The number of food recalls has risen over recent years, with the exception of a decline in incidents through the coronavirus disease 2019 (COVID-19) outbreak. Such recalls can be a costly business. The resulting disruption in operations while managing the recall, the direct cost of recalling stock, and the indirect costs caused by the knock-on effects, such as reputational damage, can result in significant long term financial losses for a company from loss of sales.
The average cost of a recall to a food company is around $10M in direct costs, including brand damage, lost sales, response team set-up, press activities and other fixed costs, according to a joint U.S.-based study by Food Marketing Institute and the Consumer Brands Association (formerly the Grocery Manufacturers Association). Analysis of product recall insurance claims in the food and beverage sector by Allianz Global Corporate & Specialty shows a similar experience with the cost of the average large claim around $9.5mn (€8mn).