By Randy Fields
The tipping point on food safety risk has been reached for retailers.
We have increasingly seen food safety issues negatively impacting retailers in recent years, from the Peanut Corp. of America’s salmonella outbreak in 2008 to the Jensen Farms listeria outbreak in 2011. Salmonella-tainted eggs in 2010, e. coli in strawberries in 2011 and listeria in Hispanic cheese this spring have all caused consumer deaths. These incidents, combined with dozens of others during the last six years, have killed more than 40 people and made several thousand more sick.
That human casualty list is bad enough; the brand reputation impact has been almost as scary.
Retailers saw cantaloupe consumption take a nosedive after the Jensen Farms case, which was one of the worst food borne illness outbreaks in U.S. history as measured by the number of deaths, and they are only now seeing levels similar to those before the incident.
The farm itself is bankrupt, so lawyers went after the companies that sold the disease-ridden cantaloupe—retailers. Now those retailers are settling with the plaintiffs.
This is a critical turning point for retailers. They are being sued for millions of dollars and are settling those suits before going to trial because juries are likely to side against them. Those juries believe, right or wrong, that retailers should know exactly where all of their food comes from. Anyone who has been in the grocery business more than a month knows they do not.
Some other recent statistics relating to the state of food safety documentation between retailers and suppliers indicate it is worse than anyone thought:
•38% of insurance certificates are missing or expired;
•Of those submitted, 24% did not meet the requirements (typically a dollar value minimum);
•47% of Hold Harmless agreements are missing or expired;
•47% of required third party audits are missing or expired.
This does not paint a picture of suppliers who are on top of their business practices and has to make retailers wonder about how ‘on top of’ their food safety operations they are. And, by virtue of the recent out of court settlement by Walmart on the Jensen Farms lawsuit, retailers are now responsible for everything they sell.
Dr. David Acheson, former chief medical officer at the USDA Food Safety and Inspection Service and CEO of the Acheson Group, a food safety consultancy, recently wrote about the increasingly litigious nature of the food safety issue. The crucial point in Dr. Acheson’s blog is “…the message is clear—the whole supply chain can be sued; and if retailers are the last supply chain player left standing because the manufacturer goes bankrupt after a major recall, the retailer may be the last deep pocket left to go after.”
In addition to the potential lawsuits that threaten to destroy any brand that becomes entangled in a recall, it is expected that retailers will have a new round of federal requirements to implement after the FDA issues its regulations for the Food Safety Modernization Act. These rules are expected to obligate retailers to document where all product is coming from and where it is going. They will need to have records of this information available for review by the FDA and other government bodies when food borne incidents happen.
The good news is that there is a lot retailers can do to reduce their brand and financial liability and comply with anticipated government regulations. Technology and best practices exist to help them not only prevent most outbreaks but quickly limit the damage when they occur. There are technologies that enable grocery wholesalers, supermarkets, drug stores, manufacturers, foodservice facilities and others to manage risk through product tracking and tracing in the extended supply chain. In addition, there are technologies to address the market need for receiving, storing, sharing and maintaining regulatory, audit and insurance documentation all in one location.
The time for retailers to act is now. They must address food safety as an enterprise challenge that will negatively impact the company’s reputation and bottom line when, not if, an outbreak occurs.
Randy Fields is chairman & CEO of Park City Group, a cloud-based software company. He can be reached at email@example.com.