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Perception is everything
Food recalls can be a nightmare if handled
incorrectly
By Lauren Kramer
April 01, 2008
A food recall can devastate a seafood company, especially if
there is a rush to judgment by the media. If recalling a
product from the marketplace becomes a high profile news event,
it can seriously impact a company's sales and even deliver a
knockout punch.
"A lot of companies have disappeared within a month or two
of a recall event, because they've become a pariah," says John
Keane, president of Capital Risk Concepts in White Plains, N.Y.
"The impact from the real or imagined cause of the recall can
kill you."
There were two industry recalls just in the past month:
Frozen fillets from Gorton's of Gloucester, Mass., due to what
turned out to be product tampering at the consumer level (see
Newsline, p. 10), and frozen langostinos from Slade Gorton in
Boston due to possible Listeria contamination.
Sometimes the difference between surviving a recall and
going under is recall insurance, a service readily available
from companies like Capital Risk Concepts. But, says Keane, the
majority of seafood companies likely don't have it.
"It's a matter of their financial capacity to absorb a loss
and withstand the rigors of an event like that," says
Keane.
The five risks involved in a food recall are the impact from
the real or perceived cause of the recall, such as bad press;
the cost of retrieving products from the marketplace; the
attendant costs related to that, such as advertising and
laboratory tests; the loss of gross earnings; and the public
relations cost of ensuring consultants are on hand to assist in
handling the recall.
"Bad press can kill you," says Keane. "Oftentimes there's a
rush to judgment. When the company conducting the recall has to
retrieve its product from the marketplace, that process causes
a high profile manifestation of what has occurred, which can
have a serious impact on sales.
"Public perception and reality are quite different, and
there's a lot of misconception out there," he adds. "If
something gets recalled, even if it didn't cause anyone any
harm at all, people can get the wrong idea very quickly."
Austin Docter, plant manager at Taylor Shellfish in Shelton,
Wash., can testify to that. When the U.S. Food and Drug
Administration issued a consumer warning to avoid the
consumption of raw oysters harvested from Washington's Hood
Canal due to an outbreak of Vibrio parahaemolyticus last
August, Taylor Shellfish was keenly affected.
"We have dozens of growing areas in the state, but in the
FDA's press release, which was poorly written, it stated only
in the small print that it was only Hood Canal oysters that
were unsafe. There were 97 other growing areas that were
approved and whose oysters were safe for consumption."
That's not what Taylor Shellfish's customers heard. The
company was deluged with calls from customers worldwide who
were afraid to sell the product based on the FDA press
release.
"A lot of them threw product away and refused to pay for
it," Docter recalls. "It was unfortunate because, in fact, our
recall of the Hood Canal oysters had worked, and that product
was under control as best it could be at the time. The FDA, at
the time the agency wrote the release, was unaware how many of
our customers had been contacted and how successful the recall
had already been."
Taylor Shellfish has a written recall procedure, and within
a couple of hours of notification of the foodborne illness, the
company had contacted all its customers who had that particular
product.
"We have a very extensive computer tracking system sorted by
customer growing area and location," says Docter.
Despite the effectiveness of Taylor's recall, the FDA
release threw everything off.
"Foreign customers read this press release a couple of weeks
later, and due to poor communication between the FDA and
foreign food ministries, they believed all product from
Washington state was banned, obviously not understanding that
it was just one singular growing area," he says.
Docter estimates that the recall cost between $50,000 and
$75,000, "due to a combination of the FDA's press release and
the recall itself," he says. "Customers didn't place their
regular orders, and our sales records for that time are down
significantly."
The company's public relations staff helped by contacting
customers and explaining the situation of a singular closed
area, and the State of Washington's Department of Shellfish and
Water Protection provided assistance, too.
"[The state of] Washington sent faxes to the foreign
ministries and to our customers, explaining that there was no
reason to ban state-wide product, only product from one
particular growing area," says Docter.
After meeting with Taylor Shellfish, the FDA promised to be
more cautious in the future and to give the state of Washington
more time to see if its own process was working before stepping
in. Despite this, Docter is not optimistic.
"I don't think this wouldn't happen again," he says.
To gauge whether or not your company needs recall insurance,
you have to examine your product line species by species, says
Keane, and make a decision what the impact would be in the
event of a recall.
"The limiting factor in seafood compared to other types of
food production is that generally it's produced in
comparatively small batches," he says. "So when you're thinking
about pathogens and the introduction of cross contaminant,
you're not contaminating a whole lot of seafood in the first
place."
Whether the batch in question is big or small, having a
recall plan in place could be the difference between sinking or
swimming for some seafood manufacturers.
Contributing Editor Lauren Kramer lives in British
Columbia