the food brands involved.

The story shows how easily food brands, their suppliers, and wholesale customers can be swept in.

Recalls happen even to companies that have followed the rules.

We have no wish to shame food brands involved in recalls. We know that recalls can and do happen to great companies.

A food recall can damage food brands of any size. What really matters is how well the company has prepared and how effectively it responds.

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Why resurrect the ugly details?

Two food companies paid a high price for this recall. Some of the consumers who ate their tainted products paid even more dearly.

Well-managed food companies weigh the statistical risk of lapses in food safety.

In gray, dispassionate spreadsheets it’s easy to discount the likely human costs.

When a serious food-safety issue arises, damage is likely appear on your doorstep in vivid technicolor. The harm can be broad and terrible.

So we hope this story helps you see how various scenarios could play out for your company.

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I.M. Healthy peanut butter substitute puts consumers in the hospital

The tainted food in this story was marketed under the brand I.M. Healthy. It made at least 32 people sick in 12 states.

Twenty-six of the victims were children younger than 18. Some suffered acute kidney failure.

26 of the victims were kids. Some got very sick.

The story begins in early January 2017, when healthcare providers reported symptoms consistent with an E. coli strain that produces a harmful toxin.

The CDC began investigating as more cases surfaced with similar symptoms.

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Toxin-producing E. coli strain poses biggest threat to kids & older people

After investigation, the CDC attributed all the illnesses to a rare strain of E. coli bacterium (STEC) 0157:H7.

The STEC designation means the bacteria produce a toxin called Shiga, which causes the severe symptoms.

Shiga can also produce a life-threatening condition called hemolytic uremic syndrome (HUS), a type of kidney failure.

The toxin can sicken people of any age, but children and adults older than 65 are most vulnerable.

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Testing points to peanut butter substitute targeted at children

CDC investigators found that everyone they tested had recently eaten a product called soy nut butter.

All of the product was from a brand called I.M. Healthy, sold by SoyNut Butter Co. of Glenview, Illinois.

The company positioned the product as a peanut butter substitute for children with allergies to tree nuts.

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Food company issues voluntary, nationwide recall of one product

The SoyNut Butter Co. responded to the CDC’s findings by issuing a voluntary, nationwide recall in early March.

The recall included only one product sold in one size of jar, with specific sell-by dates. But the CDC and FDA warned consumers against other I.M. Healthy products, including the brand’s granola.

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Canada follows suit

The Canadian Food Inspection Agency (CFIA) also recalled the product shortly after, though no illnesses were reported in Canada.

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Brand owner adds products to recall; doesn’t name maker or retail customers

SoyNut Butter Co. expanded the scope of its recall three times in as many weeks.

The recall finally included all flavors and all portion sizes of soy nut butters and granola sold under the I.M. Healthy and Dixie Diners Club brands.

None of the FDA’s recall notices named the contract manufacturer of the product nor the retailers that had bought it.

That’s because the FDA interprets U.S. law to mean that the agency can’t share such details. They protect what a company considers to be its confidential commercial information (or CCI).

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Lawsuit reveals contract manufacturer

Three weeks after the FDA’s first recall announcement, neither SoyNut Butter Co. nor the FDA had said who made the I.M. Healthy products.

But the name of the manufacturer came to light at the end of March. A civil suit filed in U.S. district court named the company as Dixie Dew Products Inc. of Erlanger, Kentucky.

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FDA reports filthy conditions in plant

The FDA had tried to enter the Dixie Dew plant in early March, but company officials turned inspectors away.

The FDA issued a Demand for Records and later returned with three inspectors. They then issued a seven-page Form 483 inspection report.

The report noted broken temperature-control equipment and an infestation of flies and larva in the company’s product-testing facilities. It found and food production tools stored on dirty, wet floors.

Plant supervisors said some equipment had been broken for 15 years. Machines used in the production of soy paste had not been cleaned for two years.

Inspectors found standing water and brown and black “apparent filth” on the floor of the processing room

Hand-washing sinks had no hot water for two years, and the soap dispenser didn’t work.

The FDA also announced it had suspended the plant’s food facility registration.

When the FDA suspends a food facility registration, it can shutter the whole operation until it lifts the suspension.

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Website touts Dixie Dew’s commitment to quality

On Dixie Dew’s website, the company’s logo bears the tagline “Quality through research.” The site also touts Dixie Dew’s line of organic products.

The website says Dixie Dew offers private-label manufacturing for the food industry.

Other Dixie Dew products include dessert toppings and sauces, marinara sauces, meat glazes, and specialty products, the site says.

Although no products other than those containing soy paste were under suspicion of contamination, the suspension stopped the plant from shipping anything.

The Dixie Dew website touts the company’s line of organic foods

Screen capture from website of Dixie Dew Products Inc

Source: Website of Dixie Dew Products Inc.

Other food brands for which Dixie Dew manufactured products could not have their orders filled.

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Lawsuits multiply with the spread of illness

By May 2, the number of reported E. coli cases related to soy nut butter had increased to 32, with incidents in 12 states. As of March 29, nine of the victims had developed HUS kidney failure.

CDC map of people infected with E. coli O157:H7, by state of residence, as of May 2, 2017 (n=32)

U.S. map of distribution of illnesses related to SoyNut Butter

Source: Centers for Disease Control and Prevention

Four parties had filed lawsuits naming the SoyNut Butter Co. as defendant in the contamination.

Among the plaintiffs were the parents of an eight-year-old boy who they said spent 25 days in the hospital. The boy experienced acute kidney failure and was on dialysis machines for days.

Photographs of the hospitalized boy and his mother appeared in social media.

Photo of the mother of a victim of E. coli infection, from Molly Shen of KOMO News

Source: Molly Shen’s Twitter account

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Major media cover the story

Articles about the recall and the illnesses it caused appeared in Fortune, the Chicago SunTimes , Fox News and other big-circulation media.

Many other stories appeared in smaller local publications and broadcast media, especially in areas where victims lived.

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Brand owner files for bankruptcy

The SoyNut Butter Co. announced its bankruptcy under Chapter 7 of U.S. bankruptcy law. It was on May 12, about two months after the company issued its first recall notice.

The full bankruptcy notice stated that the company, based in Glenview, Illinois, had generated about $2.8 million in revenue in 2016. The company had been in business for about 20 years. Its president owned 90% of it.

The Chicago Tribune and other Chicago media covered the bankruptcy.

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Marketing statements intensify concerns about risks to public health

A review of the company’s 2012 marketing materials, viewed in retrospect, raised further anxiety.

One company document said I.M. Healthy products were available in “leading supermarket chains, in more than 1,400 specialty natural nutrition and health food stores across the U.S and at online retailers.”

A news release said the company’s products were also sold to day-care centers and school foodservice facilities. They “feed 2 million children a month,” according to the company’s president.

The release underscores the irony of tainted food that bears the brand I.M. Healthy:

  • We take great measures to ensure the quality and safety of our products including the testing of each batch of SoyNut Butter for salmonella and other contaminants.
  • We process multiple batches of SoyNut Butter daily with each batch tested for salmonella bacteria. We've never had an issue.

The release attributes the statements to the vice president of research, development and quality at SoyNut Butter Co.

Meanwhile, the public was still in the dark about where the tainted products were being sold. That’s because SoyNut Butter Co. considered its customer list to be confidential information.

By withholding confidential commercial information, the brand provoked intense criticism and emotion.

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Food-safety advocates create a makeshift list of customers

In the absence of any help from the brand, food-safety websites assembled lists of possible retailers. They did so by checking retailers’ websites for recall notices.

They found that product was sold online by Amazon.com, Target.com, and Nutricity.com.

It had also appeared on the shelves of about 65 national and regional supermarket banners and four health-food specialty stores.

Compilers of the list warned that it is incomplete because the product was also distributed to small, independent retailers.

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Root cause of outbreak remains unproven

Which party is responsible for the root cause of the contamination?

  • The FDA points its finger at Dixie Dew Products. An FDA spokesperson said this:
  • In addition to inspecting and collecting records at the manufacturing facilities, FDA inspected and sampled Dixie Dew’s soy flour manufacturer to determine if product entering the Dixie Dew facility could have been the source of the contamination.
  • There were no objectionable conditions noted during this inspection. The supplier conducted all processing for the flour sent to Dixie Dew and did not ship out unprocessed soybeans.

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24 lawsuits move to the courts

In the end, it’s for the courts to decide responsibilities and liabilities.

To date, 24 parties have filed claims related to the SoyNut Butter contamination case. The Marler Clark law firm of Seattle has filed 20 of the suits.

Bill Marler is managing partner of Marler Clark and publisher of Food Safety News.

Current claims total about $75 million, Marler estimated in a telephone interview on March 23, 2018.

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Liability insurance doesn’t cover all the claims

The combined liability insurance coverage of SoyNut Butter Co. and Dixie Dew would total about $12 million, Marler said. That will be the amount if both companies go bankrupt.

The plaintiffs will divide up the $12 million in proportion to the severity of illness, Marler said.

One 11-year-old boy was in intensive care for five months. He lost his large intestine and is brain injured. He needs a kidney transplant, and his mother is going to be the donor.

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Retailers face future legal action

“We’re certainly not going to take just the $12 million and leave some people uncompensated,” Marler said. The victims will seek the remaining damages by suing retailers that sold the products to them, Marler said.

Lawyers will turn to retailers for the $63 million balance of claims that insurance didn’t cover.

He named Target and Amazon as likely defendants.

“This underscores how important it is that retailers pay attention to where they’re getting their products,” Marler previously told Food Safety News.

“If a responsible retailer would have looked at Dixie Dew and I.M. Healthy, they would have seen what the FDA saw. You can’t just buy stuff and sell it without knowing where it comes from.”

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Part 2 of this three-part series considers the implications of the I.M. Healthy story and suggests eight ways to reduce the cost of recalls. Part 3 recommends ways for food brands and retailers to plan and prepare for recalls.

Regulations related to food recalls are complex. They also vary considerably between the United States and Canada.

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.

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