Prevention and management of product recalls in the processed food

industry: a case study based on an exporter’s perspective

Sameer Kumar*, Erin M. Budin

College of Business, University of St Thomas, Mail # TMH 343, 1000 LaSalle Avenue, Minneapolis, 55403 MN, USA

Abstract

During 1999–2003, the US Food and Drug Administration reported a total of 1307 processed food product recalls, most of which were

avoidable. There are many areas of the processed food supply chain where significant exposure to risk exists. Additionally, there are systems

that can be used in-house at manufacturing facilities, such as hazard analysis and critical control point (HACCP) and radio frequency

identification (RFID) that can be very beneficial in recall avoidance. Effective employee training is another key point for consideration. In the

event of a recall, a company must be prepared in advance with a detailed crisis management procedure. Companies should consider recall

insurance, depending on their size and market dominance. Public relations strategies are critical in surviving a recall. Care must be taken to

connect to the consumer and communicate a strong message. Findings from analysis suggest potential reduction of product recalls through

recommended preventive measures including the use of HACCP and RFID systems.

q 2005 Elsevier Ltd. All rights reserved.

Keywords: Product recalls; Food safety; Contamination; Recall management; Export marketing; Consumer attitudes; International marketing; Brand image;

Recall insurance

1. Introduction

Product recalls are an increasing concern for US based

food companies and government agencies. In response to

this growing concern, the Erickson Research Group (ERG)

of Lexington, MA published a report, ‘Good Manufacturing

Practices for the 21st Century—Food Processing’ on behalf

of the Food and Drug Administration. The study, published

in August of 2004, focused on the processed food industry.

It involved recalls that occurred from 1999–2003. Hence,

the findings and recommendations are current and

applicable for food processors as they continue to

implement best practices within their organizations.

According to the study, 88% of the recalls were the direct

result of a failure in good manufacturing practices (GMPs).

GMP related problems are defined as ‘any problem that may

have been avoided through the use of preventative measures

including; adequate employee training, proper equipment

0166-4972/$ - see front matter q 2005 Elsevier Ltd. All rights reserved.

doi:10.1016/j.technovation.2005.05.006

* Corresponding author. Tel.: C651 962 4350; fax: C651 962 4710.

E-mail address: skumar@stthomas.edu (S. Kumar).

sanitation, a review of labels for accuracy and adequate

maintenance of processing equipment’.

The total number of recalls that occurred from

1999–2003 is an astounding 1307.

Figs. 1, 2 and 3 provide a clear illustration of the exact

nature of the recalls.

While the effect of a recall can be significant in the US

market, the impact on export markets worldwide can be

devastating. Prevention through education and training is

the key to avoiding such a crisis. When employees

understand why recalls happen, they are less likely to

make the kinds of mistakes that warrant them. In the case of

Japanese food makers, Meija Seika Kaisha Ltd and Ezaki

Glico Co. a massive recall in 2002 could have been avoided

if they had a better understanding of banned ingredients

under the Japanese Food Sanitation Law (Jiji Press, 2003)

Export markets can be jeopardized in several ways when

a product has to be removed from the shelves or pulled back

from a distributor. The latter is a far better situation. When a

product has to be removed from grocery shelves in export

markets, the biggest potential consequence is a drop in

consumer confidence. In many foreign countries,

particularly in Japan and some countries in South America,

consumers are far more astute than they are here in the US.

They tend to pay careful attention to date codes, and shop

Technovation 26 (2006) 739–750

www.elsevier.com/locate/technovation

IneffectiveEmployeeTraining

32%

IncorrectPackaging or

Labeling 68%

Source: Food GMP Modernization Working Group: Report Summarizing Food Recalls, 1999-2003, US Food and Drug Administration, August 3, 2004

Fig. 1. Avoidable errors in processed food recalls, 1999–2003.

17%8%

8%

3%64%

MicrobiologicalContaminationContamination ofRaw MaterialsPoor SanitationForeign Objects

Non-Contaminated

Source: Food GMP Modernization Working Group: Report Summarizing Food Recalls, 1999-2003, US Food and Drug Administration, August 3, 2004

Fig. 3. Types of contamination in processed foods, 1999–2003.

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750740

for their dry processed foods on a weekly basis to ensure

that they are getting the freshest date codes possible. For this

reason, unique products, products produced and labeled for

a specific market, must adhere to very strict LIFO (last in

first out) shipping. Generally speaking, there are a limited

number of US processed food products in foreign countries.

Therefore, a significant recall would not go unnoticed. The

logistics involved in resolving a recall internationally are

considerable.

In addition to education and training, preparedness is of

utmost importance. An operational risk management

(ORM) assessment is one proactive step that could be

taken by food manufacturers. An ORM assessment

involves; identifying hazards, assessing severity of risks,

assessing their probability, creating and implementing risk

controls and finally monitoring the effectiveness of the

analysis (Food Engineering, 2002)

This preparedness is critical to minimize the impact of a

food product recall. This is especially true for smaller

companies, whose market share could be jeopardized,

leaving them vulnerable to a hostile takeover (Bowers,

1999). Regardless of the size of the company, marketing

experts say that food manufacturers should assume that a

product recall will happen and plan for it (Berry, 1998)

Advanced tracking capabilities, such as Warehouse

Management Systems (WMS) software track lot numbers

of manufactured goods. This makes traceability far more

UndeclaredAllergens

34%

UnapprovedColor Additive

28%

Nothing Mis-Declared

29%

Undeclared orExcess

Ingredients orChemicals

9%

Source: Food GMP Modernization Working Group: ReportSummarizing Food Recalls, 1999-2003, US Food andDrug Administration, August 3, 2004

Fig. 2. Undeclared and unapproved ingredients in processed foods 1999–

2003.

successful than it is ever been with real-time information

about palletized products that currently exist or have ever

existed in a warehouse’s inventory.

Formal plans must be securely in place, so that when a

recall occurs, its execution is seamless. Often times, market

dominance has a direct impact on the timeliness with which

a food company is able to share data with the appropriate

government agencies. Two of the most important things a

recall management team can plan for are retrieval and

containment. It is critical that a network of loyal carriers and

a variety of storage options be available to divert product

immediately upon recall. This requires carefully planning

and extra work in export markets, as the connections to

these service providers are not as strong or familiar.

Therefore, a proactive measure would be for regional

sales to spend some time meeting and building relationships

with the providers in the market, with the mutual under-

standing that their services may be needed on a much

grander scale in an emergency.

Another critical area for consideration is damage control

and avoidance of lawsuits. It is important that suppliers and

distributors work together to achieve this mutually

beneficial aim. This was illustrated when Detroit meat

distributor, Wolverine Meats, saved Steak Out franchisees

from intense public scrutiny by pulling back over 100,000

pounds of meat it’s own supplier thought ‘might’ be

contaminated by E. coli bacteria. They did this despite the

fact Wolverine had conducted their own pre-shipment

analysis of the meat and had gotten a negative result

(Prewitt, 2004).

Although we can draw heavily from the industry

practices surrounding recalls in the US, we must also be

able to apply them whenever contextually appropriate in

export markets. An analysis of international processed food

industry standards for recall management and the cultural

consumer implications will ensue.

The following study will include an overview and

detailed review of relevant literature related to all aspects

of recall management. Interviews with international quality

experts will provide frank and accurate insight into the

realities of recall management in a variety of global

contexts. Furthermore, findings and recommendations on

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750 741

improved product recalls management will be offered

through a variety of analytical approaches.

2. Background and literature review

The prevention and management of product recalls in the

food industry requires careful consideration of the following

areas: education, preparedness, execution, damage control

and containment. As education and training are fundamental

in avoiding a recall, we begin with a review of some

principles for prevention.

Considering that 68% of the recalls in the ERG study

were related to incorrect labeling and packaging, we will

focus on education and training in this area. It is important

to note that even if ingredients in a product are the correct

ingredients as listed on the nutritional label, problems can

still occur. For example, a very serious risk is accidentally

adding too much of an approved ingredient. This sort of

error could occur with nutritional additives, color additives

or flavor enhancers. A control that has been recommended is

keeping all sensitive ingredients in a locked area, where

separate bags are weighed and measured in advance for each

production run. It is also important to recognize that

vitamins added to fortified foods, such as Vitamin A and

Iron, can be toxic at high doses. Conversely, in the case of

infant formula, or other foods most often consumed by

children, adding too little of a nutrient can result in

malnutrition (ERG, 2004).

Labeling of allergens is a key point for consideration.

Studies have shown that most plants do not have a formal

label review procedure in place. One of the most effective

basic controls is removing old label and packaging

inventories from the plant. To date, many of the largest

food manufacturers are lacking bar code technology, which

would be the most secure and efficient control in this area

(ERG, 2004).

Despite the controls that a plant must implement, the

responsibility of R&D should not be overlooked. R&D

should work closely with manufacturing sites to be certain

that they have a clear understanding of the issues and

consequences at stake. All food processors employ

scientists. Although their research is critical, their

responsibilities must not end in the laboratory.

Another area to consider is that actual raw materials that

may be contaminated with allergens. It is important to

obtain current ‘specs’ or ingredient specifications to ensure

that the raw materials food processors are using are allergen

free. In addition to keeping detailed ingredients listings,

maintaining a close working relationship with suppliers is

critical. Manufacturers should audit their suppliers annually,

keeping an account of what other ingredients are run on

their production lines. Furthermore, they must ensure that

the product has not been reworked (reallocated or reused) in

any way. Reworked product can be kept identifiable through

the use of color tags or bar coding. The most proactive

measure would be to implement a training program to

educate suppliers about allergen control. This is only

necessary if they have not already implemented such a

program of their own. In an FDA study of 85 small, medium

and large food processors, inspectors found that only 50% of

the subjects had any sort of label cross-checking system in

place. It was also revealed that many processed foods

contain traces of peanut or eggs, which were not declared on

the label. This generally happens for two reasons; improper

cleaning of production line between runs or a slight change

in product formulation. Another study of 87 food processors

in Minnesota and Wisconsin found that 25% of them did not

declare raw ingredients, such as nuts on the label.

Furthermore, 15% of the businesses were found to have

inadequate label review policies (ERG, 2004). Companies

are supposed to discard all labels after a formulation change.

However, replacing them is very costly and negligence

can occur.

It has been suggested that allergen controls are best

addressed by the implementation of a Hazard Analysis and

Critical Control Point (HACCP) plan. Even when effective

training plans are embraced by a plant, training methods are

often ineffective. More specifically, training the wrong

people, not training enough people or not providing enough

training can render the attempt useless. Often times,

consultants are brought in as experts in the field. The

problem is that a consultant is not always able to apply the

principles on a plant specific basis, as they are unfamiliar

with the surroundings, nuances and general operating

procedures (ERG, 2004).

As is the case in many businesses, solutions are often

reactive, rather than proactive. A company should not wait

until a crisis occurs to invest in training and prevention.

Also, companies should consider training a few internal

plant employees in practices such as HACCP, rather than

hiring a consultant. Those trained should be floor or line

supervisors, rather than workers that may have a higher turn

over, or plant management who will have very little

opportunity to apply or teach the training principles.

However, the trained supervisors should be responsible for

providing their own training to plant management. If a food

processor has multiple sites, all should receive the same

training opportunity at the same time. In this way, clear best

practices are developed company wide.

2.1. HACCP systems

These systems are often seen as unnecessary, burdensome

and bureaucratic in the food industry. They are often

ineffective because the premise of the system is not

emphasized. HACCP was intended to be ‘a minimalist

system that ensures maximum control’. It is important that

employees understand its many benefits, including reduced

waste and downtime. The system can become overly

complex due to a lack of internal knowledge of

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750742

microbiological and toxicological issues, forcing those

involved to seek advice from outside sources (Mortimore,

2003).

HACCP system was developed in 1996 and is preferred

by food safety professionals around the world and is widely

viewed as critical to food safety because it helps prevent

food contamination by identifying potentially unsafe links

in the food processing chain. The system manages the risk

associated with food safety aspects of production. The

HACCP plan is based on seven principles identified in the

Codex Guidelines for the Application of Hazard System

adopted by the 20th session of the Joint Food and

Agricultural organization and World Health Organization

Codex Alimentarius Commission in 1993. The plan

involves examining and analyzing every stage of a food

related operation to identify and assess hazards; determining

the ‘critical control points’ at which action is required to

control the identified hazards; establishing the critical limits

that must be met at, and procedures to monitor, each critical

control point; establishing corrective procedures when a

deviation is identified by monitoring; documentation of the

HACCP plan and verification procedures to establish that it

is working correctly. It is a system in which points in a

process are identified and controls are put in place to ensure

that food safety hazards are eliminated—each plant must

have an approved HACCP plan for each class of product (s)

produced. It is a systematic, science-based approach used in

food production as a means to assure food safety. In

summary, HACCP is a dynamic system that uses a

combination of proper food handling procedures, monitor-

ing techniques, and record keeping to help ensure the

consistent safety of food.

2.2. Recent examples of avoidable recalls

The following are some examples of fairly recent,

completely avoidable recalls that have occurred. They all

could have been avoided if adequate employee education

and training had taken place.

† ConAgra recalled 36,000 cases of soup due to

mislabeling. Healthy Choice soup labeled ‘Old

Fashioned Chicken Noodle’ could have in fact contained

two different soups: ‘Turkey with White Meat’ or ‘Wild

Rice’. Both of those contain a small amount of whey,

which can cause an allergic reaction

† Sargento cheese had to be removed from store shelves

after customers panicked over a white powdery

substance thought to be anthrax. In reality, it was over

zealous application of cornstarch, which is used to keep

the cheese from sticking to the package

† Finam International allegedly repackaged Twin Marquis

Chicken Sui Mei. It was put into packaging marked with

a Star-K kosher certification. The company produces

both kosher and non-kosher products in 2 separate

plants. The Chick Sui Mei is a non-kosher product.

The manufacturer was accused of fraud and is in very

serious legal trouble (Wolf, 2003).

2.3. Recall management preparedness

The next aspect of recall management to be considered is

preparedness. We have narrowed the element of prepared-

ness as follows; procedures, teams, traceability and

insurance. The notion of procedures and teams is the

simplest of the concepts, despite the fact that they are often

inadequate and sometimes non-existent among food

processors.

It is critical that companies don’t deal with supply chain

disruptions as they occur. Rather, formal plans for

disruptions, such as recalls should exist. Manufacturers

must not view recalls as a short-term tactical issue. Rather,

they must be seen as long-term strategic problems that

require a prompt, short-term solution. Another important

aspect is a company’s ability to share data in a timely

fashion with the appropriate parties. This is a much easier

feat for the larger companies with dominant brands,

especially where the government agencies are concerned.

Even before 9/11, many food processors were becoming

progressively much more concerned with food safety issues.

However, in the post 9/11 world, consumers all over the

world are concerned about the safety of the food they

consume. Therefore, security measures have been increased

at plants to avoid tampering and other acts of terrorism

against the food supply. The newest health and food safety

crisis, SARS and Bovine Spongiform Encephalopathy

(BSE), also known as Mad Cow’s Disease, have caught

the attention of industry executives like never before. They

are working hard to put consumers at ease and prove to

government agencies that avoiding potential health hazards

is a top priority.

2.4. Supply chain integrity

Also crucial to preparedness are the issues of traceability

and recall insurance. Traceability is inherently liked with

supply chain integrity. Despite the fact that our food supply

is safer than it is ever been, the general public perceives the

contrary. Tied to the need for integrity in the supply chain

are concerns about ethical employment practices (Hutter,

2004).

More specifically, poorly trained employees may

accidentally contaminate food products. Or worse, poorly

treated employees may intentionally do some sort of

damage to the product. This can be exemplified by the

recent PETA finding in a chicken processing plant.

Disgruntled employees, who were angry about having to

work overtime to process a new batch of chickens, were

filmed abusing the animals. There is also a growing concern

that non-English speaking employees will not be able to

receive proper training. Although there is quite a bit of

Farming Co-OpProcessing

Manufacturing(Food Processors)

Consumer Interface(Supermarkets, Vending

Machines)Consumers

Transportation(Farmers)

Transportation (Third-Party

carriers)

Transportation(Third-Party

Carriers)

Purchase

Raw Farm Produce Clean Farm Produce Processed Packaged Foods Processed Packaged Foods

Fig. 4. Processed foods supply Chain—a simplified view.

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750 743

Spanish training material, there are no provisions for more

recent immigrants from Somalia or Russia.

Leading retailers are driving the global food safety

initiative (GFSI). They are attempting to develop a global

model, complete with standards, benchmarking, prevention

processes and consumer education. One of the most

important elements of supply chain integrity is determining

where the process breakdown occurred. There are several

different, yet equally important links in the supply chain. If

one breaks, there is an unavoidable domino effect. Specific

stages of the processed food supply chain are illustrated in

Fig. 4.

The following are examples of where the processed

food supply chain could be jeopardized; farming, co-op

processing, transportation, manufacturing, point of sale or

consumer interface. During farming, a supplier has

minimal control over operations. Following the farming

phase, is the co-op stage, where a cooperative could

potentially wash farm produce with contaminated water.

The next phase, transportation, poses one of the largest

risks of damages caused by third party carriers. Tempera-

ture controlled products are most vulnerable at this stage.

Carriers can either be negligent in terms of temperature

abuse, or refrigeration units can fail. Carrier risks are most

pervasive in international shipping. As previously dis-

cussed, manufacturers can cause contamination of ingre-

dients in their plants during processing of the finished

goods. Traceability becomes especially precarious once

product has reached the point of sale. At this stage, the

product is no longer palletized for easy batch identification.

Finally, the vending industry has to be concerned with

consumer interface. As many of us have witnessed,

vending machines carrying perishable products and soda

fountains are not always the most hygienic of devices

(Hutter, 2004).

The most cutting edge technology for supply chain

integrity and traceability is the radio frequency identifi-

cation (RFID) tag. These are electronic tags (bar codes)

on individual products that allow a manufacturer to have

an audit trail of every single moment of the retail unit’s

life, monitoring correct handling, storage, transportation

and delivery. The tags also have the capability to

monitor temperature controlled product on a per unit

basis, hence allowing manufacturers to find out exactly

where a temperature abuse occurred (Hutter, 2004).

Thefollowingare examplesofcompletedisasters thatcould

have been avoided if tracing capabilities had been in place;

† US based Pilgrim Foods had a massive recall of Perrier

water due to benzene contamination of one production line.

The once successful company fell prey to a takeover.

† Coca-ColahadtoremoveallcansofCokefromstoresacross

Belgium and France when traces of a wood preservative

were found on the exterior of some cans, again, from one

production line (Bowers, 1999).

Tracing capabilities would have enabled in both cases of

recalls to only withdraw products that came from one

production line instead of pursuing massive recall of entire

quantity of product, major part of it was not produced on the

specific production line.

Although most manufacturers are years away from full

implementation of RFID, many are currently utilizing WMS

to meet their tracking needs. WMS provides reliable, real-

time inventory and inventory level accounting information. It

is an essential tool for compliance with government

regulations and auditing. Additionally, WMS systems are a

must have when facilitating recalls which occur before

products reach their point of sale (Trunk, 2003).

The EPA, FDA and SEC are three government agencies

very interested in the use of WMS in the food industry. The

Securities and Exchange Commission (SEC) is especially

vigilant with their increased emphasis on integrity of sales

practices by all manufacturers. In the food industry, it is

absolutely essential to have a WMS system in place, so that a

recall can be managed as quickly as possible. WMS

capabilities include pallet lot code identification, as well as

information on every worker and transportation provider who

touched the product. Although the previously mentioned

HACCP systems, devised by the federal government were

intended for meat, fish and poultry processing plants, most

other food manufacturers are using HACCP, in conjunction

with WMS to manage their production and distribution

processes (Trunk, 2003).

Many food processors have legitimate concerns about the

next major terrorist attack occurring through our food supply.

Therefore, they are becoming increasingly willing to adopt

the aforementioned formal practices.

In July of 2004, the French mega-retailer Carrefour

presented a major lecture to the IAMA 14th Annual World

Food and Agribusiness Forum. It was refreshing to read

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750744

the material they presented, because it took the focus off of

the manufacturers and retailers for a moment, instead

focusing on responding to consumer’s needs. More specifi-

cally placing emphasis on consumer safety first, conducting

all activities honestly and meeting the consumer’s newfound

expectation of product traceability.

2.5. Recall insurance

In the event of failure in the area of traceability, it is

important for retailers to understand the availability and

importance of recall insurance. There are a number of

categories of recall insurance exist. However, the most

common policies cover malicious product tampering and

accidental contamination.

As many will never forget, in 1982 Johnson and Johnson

had to pull 31 m bottles for Extra-Strength Tylenol after

seven people in the Chicago area died from cyanide laced

tablets (Bowers, 1999). A large percentage of consumers did

not touch a bottle of Tylenol for years after the incident. This

horrible incident is still very vivid in the minds of consumers

22 years later. It is safe to assume that a fair number of

consumers don’t use the Tylenol as a result. The impact of

this recall was so significant, that the negative brand image

that remains in the subconscious of many potential

consumers today.

The only positive impact of this horrible incident was the

implementation of tamper resistant packaging of over the

counter medications. Clearly, this tragedy led to important

progress in area of consumer safety. This simple, relatively

inexpensive preventative measure could have saved seven

human lives. Not to mention, serious financial damage and a

permanent impact on the sales of this product for Johnson and

Johnson. Potentially, it will be two generations before those

that remember the scare will no longer represent potential

consumers. More specifically, many children that were 10

years old in 1982 have a vivid memory of the terror

surrounding the recall. A good percentage of them will live to

be at least 80 years old. This point illustrates that the impact

of this recall could last as long as 70 years.

Insurance providers are becoming increasingly aware of

the need for recall insurance, as many companies have been

put out of business by recalls. Over the past 5–10 years,

insurance providers have increased their liability limits from

an average of $100,000 to an average of $1,000,000.

However, some policies are written for as much as

$25,000,000. Some of the allowable claims include the cost

of removing product from retailer’s shelves and the cost of

publishing advertisements to inform the public of the recall.

An estimated 80% of companies currently carrying recalls

insurance are food processors. In addition to direct financial

losses, insurance providers recognize the severe damage that

can be done to a company’s reputation. This damage is felt by

third parties that in reality, are not at fault. This has opened

the door to a yet another necessary category of recall

insurance for image and reputation (Bowers, 1999). One good

example of this reality for third parties is the damage done to

Ford Motor Company’s reputation after their Explorer model

was found to have defective Firestone tires.

Despite the increasing demand for recall-related insurance

products, the supply is increasingly scarce. The dramatic

increases in high-profile food recalls, especially in the meat

and poultry industry, have caused many providers to abandon

the market. Toronto based Hudson Foods, who conducted the

biggest meat recall in the history of the US in 1997, was

unfortunately uninsured. What coverage food processors are

able to find is minimal and comes at a very high premium.

Historically, insurers have tended to look at recall insurance

as low frequency, high severity coverage. According to Ed

Wu, Senior VP of Marsh’s, Inc., ‘At that time, they

underwrote policies inexpensively to gain market share. So

when losses started coming in, it was full-limit losses because

a recall, when it occurs, is a very large loss’. However,

according to Mr.Steves, VP of wholesaler Swett Crawford

Group in Chicago, there are still providers available.

However, these providers tend to pay careful attention to

risks and quality control of a particular company before

deciding which policies to underwrite. The current trend is

for larger companies to forego the insurance and risk

exposure. However, many smaller companies feel they

need it, despite the high cost. This is understandable, because

as previously mentioned, a small company could quickly

become at risk of hostile take over in the event of a recall. The

insurance industry has come up with an alternative product

for companies, a finite risk policy that would help them

manage the cost of a recall over several fiscal periods. More

often, companies are choosing to invest in supply chain

improvements that will significantly reduce the likelihood

and severity of a recall, rather than purchasing costly

insurance polices (Roberts, 2002).

When a recall inevitably does occur, the most important

response for companies is proper execution and management

of the recall process. Despite continuously advancing

technology and processes that will help in the avoidance of

product recalls, the number of recalls is expected to increase

over the next several decades. The reasons for this are;

increasing legislation, technology driven design changes,

higher safety expectations, poor quality control in certain

manufacturing segments, and the increase in consumer

lawsuits (Mateja, 1987).

2.6. Risk management ingrained in corporate philosophy

It is essential that risk management is an area embraced by

the very top management of an organization, regardless of its

size. It is commonly acknowledged by business leaders that

risk management must be integrated into corporate philos-

ophies. One example of how the actions of top management

can have a tremendous impact on the outcome of a food recall

is the Odwalla, Inc. recall in 1996. Odwalla, Inc. is a

California based organic foods company. One of its juice

brands was contaminated with E. coli, resulting in the death

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750 745

of an infant and serious illness of 60 other adults. Within

hours of the news breaking, product sales dropped 90%. A

food recall is an especially precarious situation for an organic

foods company whose entire brand image is based on

goodness and purity. Chairman and CEO, Steve Williamson

took contentious and prompt action, by restructuring the

company within hours after the recall went public. As the

leader of an organic foods company, he took a rather

unconventional approach by informing the public first. In

addition to that, he kept the public informed of the immediate

changes taking place within his company to safeguard

consumers from a repeat occurrence. These measures

included hiring two full time safety officers, with the sole

responsibility of ensuring product safety. He determined that

some processes had to change, after measuring the risks and

rewards of producing fresh juice. Today all juices are flash

pasteurized. The end result is that the company is much

stronger than it was prior to the recall and sales have

increased tremendously (Risk Management, 2000). The

actions of Williamson are a perfect example of how risk

management practices should be conducive to a company’s

corporate philosophy. Although his actions were admirable,

they should not be generalized as a desirable course of action

for all food processors. The level of exposure of a given

company must be considered, as well as the ramifications for

companies with multiple product lines. Fundamentally, all

companies should conduct a recall in the most ethical

manner, taking into consideration legal and regulatory

matters before going public. The key to reaching the public

quickly is once again having a crisis management team in

place so that all the actions secondary to consumer safety are

set into motion very quickly.

2.7. Recall process and types of recall

For larger companies with much higher exposure, the

order of notification is generally as follows (Mateja and Pete,

1987);

† Notify the legal department and the board

† Notify employees

† Notify the appropriate government agencies

† Notify shareholders and distributors/retailers

† Notify consumers

Before implementing a recall it is important to understand

the types of recalls that exist. A recall can be voluntary, at the

discretion of the food manufacturer, or involuntary, forced

upon a company by a government agency, such as the Food

and Drug Administration (FDA). According to public

relations consultants, voluntary recalls are becoming the

norm. It used to be that most recalls were involuntary and

generally imposed by the government of the US (Blackwell,

1990).

It is also important to determine the necessity of a recall

and to understand what types of recalls exist. Recalls are

Class I, Class II or Class III. Each category is defined as

follows;

† Class I: the most severe classification. In this category,

there is a probability that use of, or exposure to the

product will cause serious, lasting adverse health

problems or death.

† Class II: this is the next level of severity, where use of or

exposure to the product may cause temporary health

consequences. However, there is a very remote change of

serious consequences.

† Class III: this is the least serious type of recall. It generally

does not involve any risk of adverse health consequences

(Doering, 2002).

Common sense dictates that Class I and Class II recalls are

urgent and very necessary. Class III recall decisions might be

based on thing such as concerns over brand image due to

something like packaging graphics errors.

In 2002, the FDA announced that it would begin

automatically classifying allergen-related food recalls as

Class I. The rule of thumb is that anytime a labeling error

occurs, not listing the following, a Class I recall will be

mandated; peanuts, tree nuts, milk, eggs, soy, crustaceans,

fish and wheat (Food Engineering, 2002).

The next area of focus will be the proper execution of

recalls in export markets. Therefore, we will not provide any

further details on how a recall is executed when removing

products from US store shelves. Before discussing export

markets, we will first review a few regulatory and legal points

for the food industries within the US and Canada. These

points are important considerations for exporters.

The first thing to be sure of when dealing with a food

recall, is that word travels quickly. This is especially true in

the foodservice and restaurant industry, where third parties

may find themselves liable. Generally, within 48 h or less,

vendors will have warned chefs, menu planners, school

systems, airlines, cruise ship fleets, stadiums and the like

about a food safety issue necessitating a recall. This industry

standard of fast action is evidence of the fact that the

tightening of regulations by the FDA in the mid-1990 s has

been effective (Prewitt, 2004.). Even before the general

public is formally notified, thousands of people will hear

about a recall by word of mouth. Unlike many other

industries, there is no tolerance or acceptable level for recalls

in the food industry. One case of recalled product is one too

many. Most everyone in the groups mentioned above will tell

at least a few people, who will in turn tell others. It is

important that food manufacturers don’t delay in making a

public announcement.

Another important consideration is proper management of

the media coverage surrounding a recall. Many larger

companies’ Public Relations departments have established

relationships with the media that can be very helpful in

respect to the timing of the release of information. Most

often, smaller companies are not as fortunate.

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750746

It may seem sad, but the media has an increasing appetite

for food safety disasters. As food safety is such an important

topic for consumers, they are often waiting for the next story

to break. This is where a prepared crisis management team

will come into play. The team must have formal procedures

in place, including a designated spokesperson who will

handle media calls. There should be a recall statement

approved by top management. One of the most important

things to remember is to never respond to a food recall

situation with ‘No Comment’. Tera Johnson, a marketing

expert in the food industry offers some very good alternatives

to a ‘No Comment’ response, including;

We’ve just learned of the situation and we’re getting more

information.

All our efforts are currently directed toward getting the

situation under control.

We’re preparing a statement on that now. Can I fax it to you

in about two hours?

Johnson also points out that it is best to avoid speculations

about the cause, allocation of blame, financial estimates of

damage and ‘off-record’ comments (Berry, 1998).

Given the tremendous damage that can be done to a

brand’s image in a food recall, it is surprising to learn that the

majority of food and beverage companies do not value their

brand assets on a balance sheet. A Lloyd’s of London survey

of the 50 most influential companies in the market had some

dramatic findings. Sixty-nine percentage of the respondents

considered their brand name to be their most valuable asset.

However, only 39% listed on their balance sheet, due to its

intangible nature (Nickson, 2000).

When a company expands into global markets, the careful

marketing strategy that has gone into their domestic business

must be applied in a variety of international contexts. An

understanding of consumers’ worldwide will have a

tremendous impact on the successful execution of a product

recall in an export market. The next section will focus on

Table 1

SWOT analysis of HACCP or RFID system used by processed food manufacture

HACCP

Strengths Long history

Understood among experts

Prevention of food contamination by ident

potential hazard in the food processing ch

Weaknesses Seen as bureaucratic

Often misunderstood

Opportunites Existing systems could be improved upon

Re-training could occur

Threats Eventual obsolescence in the wake of imp

technology

a few specific areas; global branding, global consumers and

international recall regulatory environments.

2.8. Information on various international regulatory

environments

Below, we have included first-hand information on five

different international regulatory environments. The infor-

mation gathered during informal interviews conducted with

Quality Regulatory Management of a large global food

company (Min, 2004; Chan, 2004; Deferrari, 2004; Jefferies,

2004). The questions posed to the respondents and their

answers can be found in (Table 2). While reviewing the

information provided by the respondents, it is interesting to

note how the information is reflective of the socio-political

situation and cultural influences in each of the countries.

In addition to this snapshot of worldwide regulatory

environments, it is also important to consider the perspectives

of the global consumer and the important concepts behind

global branding.

3. Challenges faced by exporters in global branding

Exporters face a specific challenge in this area, as brand

loyalty and consumer trust levels are nowhere near as strong

as in the US.

A recent study of global brands found that most global

consumers associate American brands with quality. At the

same time, global brands are viewed with much more

intensity than locally produced products. In particular,

American brands are seen as very powerful, able to do either

very good or very bad things for the consumer. In general,

global consumers consider three factors when making a

purchasing decision. These factors are; quality signals, global

myths and social responsibility (Holt et al., 2004).

Quality signals refer to the consumers’ perceptions of a

brand simply because of its origin. Global brands are almost

without question seen as a better value due to higher quality

standards. Therefore, consumers are willing to pay more for

r

RFID

Most advanced technology available

Able to track units of sale to the cash register

ifying

ain

Product traceability

‘Bugs’ may take time to work out

In plant control capabilities not as clear

Could change the face of retail

Potential to apply direct consumer tracking

in the event of an emergency

roved System crashes

Hacking

Loss of data

Table 2

Interview summaries with global quality regulatory operations experts

Respondent origin How are recalled food products disposed of when

contaminated?

Is there a re-allocation

channel for non-contaminated

products?

Please provide further

information about food

recall management in your

region

Latin America Most countries have no specific government

requirements

No specific regulations Global Food Industry sets

the standard

Any existing regulations are very vague and unspecific If there is no risk to con-

sumer’s health or the brand

image, companies might

choose to donate products

Industry leaders are based

in Europe and US. Those

are the standards aspired to

Recalls are highly controlled by the companies If global operations, recall

policies are the same in

every country

Microbiologically contaminated products are

mechanically destroyed and disposed of with the local

trash

Dangerous contaminants that pose a threat to the soil

are burned, the ashes are disposed of in designated

places

China All food imports are tested at customs No reallocation channels for

recalled products

Chinese consumers have

very little knowledge of

food safety issues and also

product recalls

Problems are proactively sought A public health risk, such as

allergens is the only reason a

recall would ever occur and

the product would be

destroyed under government

supervision

Government is becoming

more interested in the issue

of allergens

Recalls are forced by the government for the smallest

infraction

There are no specific regu-

lations surrounding food

allergens

Government issues public notice Some standards have been

set by the alcohol industry

and retail food chains in

relation to recall

Government must observe product destruction

If product have gotten into the market, companies must

direct the recall and product destruction, under close

government supervision

European union An operational framework for product recalls is

defined in the European Union Food Safety Regulation

effective January 1, 2005

Consumers are allowed to

return the products to point of

sale

Strong traceability mech-

anisms are clearly key to

dealing with a food recall

in the most efficient and

effective manner

The operational framework can be found at: http://

europa.eu.int/comm/food/food/foodlaw/guidance/

index_en.htm

Discount stores exist for

products that are slightly

defective

Gaining consumer trust by

demonstrating trans-

parency in the food supply

chain

Hong Kong Well defined and publicized government procedures Consumers are allowed to

return the products to point of

sale

The Hong Kong Food and

Environmental Hygiene

Department will work with

the company to guard con-

fidential information

whenever possible

Company must adhere to government requirements,

while carrying out their company’s own policies

When no public health risk

exists, government

encourages reprocessing or

reallocation of recalled items

Post-recall reporting is

required no more than 2

months after recall is

initiated

See Hong Kong Food and Environmental Hygiene

Department (www.fehd.gov.hk/safefood/safe-recall.

html)

Very similar to US FDA policies and procedures(continued on next page)

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750 747

Table 2 (continued)

Respondent origin How are recalled food products disposed of when

contaminated?

Is there a re-allocation

channel for non-contaminated

products?

Please provide further

information about food

recall management in your

region

Australia Well defined and publicized government procedures No formal reallocation

channels

Companies are required to

have a recall plan in place

that follows government

guidelines

Government agency FSANZ and the State Public

Health Department determine make decisions about

recalls

Discount stores exist for

products that are slightly

defective

Plan must be approved and

followed if recall occurs

Procedures can be found at www.foodstandards.go-

v.au/recallssurveillance/foodrecalls/index.cfm

Very rare that a recalled item

would be put back into the

market

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750748

them. The average global consumer seems to be very

impressed with the product innovations and technological

advances not often seen among their own countries’

manufacturers. Global myths involve brand image and a

sense of worldwide connection to others like oneself around

the globe. It is almost a subconscious sense of belonging to an

elite club. Social responsibility refers to the fact that global

companies are held to a much higher standard of

accountability than local manufacturers (Holt et al., 2004).

The most advanced global consumers are often attentive

watchdogs for consumer safety, public health, worker rights

and the environmental issues. It is not surprising that food

companies in particular are under rigid and constant scrutiny.

4. Analysis of product recalls management

Upon considering the information provided, two things

are quite clear. First, hazard identification systems (such as

HACCP) and bar code tracking technology (such as RFID)

can greatly reduce the number of recalls and their subsequent

impact in the processed food industry. Second, imported

processed food’s brand names can become seriously

compromised in export markets in the event of a food recall.

Through the use of the SWOT analysis and Porter’s Five

Forces model, we provide qualitative analyses of issues

surrounding the aforementioned points. Furthermore, some

prediction by experts suggests the potential reduction in

reported recalls through the use of recommended preventa-

tive HACCP system or product traceability system based on

RFID technology.

The SWOT analysis involves a grid that is used to identify

the following: Strengths, Weaknesses, Opportunities and

Threats. Both hazard analysis and critical control points

(HACCP) system and radio frequency identification (RFID)

technology approaches used by a processed food manufacturer

are reviewed (Table 1). SWOT analysis provides framework

for quickly isolating the key issues for a business proposition.

The Porters Five Forces model involves a review of

market forces that can jeopardize businesses. We will apply

this model in the context of export markets faced with a

product recall. Porter’s model considers the following

factors: internal rivalry, buyer power, supplier power, threat

of entry and substitutes and complements. All of these factors

are of utmost importance for food processors in export

markets.

Porter’s Five Forces model provides a framework for

analyzing implications of a food recall in an export market

through a deeper look at each of the five factors (identified

above) for the processed food industry. In essence the

analysis given below enables improved understanding of how

effectively a given brand would withstand the product recall

security in processed foods industry. In other words, in the

event of a recall, how strong is the market presence for the

given brand and how jeopardized would that brand be.

Internal Rivalry in export markets of the processed food

industry rates medium. There are a fair number of local

companies that have attempted to replicate American

products. However, the more diverse companies’ product

portfolio, the better off they are. There are certain niche

products that are desirable and presently can only be fulfilled

by the US suppliers.

Threat of Entry in export markets of the processed food

industry rates high. Processed food companies invest a

tremendous amount of money into marketing and develop-

ment of brands. Furthermore, each product must be registered

with the importing country’s government. This registration

process can take months, and be very costly. At times products

are even rejected, rendering extended resources useless.

Supplier Power in export markets of the processed food

industry rates high. Compared to local food companies, an

importer generally has much greater capital resources.

Importers also often hold advantageous positions in foreign

markets because their investments are welcome by the

government and their products are desired by consumers.

Buyer Power in export markets of the processed food

industry rates low. Most processed foods imported into a

country are beyond the reach of large segments of the

population. They are often much more expensive and most

often bought by the upper and upper-middle classes.

Table 3

Potential reduction of recall numbers using HACCP plan

Percentage of recalls

due to packaging errors

1999–2003 2004 2005 2006 2007 2008 2004–2008

68% of 1307 888 assumes

average of 222

recalls per year

133 80 48 29 18 308 assumes a 40%

annual improve-

ment over 5 years

S. Kumar, E.M. Budin / Technovation 26 (2006) 739–750 749

Substitutes and Compliments in the export markets of the

processed food industry rates medium. Some substitutes exist

as previously mentioned. Compliments are more prevalent,

as consumers often flavor foods to meet their local tastes. For

example, canned corn is often put on ice cream in parts of

Southeast Asia.

According to Porter’s theory of competition, a product

can be competitive in a market if the price is high and the

product is differentiated. This is applicable in the

processed food industry if company with a broad and

innovative product profile is selling their products at

premium prices.

To understand potential impact of recommended pre-

ventive measures on product recalls, 55 leading experts in

food processing industry were interviewed for this study.

Their independent consensus prediction calls for a minimum

40% annual reduction rate in product recalls over the next 5

years (2004–2008) if recommended preventive measures are

adopted by the industry. Table 3 is based on experts’

projection and it shows number of packaging related food

recalls dropping (at 40% per year) from 222 in 2003 to 18 in

2008 with the adoption of preventive measures.

5. Findings

When determining best practices for recall manage-

ment, decision should be long term and cross-functional.

Crisis prevention should be just one of many reasons for

investing in technology and connecting to the consumer

base.

Technologically, the most advanced system possible is

recommended. Investing in RFID technology is very

costly. However, it is an excellent long-term capital

investment. Most processed food exporters are part of

companies that have a substantial domestic market. The

benefits will be immediately realized domestically, and

should eventually be able to be adapted to export market’s

points of sale.

Good public relations strategies are critical to success-

ful recall management. Connecting to consumers in export

markets has obvious cross-functional benefits in terms of

marketing. Whenever a food company enters a new export

market, there are generally sampling and promotional

events taking place to introduce consumers to the product.

Our suggestion is to take this one step further. For

example, why not hold a soccer game, followed by

a community meal featuring the products? It is advisable

to make some sort of investment in the export

communities abroad. That investment might be a token

gesture, as described above, or a more significant step,

such as making charitable contributions in the area. It is

important to find every opportunity possible to show the

consumer that you care about people, not only profits.

Once a company begins to gain a good reputation through

regular demonstrations of good faith, consumers are much

more likely to remain loyal in the event of a recall.

6. Conclusion

Product recalls in the processed food industry are just about

the worst type of recall that exists. There is nothing more

personal to a consumer than what they physically ingest.

Emotions can be very intense when a recall occurs. In the

worst instances, consumers can feel betrayed to the point of

never purchasing another product made by your company.

All the implications are very serious, both in the short and

long-term.

This study has only scratched the surface of the all

encompassing topic of product recalls. Each area of

information provided is a study unto itself. Using the

information provided as a foundation, an exporter of

processed food products should be able to examine their

current practices, and benefit from the applicable elements.

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Sameer Kumar is a Professor and Qwest Chair in Global Communi-

cations and Technology Management in the College of Business at the

University of St Thomas, Minneapolis, Minnesota. Major areas of

research interests include optimization concepts applied to design and

operational management of production and service systems where issues

relating to selection and deployment of technologies, innovative

approaches in new product development, supply chain management

and capital investment justification decisions are also considered.

Erin Budin works as an Export Services Specialist for General Mills

International. She has been with the company since June of 1999. Erin

has a BA in International Studies and Anthropology from Hamline

University in St Paul, Minnesota.