The risk and insurance services group Marsh believes that greater regulatory scrutiny in Europe, coupled with strict enforcement of recently passed food safety legislation, will lead to an increase in product recalls.
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In a new report, entitled Managing liability in the food and beverage sector, Marsh says that regulators are now generally swifter in recalling products from the market, though instances of food contamination are rare. The research surveyed some 232 food and beverage companies across Europe.
“European and national regulators have become much more involved with the recall process,” said Jeremy Moore, Marsh’s practice leader for cost recoveries. “The launch of the ‘General Framework Law for Food Safety Regulation’ in 2005, which stipulates that regulators must be involved at the first sign of a product being unsafe, has resulted in 60% of recalls of all food and non-food related products being government enforced – with major variations between different countries.”
The report also suggests that inconsistency in product recall and withdrawal processes across EU countries is creating uneven competition between multinational companies. “Companies with multi-country distributions face a problem of inconsistencies during recalls or withdrawals,” Moore said. “For example, in 2004 the Italian government called for a withdrawal of four times as many food products from Italian shelves as the French government.”
Moore said that although regulators are becoming more cautious with regard to consumer safety, little distinction is being made between safe and unsafe levels of contamination before a recall is made. Furthermore, the rising number of recalls will increase overheads, resulting in pressure on companies to cut costs in areas such as packaging and ingredients. With an increase in the number of food recalls, companies will also need to review their product recall insurance policies, Moore added.
