The number of food recalls in the United States has nearly doubled since 2002, driven mainly by regulatory changes and an increasingly globalized food supply chain, according to a new report from Swiss Re. What’s more, 52 percent of all food recalls cost the affected U.S. companies more than $10 million each with losses up to more than $100 million in direct costs.
According to USDA, the public cost of foodborne illness was $15.6 billion in 2013, and a significant portion of that cost was due to recalled foods. Approximately 8.9 million people fell ill from the 15 pathogens tracked, with more than 50,000 hospitalized and 2,377 fatalities.
“In a more globalized economy, ensuring the highest level of food safety is becoming an greater challenge for firms," said Jayne Plunkett, head of Casualty Reinsurance at Swiss Re. “Today ingredients and technologies are sourced worldwide. This leads to greater complexity for food manufacturers and consumer and regulatory demands on companies are continually increasing."
Globally, the report finds that demographic change is also exposing more sensitive consumer groups to the dangers of contaminated food. Aging societies, an increase in allergies in the overall population and the fact that malnourishment as a source of weak body defenses is still prevalent in many countries are significant drives for the increase in exposure.
Risk management tools to ensure safe food production must be applied and adapted to ever more complex global markets and supply chains. Adaptation also means taking lessons learned to places where they are yet unknown and tailoring them to local conditions.
“Food recalls can be caused by something as simple as a labeling error on the packaging, or as complex as a microbial contamination somewhere along a vast globalized supply chain," said Roland Friedli, risk engineer at Swiss and co-author of the report. “Yet even a simple mistake can cost a food manufacturer millions in losses and even more in terms of reputation. Insurance and sound risk management are essential for keeping affected businesses afloat."
The bottom is food manufacturers operate in a vast, globalized supply chain, where one mislabeled product or contaminated ingredient can cause sickness, death, multimillion dollar losses and massive reputational damage for the affected companies.
One of the most expensive U.S. food recalls was tied to Salmonella-tainted peanut butter products produced by the Peanut Corporation of America. More than 200 companies recalled nearly 4,000 products—ranging from candy, snacks and ice cream—that contained peanuts, peanut butter or peanut paste processed at the plant as an ingredient.
The 2009 Salmonella Typhimurium outbreak was traced back to PCA’s plant in Blakeley, and was linked to 714 reported illnesses in 46 states and nine deaths in Idaho, Minnesota, North Carolina, Ohio and Virginia, according to the Centers for Disease Control and Prevention (CDC). The government contends the PCA officials failed to ensure the plant was sanitary and prevent cross-contamination between raw and cooked products.
Stewart Parnell, the owner and president of the defunct Peanut Corporation of America (PCA) in Blakely, Georgia, and his brother Michael, who worked as a food broker on behalf of the peanut processor, were convicted of several criminal counts. A third executive, Mary Wilkerson, was convicted of obstruction of justice.