The biggest food contamination event to hit the headlines in recent months was the Dutch egg scandal that ultimately affected companies in 24 EU states, the US, Russia and South Africa. If you weren’t affected, you’ll have breathed a sigh of relief. But what if you had been? How well would your business have stood up to the commercial and operational challenges that such an event presents?
Right across the food and agri sector, contamination is a major concern. It was eggs that made the news this summer, but sparkling water, powdered milk, chocolate bars and peanuts have all had their unwanted time in the limelight. Indeed, it’s difficult to think of a product that hasn’t.
From snacks and starters through to puddings and pastries, food contamination and recalls are a fact of everyday life.
The incidents mentioned in the next column were all reported by the Food Standards Agency and all occurred between mid-August and mid-October this year.
The companies concerned vary from small independents to multinational supermarkets. The diverse reasons for each recall demonstrate the wide range of potential causes.
- Supermarket recalls readymade beef meals because a small piece of plastic has been found in one product
- Supermarket recalls four varieties of chocolate bars because they may contain pieces of plastic
- Company recalls several products due to the presence of salmonella
- Excess aflatoxins in chillies breach legal limits and lead to recall
- Tablet products recalled because they may contain small pieces of metal
- Poorly controlled clostridium botulinum leads to recall of pates and rillettes
- Cured ham products carrying incorrect ‘use by’ dates recalled
- Company recalls various baked goods products as they may contain glass fragments.
Source: Food Standards Agency.
The point, therefore, is that no matter where you are in the supply chain, it is possible you will be affected by a contamination and recall event.
COMPLEX SUPPLY CHAINS
The complexity of today’s supply chains means you might not be in any way responsible for an event, but could still suffer significant consequential losses as a result.
Most companies have a clear corporate vision and have well-defined commercial targets. They have created the most effective means of achieving these goals in everything from sales and marketing to product production and service delivery.
This concentrated focus on driving businesses forward creates very structured operations that work to very efficient standards. But it’s also important to understand where things could go wrong, and to build flexibility into corporate models that will allow senior executives to respond effectively to unexpected situations.
So how can you set your company’s defences to minimise the commercial, financial and operational impact of a food contamination event and what sort of assistance is available?
In short, the answer is robust crisis management and disaster recovery planning. Unfortunately, this is something that seems to slip down the boardroom priority list in direct correlation to the size of a company. It’s not that smaller businesses don’t see its value or recognise its importance, but more that they struggle to apportion the necessary resources to implement it effectively.
Contaminated product (recall) insurance can play an important part in an overall crisis management plan. It will help protect your business because it provides a financial safety net and offers access to information, guidance and specialist technical knowledge.
Some have the misconception that contaminated product (recall) insurance extends only to the costs associated with the actual recall and decide to leave this risk on their own balance sheets. But that is the thin end of the wedge when it comes to the extent of the cover, and the costs, they’ll have to bear without it.
Contaminated product (recall) insurance will cover the cost of the recall. It can also cover the insured’s loss of gross profit and business interruption costs that arise from the recall, as well as covering third-party loss costs.
But when a contamination event happens it’s your ability to respond effectively that will play the biggest part in mitigating the potential financial losses and minimising the operational, commercial and reputational impact that it creates.
For example, access to specialist technical advice will allow you to evaluate whether a recall is actually necessary, and if so, how to go about it effectively.
Concurrently, the insurance provides access to expert crisis management and PR advice to ensure all communications surrounding the recall are made quickly, consistently and effectively.
In today’s 24-hour news environment effective communication is incredibly important and will minimise any potential reputational damage emanating from the recall. This is especially critical in the food and beverage industry where brand and brand protection is paramount.
Being able to immediately call upon expert PR advice will prevent you from inadvertently making matters worse through poorly considered, inconsistent and untimely communications.
Indeed, where you manage your communications well and provide a positive and proactive response, there are numerous examples of companies improving their brand’s standing in the wake a crisis.
The food and agri sector has never been more complex. Global sourcing, increasing legislation, and intricate and international supply chains have all played a part in growing the frequency and severity of recall events.
Without detailed pre-loss planning it’s difficult to get the immediate response to a contamination event right. Without immediate access to the right expertise it can then be difficult to enact those plans effectively.
In turn, this will make it less likely your company survives the financial impact of such an event or manages to successfully recoup losses from third parties.
If you operate in the food and agri sector then it’s likely a contamination and/or recall will, one day, land on your desk. If you’ve got the right preparations in place, it needn’t turn into a commercial disaster.
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For further information, please contact Stephane Baldanoff, Managing Director of Food & Agribusiness at Stephane_Baldanoff@jltasia.com