The Cost of Food Recalls: 2022

Food recalls are a risk for food companies. Not only do damaged goods pose a health risk to the public, but the cost of food recalls can be astronomical. Businesses that are unprepared to deal with food recalls can quickly be overtaken by the process. Therefore, it is important to understand the cost of food recalls and how you can better prepare your company for any potential situation. Here’s what you need to know.

Average Cost of a Food Recall

Depending on the severity of the recall, such as how widespread it is, how many products are being recalled, and how much harm the product may have caused the public, the cost of a food recall may change drastically. According to a 2011 publication by the Consumer Brands Association, the average cost to a company for a food recall is around $10 million.

The final impact of a food recall often has more to do with the fallout of the recall rather than the recall itself. After news of a spoiled product reaches the public, consumers will likely avoid that brand for longer than necessary out of fear. This bad publicity will hurt future profits while companies will still be paying the cost of lost product and the man-hours involved in the recall itself. 

The Cost Breakdown of Food Recalls

Several factors go into the cost of a food recall. Here is a brief breakdown of the process, as well as the fees involved.

Public Relations – During a food recall, you will need to increase public relations to communicate the issue as well as what the company is doing to resolve it. 

Legal Teams – While your company likely already has a legal team assembled, the costs associated will go up as you receive counsel on how to proceed through the recall process.

Technical Help – Technical help, such as a temporary call center to help field customer calls, will need to be set up. The initial process of this alone can easily cost thousands of dollars.

Lost Revenue – Not only is the recalled product no longer good for sale, but the fallout related to a recall will drastically affect a company’s revenue going forward. Once your reputation is hurt, it can be very difficult to restore the faith of the public.

Wasted Man-Hours – Not only will employees be tied up in dealing with the recall, but they will have been paid to assemble and ship products that you’ll never see any return on, further hurting your bottom line.

The Cost of a Major Food Recalls

While the average cost of a food recall is estimated to be around $10 million, the size of the company and the total units recalled can quickly increase that amount. Take, for example, the recent Jif peanut butter recall by Smucker.

Their recent quarterly earnings report shows that between manufacturing downtime, consumer refunds, and the recovery of contaminated products, the company could easily end up paying around $125 million. 

A food recall doesn’t have to mean the end of your business. Product recall insurance is the best way for companies like Smucker to protect against liabilities involved with a contaminated product. Product recall insurance covers a multitude of costs, including loss of sales, equipment shutdown, loss of product, and much more.

Reach out to Coughlin insurance today to find out how product recall insurance can help protect you and your business from the potential consequences of a product recall!

Need business insurance? We’ve got you covered!

At Coughlin Insurance Services, we believe that our customers should be valued and taken care of. We aim to provide quality service and meet the needs of our clients by providing businesses, especially those in the food industry, with the insurance they need to protect their assets. If you’re a business looking for insurance, don’t hesitate to reach out for a free insurance quote today!

Leave a Comment