Product Recalls Are Too Common to Ignore

Leading supermarkets are having to recall products, following warnings issued by the Food Standards Agency (FSA).

A variety of reasons necessitated this including incorrect labelling when it came to the ‘best before’ date on cocktail sausage rolls, errors in packing led to beef lasagne being sold in sleeves intended for fish pie and therefore did not highlight that the lasagne product contained eggs. Salmonella was detected in stuffed dates, whilst ice cream contaminated with plastic was on sale and salad cream containing milk – an allergen needing to be declared by law – had also made its way on to the market, without the necessary labelling.[1] (source: FSA Alerts which is regularly updated).

Due to these food production and labelling errors, specific batches of the products affected had to be recalled. Refunds were on offer to customers who took them back into store.

The refunding of the consumer would have been just the tip of the iceberg, in terms of the overall cost of the exercise. The products – returned or taken off sale – need to be disposed of and that typically means paying to collect and transport them and then arranging for safe and efficient destruction.

The loss of anticipated profit from sales, plus the losses incurred on the production costs of goods not then sold, both need to be borne. Advertising costs are incurred, as the public needs to be made aware of defective products. Reputational damage also occurs, and future sales can be lost.

Financial losses regularly punctuate product recalls. The reasons why products are recalled are numerous and can include automated production line errors, human error, lack of awareness about an allergen’s presence or even malicious tampering with a product. All highlight why businesses may consider insurance cover to safeguard against losses.

Product recall insurance can be a lifeline for food manufacturers and producers supplying goods to the public, whether through supermarkets or some other means of distribution. Without it, having to suddenly absorb the costs of a product recall, within a short space of time, can greatly affect cash flow and lead to financial instability.

Product recall insurance protects a business against the costs of a manufacturing, labelling or packaging error. By calling on the insurance, the manufacturer or supplier can put the defects right, re-manufacturing the product. The costs of investigating an incident, physically recalling the product and transporting and destroying it, can also be covered.

Furthermore, there can be a facility with the levels of insurance cover available that can also compensate a business for lost future sales within a set timeframe and provide the expertise or crisis PR that will assist with any reputational damage.

Food, manufacturing and supply are areas under increased risk and focus, with many elements within the chain. If you recognise that things can and do go wrong, despite best efforts to prevent issues, product recall insurance protection may be a suitable option. To speak to a broker about this, please get in touch.