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The product known as the hipster’s Tabasco – Sriracha hot chilli sauce

Overlooking Product Recall Insurance Could Land You in Hot Water

Mar 2020

The product known as the hipster’s Tabasco – Sriracha hot chilli sauce – shared something with chicken nuggets, sauces, houmous, desserts and baby foods in the last quarter of 2019, namely a product recall.

In Sriracha’s case, the issue was the risk of exploding bottles, due to a build-up of lactic acid in supplies in the Australasian market.  Bloated bottles were to be taken as a warning sign not to open them and to return them to the place of purchase[1]. With the other products, it was a UK-based problem with the foods thought to be risks due to plastic particles in the nuggets, a botulism risk with the sauces, salmonella in the houmous, glass in the desserts and food tampering in relation to the baby food.[2]

More recently still, sardines in tomato sauce, bought in Asda, have been deemed unfit for consumption due to bacterial contamination, evidencing itself in some cases through swelling of the can.[3]

500 food product recalls occur every year across Europe.  Around a third of these are due to the presence of undeclared allergens and around 20% because of foreign bodies lurking in the foods.[4]  But product recalls are not just necessary because of unsafe and contaminated food.  Many also occur when products are found to be defective and can be due to errors in everything from design to labelling. 

Not recalling a product known to be defective could lead to prosecution on the grounds of negligence and possible damages being paid to an injured party.  However, this is not the only business risk attached to product recall.  Recalls are time-consuming and expensive.  There are associated costs to pick up such as those relating to shipping returns from the purchaser, retailer or distributor, the cost of advertising the defectd to alert the general public, and extra storage expenses. 

There are typically also the costs of product disposal and redistribution and potentially a higher wage bill to meet as staff handle the crisis. It may also be necessary to bring specialist consultants on board, to offer advice or limit a brand’s reputational damage.

While big retailers will buy product recall insurance as a safety net without even questioning the need, some smaller or artisan food producers or product manufacturers may not, placing themselves at risk of financial loss.  Unless they act swiftly, they could also lose the listings with retailers they rely upon. Speedy responses often depend on having adequate resources, however, and without insurance protection those resources could be limited.

Anyone producing a product for the public’s consumption should consider their risks carefully and take a look at the cover options afforded through Contaminated Products Insurance and Defective Products Insurance policies.  

If you need assistance with product recall insurance and the level of cover you require, an insurance broker will be able to assist you.  To find that expert, please use our ‘Find a Local Broker tool’.