Few things keep food producers up at night like the prospect of a product recall. At best, a product recall is a benign mistake that causes nothing more than aggravation, inconvenience and perhaps an angry customer or two. At worst, the consequences can be tragic, in both human and economic terms.
Industry research generally puts the average cost of a food product recall at around $10 million. That average figure includes all three classes of recalls (see the end of this article for a refresher on the FDA’s classification scheme for food recalls). Some companies can weather a loss like that without skipping a beat. Can yours?
Before you answer, consider that only the direct costs of a recall are included in that $10 million estimate. For the full cost, you have to further account for the immediate lost sales caused by the recall as well as the long-term damage to your top line caused by consumers’ erosion of confidence in your products.
The larger your company is and the more public attention it enjoys, the greater the cost of the long-term reputational damage. Case in point: what do you think of when someone suggests Jack in the Box? If tainted meat and deathly ill diners come to mind, you can appreciate how lasting reputational damage can be; that E. coli outbreak at Jack in the Box happened nearly 25 years ago.