How would you feel if we were to tell you that it is possible to transform a Product Recall – the well-known number one risk in the food and beverage industry – into an opportunity?
If you’ve been involved in the food and beverage industry for any length of time, you will most definitely have a recall story. Product recalls pose the highest threat to a business’ existence with those in the industry admitting it is the one thing that can keep them awake at night.
Data collected in the last few years highlights a significant increase in the number of recalls occurring, with approximately 81 reported in 2015 and 72 in 2016 compared to a considerably lower number of 42 reported recalls in 2013. This increase is largely due to undeclared allergens which can be deadly to a growing number of consumers. Now, this figure may not seem like a lot when compared with the number of food and beverage businesses out there, however the potential impact of just one recall on a business can be unquestionably devastating – that is if it is not managed well.
Additionally, while the number of recalls are increasing, so are the costs of a recall – at an even more alarming rate. A survey by Ernst and Young and the Grocery Manufacturers Association in the USA discovered the estimated direct cost of a recall is more than $10 Million USD. Then there are the indirect costs that accompany a recall: brand and reputation, market share, share price and market impact – to name a few.
Unfortunately, in our experience we have seen many cases that have been managed poorly due to lack of preparedness, lack of transparent and speedy communication with consumers and stakeholders which dug them into a very deep hole leaving them unable to climb their way out.
So, let’s turn this around and discover how similar negative events can add value to your business.
The four vital elements to successful recall management
Our four vital elements to successful and effective recall management are as follows.
Preparation involves ensuring that plans and training are in place and up to date to provide your business with the best possible tools to guarantee a proactive response when required. It also ensures suitable administrative systems are in place to aid with quick response time during a crisis.
Once the recall plans have been set up and staff have been adequately trained, it is vital to maintain this high-level standard. Mock recalls are key to this and the frequency at which they take place.
Each recall scenario requires a unique response, however at a high level, the following key elements are required for the effective negotiation of a crisis:
- The speed of your response
- Clearly defined responsibilities for your team
- Transparent and compassionate crisis communications
- Quick access to experts to aid with Crisis Decision Making
Insurance can be the one thing that is the difference between the end of your business or its ongoing viability.
The importance of a proactive approach
So, what are the benefits of a proactive approach to recall management?
We’ve talked about examples of well managed recall scenarios in previous blogs Are Recalls Preventable?
In 1997, Arnott’s demonstrated that the commitment to their core principles accompanied with flexible thinking allowed them to be successful in a high pressure crisis situation.
Similarly, in 2016 Mars Incorporated showcased the importance of putting customers first and building trust through transparent communication and immediate reactions despite the imminent monetary cost to the company.
Arnott’s and Mars Incorporated demonstrated text book strategies to prepare for a crisis and communicate with its consumers.
We believe every brand can learn a thing or two from these timeless illustrations.