Recalls: An Abundance of Caution

A product recall is among the toughest and costliest "corrections" a company can make when faced with an issue or concern about quality, safety, labeling or marketing materials. The total burden of a recall is not just in the cost of retrieving the affected product from consumers, retailers and distributors, followed by replacing the product and/or paying for any damages caused by the product undergoing recall, but it also includes the cost of damaged reputation and consumer confidence in the brand and company. The recent recall by USPLabs LLC of its OxyLite product cost the company about USD $22 million just for the cost of inventory recalled or destroyed.

 FDA, which is involved in most recalls of natural products such as supplements and foods, reported 11 dietary supplement recalls during November and December 2013, and more than 40 such recalls for all of 2013; this does not include foods and beverages. Insurance giant AIG, which was the first to offer contaminated product insurance in 1986, estimated about 30 recalls are triggered each week in the food and beverage market in the United States, with 22 per week likely in Europe, based on USDA and equivalent European Union data.

Mirroring the common health benefit of natural products, the best approach to recalls is prevention. However, this is a difficult method to perfect, and companies are wise to prepare for recall, just in case one should become necessary in the course of business. Public relations experts advise a company's ongoing relationship with its customers can determine the scope of a recall's effects on business.

Recent regulations have given FDA increased authority to demand recalls.  According to FDA, a product recall is a more timely, efficient and economical alternative to formal administrative or civil action, especially for widely distributed consumer goods.  but companies should consider voluntary recall, in lieu of mandatory recall.  A voluntary recall might be a better approach, showing proactive responsibility, but legal experts advise FDA is involved in some way in every natural products recall, even voluntary ones. The agency offers guidance to industry on recalls, but companies can also turn to PR and legal consultants for specifics on planning, liability, press releases and damage control.

Read the full scoop on recalls in the INSIDER's Regulatory Content Library.