Let’s be honest, there is a lot of confusion surrounding food recalls – ranging from how to prevent them from occurring, to the best way to manage these unfortunate events. Studies demonstrate that most food and beverage businesses have recall plans, but many businesses still operate by burying their heads in the sand and hoping that a recall won’t happen. So what are some of the most common misconceptions that cause people to adopt a ‘it won’t happen to me’ attitude?
1. Recall is all about traceability.
A large percentage of the work involved in a recall, or around 90%, is traceability. Yet it is the remaining 10% that can be detrimental to the ongoing liability of your business during a recall or crisis. Significantly, this 10% is usually overlooked. It is, of course, paramount to ensure your traceability systems and processes are in place and effective. They should extend the traditional focus of the “1 step forward and 1 step back” approach, since in recent times we have seen this process move beyond this.
Great planning and preparation needs to go into the things that determine whether a recall turns into a crisis. For example, these include adequate administrative systems, staff training and appropriate insurance.
2. Product liability insurance covers a recall.
In times of crisis, insurance is an essential component of protecting your business’ affairs. Insurance policies are complex, but it is critical to understand them to ensure that you are not exposed to the major costs relating to a recall. Many businesses opt for what is called Recall Expenses, and this is attached to a Product Liability Policy, however there are many costly elements that are not covered by this policy extension. These include malicious tampering, retailer recall costs or third party financial losses.
3. The only costs incurred are direct costs.
Most businesses are aware that there is a considerable direct cost that follows a recall or crisis. The average global direct cost of a product recall is $10 million USD. Despite this awareness, it is less well known that indirect costs can have just as much, if not more, of an impact on your business in the unfortunate event of a crisis. Indirect costs include the loss of revenue due to lost shelf-space. More significantly, they can include the loss of long-term market share and revenue as a result of plummeting consumer trust and loyalty.
4. Delaying communications with key stakeholders will protect your brand.
Delaying communication with key stakeholders is a mistake. When this communication is delayed, which is often done in an attempt to contain the issue, it may further escalate the situation via false news and consumer distrust. In today’s 24hour news culture, and with communication via social media platforms, news will spread regardless of whether or not there is official company-led communication. It is always better to be the first to share correct information, delivered in an empathic and customer-centric manner. There are plenty of examples, such as the American Chipotle crisis, that illustrate how damaging insincere, non-apologetic communication may be, and how this can also lead to a loss of market share for the company.
5. Recalls are best managed in house.
A crisis needs to be managed quickly and decisively. Yet making good decisions during the immense pressure of such an event is extremely difficult. This is especially the case for businesses that have not experienced a recall situation or crisis, but still have the responsibility of running their day-to-day operations at the same time as dealing with this event.
Quality managers and recall coordinators are unlikely to be experts in all areas. Therefore, it is important to think about the type of expertise businesses may need to call upon during a unique recall situation, such as call centre operators, crisis communication consultants and legal experts.