The recent announcement that Mars has launched an international recall of chocolate bars has sparked widespread media attention.
Mars carried out a voluntary recall after a customer found a piece of plastic in a Snickers bar bought in Germany. Internal investigations showed that the plastic entered the product while it was being manufactured at a Mars factory in the Netherlands. Although the recall only covers products manufactured within a six week window, its geographic scale is extensive: according to media reports, around 55 countries are affected.
This incident has attracted considerable media coverage due to its global reach, but recalls of food and drink products are not unusual. Many incidents do not draw as much publicity as the Mars recall, but they will have raised similar challenges for the businesses involved.
Challenges of product recalls
The financial and reputational implications of a recall can be significant. It is inevitable that any recall will lead to some customers being deterred in the short term from purchasing related products. A recall’s impact on long term sales figures will largely depend on the nature of the incident and how it is handled. However, the financial impact of a recall is not limited to sales figures. The costs of disposing of and replenishing affected stock, removing products from the distribution chain and reimbursing consumers can be huge. Recalls can be a major drain on management time. And rectifying an incident can involve making costly long-term changes such as replacing a major supplier or changing a key aspect of the manufacturing process.
Product recalls can sometimes have a long term or irreparable impact on a brand's reputation. Ensuring that any incident is dealt with in a timely, transparent and responsive manner can be the key to preserving consumer confidence and investor relations. It is even possible for an effective response to a product recall to become a positive PR tool, because it shows that a business prioritises the safety of consumers over other commercial factors. It is likely that by quickly taking the decision to carry out an extensive voluntary recall, Mars has minimised any long term reputational damage, although clearly the strength of the Mars brand will play a major part in this.
What can you do to minimise damage?
Forward planning is key. Food businesses are legally obliged to immediately initiate procedures to withdraw and/or recall unsafe food from the market and to effectively and accurately notify consumers of the reasons for doing so. Businesses must also immediately inform the relevant authorities (in the UK these are the Food Standards Agency and local authorities) if they have reason to believe a food is unsafe, and are required to collaborate with these bodies when taking remedial action.
Businesses must therefore be ready to act quickly. Every business, regardless of its size, should make sure that it has a policy in place ahead of time for managing food safety incidents. A key part of this is identifying who will be responsible for managing each stage of an incident, from identifying and assessing the relevant risks to notifying the authorities and consumers. Who in senior management should be called upon in the event of an emergency? Who will be your PR spokesperson? Who are your points of contact at suppliers, distributors and the authorities? Establishing a core team to oversee a recall is especially important to ensuring that any response is coordinated and consistent across all of the markets involved.
Practical issues are also important. It is vital to keep accurate records of internal investigations, but be wary of creating damaging communications, and consider involving lawyers from the outset to advise on maintaining privilege over documents. Businesses should also consider setting up a dedicated phone line and/or mailbox so that customers have a point of contact and are not left frustrated by a crashing website overloaded with traffic.
Scoping is crucial. While legal requirements and reputational concerns will limit the extent to which a business can control the scope of a recall, a thorough investigation, including a detailed risk assessment, is crucial to ensuring that unnecessary costs are not incurred by under or over-recalling. This is particularly important for smaller businesses, where financial constraints mean that action must be limited to that strictly necessary to reduce the risk to a tolerable level.
Businesses can also plan ahead by ensuring that their exposure under their manufacturing and supply contracts is as low as possible. While Mars’ chocolate bars were manufactured at a Mars factory, many businesses choose to outsource manufacturing to third parties. It is essential that contractual arrangements with external suppliers allow businesses to pass on the costs of a recall, by allowing them to recover losses which are not their fault. When negotiating supply contracts, it is important to ensure that suppliers' liability is as wide as possible. When assessing the reasonableness of any financial cap, businesses should take into account the potential costs of any food safety incident. For an added level of protection, businesses may also wish to consider taking out insurance to cover some of the costs of a recall.
Burges Salmon is involved in advising a number of businesses on food safety issues and crisis management. For further information, please contact our Food and Drink team.