The Australian Food and Grocery Council has identified that as supply chains get broader, and companies are increasing the number of markets they export to, product recalls have become incredibly complex and costly exercises.
Consumers reporting allergic reactions to packaged foods due to undeclared allergens are on the rise, fuelling an increase in the number of food recalls across Australia.
Food Standards Australia and New Zealand (FSANZ), says that between January in 2009 and December last year, they coordinated 675 recalls. Most recalls have been due to undeclared allergens and microbial contamination.
During the last 10 years, the most common food type to be recalled due to undeclared allergens is processed food. Other food types involved in undeclared allergen recalls include cereals, seafood, meat and poultry, nuts and sauces and other condiments.
The $131 billion food and beverage sectors are rife with complexities across their vast supply chains, which frequently cross borders and continents and involve numerous variables including personnel and environmental conditions. These two factors alone raise the risk of food firms falling prey to a product recall.
The primary focus of food recalls is to quarantine and remove affected products from shelves, so people don’t get sick or die.
Expenses are also incurred by retailers or manufacturers from refunds; business interruption, loss of contracts, third-party liability and reputational damage when a product is recalled.
“By virtue of having thousands upon thousands of SKUs, food and grocery retailers regularly find themselves executing a product recall or withdrawal on behalf of their suppliers as many of the products they stock are at risk of contamination or production error,” says Andrew Brown, Sales Manager of Recall Services at GS1 Australia.
“This is based on the nature of the product or production methods.”
“Fresh fruit and vegetables and fresh meat products are good examples of products where production controls do a good job of limiting product safety issues on the whole,” says Brown. But production controls often cannot eliminate all risks of an issue occurring that might require removal from the supply chain.
“Particularly in relation to food products, the implication of product contamination or other product safety issues including tampering can be dire for consumer and by extension, suppliers and retailers alike.”
Repercussions often have the most impact on the most vulnerable people in society, including the young, elderly or immune compromised. “A good example of this would be the most recent recall of rockmelons where seven people have been reported to have died from an outbreak of listeria,” adds Brown.
Another area of concern is in the category of general merchandise where safety is more about injury than illness. While at the very least, consumers are to be refunded for recalled product purchases by law, the Australian Competition and Consumer Commission is considering updating this legislation to include a general safety provision.
The proposed changes would make the sale of unsafe products illegal – thus increasing the onus on retailers to ensure products are removed from sale as expeditiously as possible.
“One area of confusion may be who is responsible for actioning a repair, replacement or refund. A retailer can’t refuse to help by sending the purchaser to the manufacturer or importer,” says Brown.
Preparing for the inevitable
Dealing with perishable or packaged food with limited shelf-lives has necessitated that most retailers are aware and prepared for dealing with product recall regularly.
“The large retailers usually have an established method to communicate product recalls internally and are diligent in executing them to the best of their knowledge and ability,” says Brown.
“Visibility of supplier preparation is usually limited to conducting a traceability exercise and this is only for food products where the supplier adheres to an appropriate food safety audit program. Where suppliers use differing methods and formats for communication, retailers might need to interpret a notice prior to distribution for action on location.”
Suppliers are usually the stakeholder that must make a decision to remove a faulty product from the supply chain and usually underwrite the cost for the activity.
“Many suppliers will have product recall insurance, there are several companies that provide this and businesses that engage their insurer in the process of product recall early in the decision-making discussion are likely to have better outcomes,” says Brown.
“This is because it’s in the insurer’s interest to make certain the incident does not turn into a crisis.”
Current best practice for retailers includes ensuring their suppliers can easily access information about how to contact them in case of a notice or an incident, and removing manual data entry steps between the source of a recall and the staff that need to action the request.
Retailers that have access to the GS1 Australia Recall portal as part of their policy, can rely on a simple-to-use tool that helps their suppliers ensure their staff have practised creating and communicating a notice before an incident becomes a company-wide task and public announcement.
“We constantly see large and small organisations that assert they employ best practice in this area only for them to find out their processes are not as well-defined or practised as they thought,” says Brown.
“Being up to date with product recall best practice is tricky for all organisations as it is rarely an area of key measurement and often an exercise that occurs occasionally at best. There are few genuine product recall experts whose sole job it is to act on product recall situations.
“As organisations start to transition to better traceability solutions with the requirement to capture and use more data, the ability to communicate effectively in a common format about important events like a product safety incident will increase across industry lines.”
Never too late
Once a product safety incident has turned into a crisis it becomes difficult, but not impossible, to recover. There are some notable examples of companies that decided to exit the market or closed completely after a recall notice, including Patties, which exited its frozen berry business to concentrate on their core baked goods market in 2015.
“More importantly for retailers, in situations where your suppliers are not prepared and exit the market, you may be required to pick up the pieces,” says Brown.
Just ask the failed hardware firm, Masters – which was one of many retailers left to identify and replace 4,000km of faulty cabling recalled by Infinity Cable. Retailers and wholesalers often become the face of a problem and assume responsibility for the clean-up of a product recall.
“Unless your business has already folded, it’s rarely too late to seek appropriate advice,” adds Brown.
“However, as a rule, the organisations that prepare best for this scenario are those that will perform the best even if it turns into a crisis.”
Is your business prepared for a recall? Find out more about effective recall procedures at GS1 Australia.