Product recalls in the food and beverage industry often result from errors in labelling and packaging. These errors can severely damage your business, often resulting in financial losses and reputational harm.
With regulations increasing and economic pressures rising, the need to ensure due diligence in your processes and regularly review your policies and procedures also increases.
Allergen Mislabelling and Recalls
In Australia, mislabelling is a significant cause of food recalls, with allergen-related errors being an important factor. Indeed, according to Food Standards Australia New Zealand (FSANZ), allergen mislabelling was the leading cause of recalls in 2023.
Staying up to date with labelling standards is crucial, and laws such as Natasha's Law in the UK (opens a new window) are increasing the focus globally on clearly labelling allergens.
Rapid increases in production to meet demand or a business experiencing growth in new markets or sectors can compromise quality control, heightening the risk of a recall.
A recent case involving a premium Australian food manufacturer experiencing a significant food recall due to mislabelling resulted from a failure to declare allergens on its labels. This could have led to potential health risks for consumers and underscored the importance of accurate labelling and robust risk management strategies in the sector.
Liability in Product Recalls
Product recalls are often costly and can result in reputational harm/damage. Due to the complexity of supply chains and raw ingredient sourcing, determining responsibility can be complex, especially if third-party labellers are involved. Therefore, a strong risk management plan encompassing exactly where ingredients come from, how they are stored, and how they are recorded on labels is vital to identify issues and prevent future occurrences.
Risk management to prevent labelling errors
To minimise the chances of mislabelling, implement a comprehensive strategy:
Label review process: Establish a thorough review process for labels before production, involving multiple checks and signoff from key personnel. Consider utilising matching software to detect errors early.
Third- and fourth-party supplier arrangements: Decide whether to produce labelling in-house or outsource it. Ensure suppliers understand how ingredient or packaging changes affect labels.
Update equipment: Regularly maintain labelling equipment to prevent faulty prints and missing information.
Prepare for promotions: Properly plan for promotional campaigns to avoid rushed production that may lead to labelling mistakes.
Reduce human error: Regularly train staff on labelling best practices and provide adequate oversight to prevent fatigue-related errors.
Stay updated on regulations: Monitor changes in labelling laws, particularly allergen regulations, as updates from FSANZ and other regulatory bodies may impact your operations.
These measures can be costly, particularly for small businesses. However, they are recommended in conjunction with robust contracts with suppliers, which may provide some protection if they are at fault.
Insurance for product recalls
The reality is that despite the implementation of tight control and precautions, errors do occur, which is why insurance protection should be considered to augment your risk management framework.
Product recall insurance can provide significant coverage to cover the costs of the recall itself. Still, it can also extend to help address business interruptions (loss of income) and resultant reputational damage. Many policies also provide up-front risk management support to assist with preventive risk management and mitigation measures.
In summary, labelling errors pose a significant risk to food and beverage businesses. By implementing robust processes, providing staff training, and securing balance sheet protection through insurance, you can reduce the likelihood of a recall and mitigate its impact if it occurs.
The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. The contents of this publication are not intended as a legal commentary or advice and should not be relied on in that way. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action based on the content in this publication.
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