Supermarkets need to have a plan of action if their private label products are subject to a recall.
By Katherine Cahill and Bill Harrison
Supermarkets have developed powerful brands, characterized by strong reputations, broad customer loyalty and the ability to engage in premium pricing.
Although brand loyalty can translate into full shopping carts and profitability, it also carries an increased responsibility to ensure product quality. For retailers, the risk is high: Just one contamination incident in a single location—whether it involves a branded product, a prepared meal, or anything else carrying the company’s name—can reduce foot traffic in multiple stores, a region, or even nationwide.
Supermarkets need to conduct a thorough review of all risks, take a hands-on approach to supplier and contract management and establish a comprehensive product recall infrastructure.
Preparing for a recall should begin by clearly understanding the risks to the organization’s reputation and revenue in the event of an incident. For supermarket operators, this begins by answering the following questions:
- Are your contracts with suppliers and co-packers worded clearly, with recall responsibilities plainly laid out?
- Do you have well-defined quality control requirements?
- Is there an audit schedule for your suppliers and co-packers?
- What are your traceability capabilities?
- Is your crisis management team prepared?
Retailers should also consider tailored product contamination insurance policies, which can respond to a variety of contamination incidents.
Don’t outsource your reputation
Any retailer that outsources the manufacturing of store-branded products should consider a few important questions, including:
- Who manufactures your store-branded products?
- Who are your manufacturers’ suppliers? How are these firms qualified?
- In the event of a contamination incident, can you identify the supplier of the contaminated ingredient? Can your suppliers reimburse you for loss of profit and rebranding costs? Is the issue clearly defined in your contracts?
•What quality assurance and food safety procedures are in place at the manufacturing facility? How often are these processes audited?
Be prepared and be proactive
A comprehensive product recall infrastructure should be in place before a supermarket product recall or contamination incident occurs. This infrastructure should include:
Product recall task force: A task force should represent appropriate departments and disciplines and include defined leadership, roles and responsibilities and up-to-date contact information.
Investigation procedures: There should be written procedures to follow, processes for identifying a problem and conducting a risk assessment and access to independent experts.
Communications: A crisis communications plan should include having a trained media spokesperson available, along with sample documents such as direct mail/email notices and a press release prepared in advance and procedures to communicate with employees, customers and regulators.
Tracking: Procedures should be in place to trace products to the end consumer, including easily identifiable traceability markings.
Compliance: Clear understanding of regulatory compliance requirements is critical and should include the necessary training for task force members and other key employees.
Phone centers: Quick activation of phone center capabilities—often in multiple languages—requires development of scripts and training protocols.
Logistics center(s): A logistics center is essential to collect, redistribute and segregate products in a warehouse and to produce status update reports to comply with regulatory and insurer requirements.
Product disposal plan: Options for appropriate product disposal after a safety-related recall can include returning the product to the manufacturer and/or destroying an unsafe product.
A product recall poses a significant challenge for any organization, especially those in the supermarket and grocery business. However, not every incident must turn into a crisis. Companies that are well prepared can meet the challenge head-on, protecting their consumers and their brand integrity.
Katherine Cahill is global leader of the product risk practice at Marsh Risk Consulting and is based in New York. Bill Harrison is leader of the product recall practice for Marsh, Inc. and is based in Princeton, N.J.