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How Food Recalls Really Work

In just the last week, nuts, salad, and dried kiwi products have been recalled from store shelves, with more recall cases still to come. In 2014, the latest year on record, 8,061 food products were recalled by the Food and Drug Administration, while there were an additional 94 recalls by the U.S. Department of Agriculture (each of which may include multiple products). Of those USDA recalls, two-thirds were "Class 1," meaning that there was a "reasonable probability" the food would cause illness or death.

Luckily, a few things have changed for food business since the Food Safety Modernization Act became a law in 2011. Notably, FSMA granted the FDA the authority to force companies to recall foods versus waiting for a voluntary recall. (Like most pieces of the federal food system, the responsibility for recalls is spread out between the USDA, FDA, Food Safety Inspection Service, and the companies manufacturing and selling these products. The USDA — which primarily handles meat, poultry, and egg products — can only force a recall if it receives an unopened package of contaminated food from someone who got sick.)

Consider the thousands of recall cases per year, and you may never want to eat again. Yet the reality isn’t quite so sinister.

Companies of a certain size are also required to follow a HACCP plan that identifies possible hazards in the food chain and identifies ways to check and control for them. In theory, that means there should be less lag time between discovering a contamination and removing it from public consumption — as well as fewer instances of contaminated food getting out at all.

But the chance that a person might come into contact with a product deserving of a recall over 8,000 times in one year sounds scary. The recalls that make it into the headlines are even worse still. In 2014, nearly nine million pounds of beef were recalled after the Food Safety Inspection Service discovered it came from "diseased and unsound animals" that had not been properly inspected. Seven years ago, the Peanut Corporation of America knowingly sent out salmonella-tainted peanut butter which resulted in the deaths of nine people and over 700 illnesses. An investigation resulted in the recall of two years' worth of peanut butter produced by the company, and eventually, jail time for the company's CEO.

Consider the thousands of recalls that take place every year, and you may never want to eat again. Yet the reality isn't quite so sinister.

Though companies can issue recalls for any reason, they are only required to do so in the case of "adulterated" food. This term, which was written into food safety law in 1938, typically refers to food that contains known poisons, was prepared under insanitary conditions, anything has been omitted or substituted that is written on the label, and others.

In 2013, Foster Farms chicken caused an estimated 2,500 people in Washington and Oregon to fall ill from salmonella, yet the USDA was powerless to force a recall. Robert O'Connor, a veterinarian and lead food safety specialist for Foster Farms, told The Oregonian, "We regret any illnesses that might occur… This is raw poultry. Raw poultry by its nature can contain bacteria." And by law as well. Unlike the deadly E. coli O157:H7, salmonella is not automatically considered an adulterant in any food regulated by the USDA. Though officials continued to contact Foster Farms about the outbreak, there wasn’t much else to be done since, technically, it was legal.

Before 1994, that dangerous E. coli strain was also legal until an outbreak originating with Jack in the Box sickened over 600 people, killed four children, and left many more with permanent health issues. When the government termed it an adulterant (and companies lost a lawsuit to keep that from happening), companies were forced to start testing for it. "The number of recalls absolutely spiked," says Bill Marler, a prominent foodborne illness lawyer and attorney. The cost of those recalls became expensive enough that companies invested in getting E. coli out of their meat. "It used to happen every other week — today we hardly ever see a recall."

But most companies don't want their customers to get sick, and they don't want their brand associated with foodborne illness or death. (Just look at how Chipotle's stock has fallen since it became the subject of a multi-state outbreak of three different foodborne illnesses.) In fact, since the Food Allergen Labeling and Consumer Protection Act went into effect in 2004, the leading cause of recalls have beenunlabeled allergens. This could be caused by improper cleaning of machinery or because the wrong label was put onto the package.

According to the FDA's regulatory procedures manual, manufacturers "may initiate a recall at any time to fill their responsibility to protect the public health from products that present a risk of injury or gross deception, or are otherwise defective." According to David Crean, vice president of corporate research and development at Mars, a recall usually starts with the identification of a problem. Afterward, company would pull together a team to look at the situation and "do very careful risk assessments looking at what had happened." This step is important since the size of a recall depends on how much product has actually been affected — and you can't know that without having some idea of where the problem came from in the first place.

"What happens next is all about the issue," says Crean. "If it's a significant safety issue, it's a clear recall situation." Mars's next steps would be to contact the press, reach out to trade partners to make sure product is removed from the shelves, and ask people to return the product or throw it away. "The hierarchy of thinking we go through is to protect the consumer, brand, and business," Crean explains.

The final step of the recall process (and often the most expensive) is that of actually removing food from shelves and disposing of it. If a product is recalled while it's still in company warehouses, the issue is much easier to deal with, but in many cases it has already been sent to hundreds of stores throughout the country. The company has to pay for each of those products to be disposed of, replaced, and — if necessary — shipped back to them. "It's a lot of hassle for trade partners to send things back to us," Crean says. And that's just half of it. "You've got to be very careful of how you dispose of these products because you can create more problems." He cites a few occurrences 20 years ago when products were simply sent to landfills and people fished them out to resell. "That doesn't happen anymore."

"The hierarchy of thinking we go through is to protect the consumer, brand, and business."

Sometimes, depending on the reason for the recall, companies can rework their products into pet or animal feed and even fertilizer. In the case of meats, if they are cooked at a high enough temperature to kill the pathogen present, they're considered safe for human consumption. An entire secondary market devoted to turning once-recalled meat into processed foods exists, and consumers have no way of differentiating between products made from always-safe or recalled meats — for better or worse. In the case of a labeling mistake, products could just be rewrapped, though Crean says that's a rarity at Mars, since foreign bodies can enter the product in the process.

Without evidence of actual willful wrongdoing on the part of a company, recalls carry no penalties from the government, but they quickly become expensive. According to a report by the Grocery Manufacturer's Association, "81 percent [of] respondents deem financial risk from recalls as significant to catastrophic." Major retailers who have to remove defective or contaminated products "generally are reluctant to continue business with the manufacturer," according to a report by the ACE Group. "Often, they will pull not just the defective or contaminated merchandise off the shelf, but the manufacturer's entire product line."

In 2010, 500 million eggs were recalled after causing the largest salmonella outbreak in FDA records. The egg industry as a whole — not just the manufacturer behind the recall — lost an estimated $100 million in revenue in September 2010 alone as sales dropped due to negative media attention. When Peter Pan peanut butter tested positive for salmonella in 2007, it cost parent company ConAgra over $78 million in recall costs. But a few years later, the Peanut Corporation of America scandal cost the peanut butter industry an estimated one billion dollars, proving that recalls are expensive to more than the company at fault.

"In the long run, it's the cost and bad publicity of recalls that ultimately drives the supply chain to fix the problem," Marler says. Though litigating against companies who have caused illness or injury — Marler's bread and butter — "certainly help the process along," recalls can cost "20 to 50 times more."

Recalls have become such an inevitability that an estimated 78 percent of manufacturers now purchase recall insurance (at a premium cost), which reimburses them for some of the costs related to handling recall logistics, replacing products, and loss of profit. Depending on the size of the recall and the parent company, some recalls have been large enough to cause companies to declare bankruptcy. Yet despite the costs, not all recalled products are ever truly "recalled" to the manufacturer.

Only 36 to 38 percent of recalled foods are ever ultimately recovered.

A 2003 report by the U.S. Government Accountability Office declared, "USDA and FDA do not know how promptly and completely the recalling companies and their distributors and other customers are carrying out recalls, and neither agency is using its data systems to effectively track and manage its recall programs." They found that only 36 to 38 percent of recalled foods were ever "ultimately recovered." This may be because the foods have already reached the end of their shelf life — especially in the case of more often-recalled products like meats and fresh leafy greens.

While companies should be able to track their products through the supply chain from raw materials to consumer, it doesn't always happen. Traceability "is mainly a manual procedure," a practice director at consulting firm Manufacturing Insights told CIO. "Companies don't have it automated."

At a consumer level, grocery chains' ubiquitous loyalty cards are an important tool in notifying consumers of recalled products. Costco, Ralphs, Sam's Club, and Walmart all use their marketing databases to send out notices of any recalled products sold in stores. In 2014, customers brought a class-action lawsuit against Safeway for the company's failure to notify them of recalled foods through its system. For grocers who have taken advantage, it's unclear if customers are targeted based on their actual tracked purchase history or whether these are general notifications.

Though a general notification may be better than none, there is some concern that with the number of daily recalls, consumers could get information fatigue. "If there are a lot of recalls going on, it creates confusion and numbness," Mars's David Crean says. He mentions that in Europe, this is an issue of concern to regulators. "They want to recall only when it's absolutely necessary." That's another reason why it's important to catch recalled products before they've been sold to consumers. Not only is it bad for the brand and a costly and logistical nightmare, but every consumer-level recall heightens the danger that someone was too overwhelmed to listen to a recall notice when a product in their kitchen was really unsafe.