A recall of any product potentially has a significant negative impact on its manufacturer. Recalls are expensive, not only from the financial hit they incur in lost sales and other direct costs, but also in the lasting impact recalls can have on a brand’s reputation. Without an effective online reputation management strategy, food producers can suffer even greater losses.
Determining the cost of a food crisis such as a recall is difficult, because it goes far beyond the hard costs. Food Safety Magazine identifies recalls as “the food industry’s biggest threat to profitability,” and the numbers back up that observation. The magazine reports that the average recall costs a company at least $10 million, which includes both the direct costs of recalling and destroying the food, as well as notifying the necessary regulatory agencies, the supply chain and the consumers.
The bill continues rising from there; there’s the expense of labor to complete all of the above actions, as well as the cost of running replacement product. But perhaps the greatest cost — and the one that is most difficult to manage — is brand reputation.