– OPINION –
Believe it or not, many food companies find it cheaper to pay millions of dollars to deal with foodborne illnesses and product recalls after they occur than to overhaul their food safety systems to prevent them in the first place.
And while this may seem like a “win” in the short term, it ignores the serious long-term consequences that come with a major recall or outbreak. This is why taking that risk is a dangerous game that can hurt the brand and the bottom line in ways that can’t be easily resolved.
- A crisis waiting to happen
In 2024 alone, the U.S. Food and Drug Administration issued company recalls of 815 foods and beverages from the market for violations of government agency regulations. Recalls can occur for a variety of reasons, but most commonly due to contamination – whether biological, chemical or physical. While many of these contaminated products are often recalled early enough that no consumers are injured, sometimes they are not recalled early enough.
And the small fraction of recalls that result in illness or adverse effects in consumers can cause lasting damage to the brands involved – beyond the financial damage. One day a company sells its products on supermarket shelves; the next it is managing a public health and public relations crisis.
- The immediate consequences of a major recall
Once a food product is recalled or identified as the source of an outbreak, the company involved must act quickly and decisively to remove the product from the shelves and from consumers’ freezers, pantries and refrigerators.
Taking the product off the shelves seems simple enough, but can be incredibly expensive. Earlier this year, Boar’s Head recalled 7 million pounds of processed meats – a drop in the bucket of the tens of billions of dollars spent annually on recalls and foodborne illnesses.
But taking the product off store shelves is just the beginning. It is much more difficult to get consumers to throw away the contaminated product. Companies and grocers should track down every person who purchased the product and ensure they are notified of the recall. Loyalty programs that track customer purchases help, but in many cases customers don’t have a loyalty account or profile with the company and don’t provide their information at checkout.
This is the case for an unnamed international grocer that does not offer a loyalty program. In the event of recalls, the company cannot contact affected customers directly; instead, the grocer posts recall notices on its website and on paper notices at checkout. I know this because one of my customers got sick from a food product sold by this grocer and was never notified of the recall. And let’s be honest: most people ignore these notices or simply don’t notice them.
This situation makes it difficult for companies to track down every buyer, leaving them exposed to indefinite liability. The risk is even greater when it comes to frozen products or products with a long shelf life. If consumers are not immediately notified and instructed to discard the product, it could be forgotten about in the back of the freezer or pantry for years and consumed years later. memory takes place.
The more widely the product is distributed and the longer its shelf life, the more the company will worry about sending its consumers to the hospital and facing lawsuits if a contaminated product is recalled.
- Speaking of lawsuits. . .
Come on in, my law firm. If the recall is related to an outbreak of foodborne illness, such as E. coli, Salmonella or Listeria, the company will almost certainly face product liability lawsuits from affected consumers.
These lawsuits can be costly – especially if the outbreak results in serious illness, hospitalization or death – and involves all entities in the affected product’s supply chain.
Plaintiffs in these lawsuits typically seek compensation for a wide range of damages, including past and future medical expenses, out-of-pocket expenses, lost wages, pain and suffering, loss of consortium, and, in severe cases, long-term damages. health consequences and the associated costs of their illness. If the company has experienced repeated outbreaks, it could also face damages or criminal fines, which could run into the millions of dollars.
Companies will need to hire defense attorneys to defend against these lawsuits. If not resolved quickly, they could cost hundreds of thousands of dollars in attorney fees and cause long-term reputational damage to the company – on top of what the company will ultimately have to pay to plaintiffs.
- The hidden costs of a major outbreak
As discussed above, a single foodborne outbreak can cost a food company millions of dollars in recall costs and legal fees. But in many cases, the longer-term financial toll is even greater. For companies that rely on insurance to cover recall costs or legal fees, the result is almost always a large increase in insurance premiums.
Then there is the lost income due to reputational damage. After the series of foodborne illness outbreaks in 2015, it took years for the company to regain consumer trust. Profits fell 44 percent and shares were still down 40 percent in 2018 as consumers reeled from foodborne illness scandals. In an effort to rebuild its reputation, Chipotle implemented a comprehensive food safety program, investing millions to improve food handling protocols, supplier audits and testing technologies. It also paid $25 million to settle criminal charges related to food safety violations.
In some cases, food companies have been forced to close entire factories, causing millions in losses. This happened earlier this year when Boar’s Head closed its Jarratt, VA facility, the source of a deadly listeria outbreak that killed at least ten people and hospitalized 59 others. Similarly, after an E. coli outbreak linked to its frozen pizza factory in Caudry, France, Nestlé closed the Caudry factory, which was involved in the deaths of two children.
Once the immediate crisis passes, companies face a long road to recovery. The most successful companies are taking this opportunity to make meaningful changes to their food safety practices to prevent future outbreaks.
For food companies, the most important principle is the importance of prevention. As we’ve seen recently, even the largest food companies are not immune to major recalls. The larger the company and the more products it processes, the greater the chance that it will eventually experience an outbreak. The good news is that these incidents can largely be avoided by investing a little more money and attention up front, ultimately saving much more in the long run.
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