Here in Australia one of the best publicised food scares we have had in recent years was a large-scale recall of frozen berries that were apparently contaminated with Hepatitis A. The recall was prompted after a string of cases of the virus in New South Wales and Victoria were blamed by health officials on the well known Nanna’s brand of mixed berries.
The recall is reported to have caused direct costs of $4.4 million, including the loss of $3.8 million worth of berries that had to be disposed of, compensation payments to people who contracted Hepatitis A, public relations and social media costs and the cost of advertising the recall to consumers.
Indirect costs were much higher: the owner of Nanna’s brand and manufacturer of the berries, Patties Foods, posted a profit decline of 90%. The chairman Mark Smith blamed the decline saying “The frozen berries recall had a significant impact and was the primary reason for the approximate $14.6m reduction in net profit,”
Patties later sold their frozen berry business and in the process lost a part of their business that had generated 13% of their sales in previous years. More on the sale
Not one sample of Nanna’s berries tested positive for the virus.
Larger brands: more to lose
Mars Galaxy and Teaser brand chocolates were recalled from markets in the United Kingdom and Ireland in June 2017 after the company found evidence that Salmonella could have been present in ingredients used to make the products. Mars reportedly filed a product recall insurance claim of $50 – $60 million in November 2017.
So to answer the question posed by the title of this blog – how much does a recall cost? – the answer is A LOT.