For the large majority of companies, the possibility of having to recall a product is a nightmare scenario as it can result in damage to the company’s brand, its corporate reputation and consumer trust. More importantly, sometimes it can put consumer safety at risk which could lead to criminal penalties. To prevent such an event occurring, most companies put specific measures in place to ensure that the products they manufacture or sell are consistently of “acceptable quality”. However, sometimes the inevitable happens which requires the recall or withdrawal of products and the focus then shifts to how to mitigate the situation. The way a company handles a product recall is important as it sends out a message about how it treats consumers and a well handled product recall can sometimes work to the company’s advantage.
In New Zealand there are a number of consumer protection laws which have specific requirements for product recalls where goods do not meet certain standards. For example, the Food Act 1981 grants the New Zealand Food Safety Authority (NZFSA) and the Minister of Food Safety broad powers to recall food products for any purpose that protects the public. If a recall is ordered under the Food Act, the penalties for non-compliance of the recall are a fine of up to $2,000 or imprisonment of up to three months. In addition, the Minister of Consumer Affairs can order a compulsory product recall under the Fair Trading Act 1986 where goods are likely to cause injury or do not comply with a prescribed safety standard.
On discovering that a product is not up to standard, generally the first step required is to record as much information as possible about the nature of the fault or injury. For example, by talking to the customers who have complained, the number of products affected such as through identifying batch, lot numbers or production dates, and possibly arranging for independent test reports or other assessments to determine the injury potential. Once a decision has been made to initiate a product recall then someone will need to be in charge of coordinating the recall, which will include finding out more information about the distribution of the affected products, putting in place a suitable remedy such as a replacement of the product or refund, and monitoring this as the recall of products eventuates. To streamline this process, members of the Australia and New Zealand food and grocery industries have adopted procedures for product recall and withdrawal through Efficient Consumer Response Australasia (ECRA). A standardized form for notifying those throughout the distribution chain, the appropriate Government agencies and the media can be downloaded from the
ECRA website.
A good example of how things can escalate was with Pan Pharmaceuticals in 2002 and 2003 when the Minister for Food Safety ordered a series of product recalls for dietary supplements manufactured by the company. This was following the recall of over 1500 different herbal products, vitamins and pharmaceuticals in Australia which were said to be potentially harmful due to a series of safety and quality breaches. The scale of the recall was unprecedented in Australia and New Zealand and initially it was hard to determine exactly which of these products were available in New Zealand. The company collapsed soon after the recall.
Similarly, in 2005 an energy drink called Ammo was recalled by the NZFSA after it was found to contain Benzylpiperazine (BZP), an active ingredient in party pills that has since been reclassified a Class C drug. The NZFSA recalled the product after getting complaints from customers that the drink had caused hyper-sensitive, anxiety and sleeplessness. The distributor of the energy drink initially withdrew the drink from dairies, but fought to keep it available to an adult market through nightclubs and adult stores. The NZFSA was eventually successful in recalling the product entirely after the voluntary recall was found to be insufficient to properly protect consumers. The NZFSA’s fight to have the drink recalled resulted in widespread negative publicity for the distributor and renewed media attention on the party pill industry.
However, statutory recalls are rarely enforced as product recalls are much more likely to be voluntarily initiated. A recent example was in March 2011 when a product recall was initiated after laboratory tests found the presence of E.Coli in Biofarm bush honey yoghurt. Although there were no reported consumer complaints or illness, a New Zealand wide product recall was initiated through all major food retail outlets and health food shops as a precautionary measure.
Nevertheless, irrespective of the nature of a product recall or withdrawal, a company should handle the recall in an efficient and transparent manner. Having a product recall plan in place will help to ensure that you can move quickly as soon as the problem is identified. Delaying a recall may put consumer safety at risk and also lead to consumer perception that the company has tried to conceal important information. Further, it may even enhance your company’s reputation, for example if you are able to contact consumers directly through database records personally rather than relying on them to come across it in the media.
For further information on the processes involved and who to contact, visit the
Ministry of Consumer Affairs and
New Zealand Food Safety Authority websites.
Published in FMCG magazine April 2011