In today’s world, product recalls affect about every type of business enterprise
As the marketplace evolves with new business models, expanded global supply chains, and imported goods from all around the globe, this list continues to grow.
When it comes to our food and beverage system, businesses that manufacture, distribute, sell or serve food products can be impaired by product recalls and food contamination events. This includes farms, restaurants, retailers, grocery stores, food processors, manufacturers, distribution chains, and private label owners—along with suppliers that might just provide one ingredient of the overall finished product. All of these companies are at risk of a manufacturing error, malicious act, mislabeling, or contamination that could leave them financial responsible in a recall event.
Wide range of business enterprises affected by a product recall
Let’s consider the many types of business segments that can feel the affects of a product recall:
The largest majority of contaminations occur during manufacturing whether an error, malicious act or foodborne contamination. The following chart shows the latest numbers on the leading causes of food recalls in the U.S. in 2019. Undeclared allergens were a leading cause of recall events—resulting in over 250 different products being recalled by the FDA1 and over 2.5 million pounds of meat and poultry recalled by USDA.2
In essences, this refers to a food ingredient, that often causes allergic reactions, found in a food product that should not contain the ingredient or the ingredient is not listed on the label. Federal law requires labels of FDA-regulated foods marketed in the U.S. to identify major food allergens, including milk, eggs, fish, crustacean shellfish, tree nuts, wheat, peanuts, and soybeans. The FDA is working on ways to reduce undeclared allergens by researching the causes, working with the industry on best practices, and developing new ways to test for the presence of allergens.3
Often these larger companies are not directly at fault for the event, yet have little recourse for the recall expense. The brands are often needing to spend PR dollars to protect their name and reputation.
These enterprises produce or manufacture products that are then sold under a brand name—known as private label manufacturing. Parts or whole goods are then produced by one firm under the label of another firm. These contract manufactures often provide services to numerous companies at the same time—some possibly competitors. This type of outsourcing allows companies to leverage the production capabilities of a third party to supplement or expand their own operations. Many of these private label companies are not well known and some of the world’s largest are active in the electronics industry. Foxconn, based in Taiwan, is one of these private-label manufactures who services large giants such as Apple, Amazon, and Microsoft.4
These companies are less often associated with the product recalls, but are not immune from recall responsibilities. In the case of court-mandated recalls, it is actually the responsibility of distributors to alert customers and participate in the collection of recalled products—even bear some of the financial burden of the recall. This can happen when a manufacturer is in bankruptcy or is located in another country. The U.S.-based wholesaler or distributor may become the responsible party.
Types of food retailers include conventional supermarkets (Kroger, Whole Foods); limited assortment supermarkets (Aldi, Save-A-Lot); supercenters (Walmart, Meijer, Target); warehouse clubs (Costco, Sam’s Club); and convenient stores (7-Eleven, gas stations).
While most of the regulatory burden under the Food Safety and Modernization Act (FSMA) falls to manufacturers, retailers still face compliance in several key areas. Verification procedures for foreign suppliers must be in place, as well as the distribution centers and any private label manufacturing facilities the retailer might own.5
In 2018, the FDA enacted new guidelines that allowed them to publicly disclose retail locations that may have sold or distributed a recalled human or animal food in situations where there’s a “reasonable probability” of causing serious adverse health consequences or death. The FDA also may disclose retail consignee lists when a recalled food is related to an outbreak of foodborne illness and the information could help safeguard consumers. For example, the agency might name retailers of a packaged food distributed in a certain region, or through a particular online seller, if that information could help protect consumers. This includes supermarkets, pet stores and convenience stores regardless if they sell direct to consumers through brick & mortar, or deliver food products through a third-party service.6
While the Department of Agriculture (USDA) and Food and Drug Administration (FDA) govern food safety in the U.S., the Consumer Product Safety Commission (CPSC) is the governing agency for consumer product safety.
The CPSC is responsible for reducing the risk of injuries and deaths from consumer products by developing, issuing and enforcing industry standards and recalling or banning consumer products to adequately protect the public. Deaths, injuries, and property damage from consumer product incidents cost the nation more than $1 trillion annually.7
Consumer product recalls can involve product designers, manufacturers, contracted overseas manufactures, distributors, logistic companies, and retailers and resellers. A consumer product in the U.S. can be recalled for many reasons, including:
- A design defect that could result in safety issues
- Manufacturing defect, error, or inconsistency in the manufacturing process
- Inadequate labeling that could open the door to liability claims
Consumer product recalls can financially affect every player involved in the design, manufacturing, distribution and sale of the product—even if it is just one piece of the puzzle. A manufacturer or importer must take additional steps8 to ensure every touch-point meets federal safety laws. One of the six best practices recommended by the CPSC is to prepare with a recall plan.9
As you now see, product recall and contamination events can affect so many types of businesses that play a big or small role in the development or distribution of a broad range of both consumable and consumer products. The need for product recall and contamination coverage is imperative and offers a great sales opportunity for you. Download this informative white paper.
- U.S. Food and Drug Administration Recall Information Search, September 23, 2020, https://www.accessdata.fda.gov/scripts/ires/index.cfm#tabNav_advancedSearch
- Summary of Recall Cases in Calendar Year 2019, https://www.fsis.usda.gov/wps/portal/fsis/topics/recalls-and-public-health-alerts/recall-summaries
- “Finding Food Allergens Where They Shouldn’t Be”, U.S. Food & Drug Administration, Oct. 23, 2014, https://www.fda.gov/consumers/consumer-updates/finding-food-allergens-where-they-shouldnt-be
- Saheli Roy Choudhur, “Apple supplier Foxconn is ahead of its peers in diversifying out of China, analyst say”, CNBC, Aug. 13, 2020, https://www.cnbc.com/2020/08/14/apple-supplier-foxconn-ahead-of-competitors-in-diversifying-out-of-china.html
- Jeff Wells, “First responders: What grocery stores do when recalls happen”, Grocery Dive, April 17, 2017, https://www.grocerydive.com/news/grocery–first-responders-what-grocery-stores-do-when-recalls-happen/535213/#:~:text=The%20FDA%2C%20for%20one%2C%20requires,how%20to%20initiate%20a%20recall.
- Russell Redman, “FDA to identify retailers where recalled food was sold”, Supermarket News, Sept. 27, 2018, https://www.supermarketnews.com/food-safety/fda-identify-retailers-where-recalled-food-was-sold
- “About CPSC”, U.S. Consumer Product Safety Commission, https://cpsc.gov/About-CPSC#:~:text=CPSC%20is%20charged%20with%20protecting,more%20than%20%241%20trillion%20annually
- “What requirements apply to my product”, CPSC, https://www.cpsc.gov/business–manufacturing/business-education/business-guidance/BestPractices
- “Be Prepared: Recall Planning”, CPSC, https://www.cpsc.gov/Business–Manufacturing/Recall-Guidance/Be-Prepared-Recall-Planning
Disclaimer: Berkley Global Product Recall is pleased to share this material with its customers. Please note, however, that nothing in this document should be construed as legal advice or the provision of professional consulting services. This material is for general informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.