The Cost of the Peanut Butter Recall?

Bill Marler, a personal injury and products liability lawyer who focuses in food borne illnesses, says the end result will be roughly a billion dollars. That’s billion with a B.

…recalls come with astounding costs. One of my good friends in the food-processing industry estimates that the peanut recall will cost well over $500 million – that’s half a billion bucks. It’s impossible to assign precise numbers, but you can start with the costs of tracking down, retrieving and transporting millions of items, most of which have already found their way onto retail shelves and kitchen cabinets.

Kellogg, just one of the companies that recalled products recently, has estimated those costs at $75 million – for just one company.

Then there are the lost sales – not just of the tainted products themselves, but most likely of related peanut products that may be completely safe. The tomato Salmonella recall last year resulted in $100 million in lost tomato sales – even though the real culprit proved to be peppers. E. coli-tainted spinach cost that industry over $175 million even though the outbreak was linked to one fifty acre farm. The peanut industry estimates that its sales already have plummeted by more than 25 percent, which breaks down to at least $500 million in losses on 2.6 million tons of raw peanut sales.

The issue with recalls is that they affect some people at a physical level – the getting sick part, which Marler estimates will end up costing close to 35 million dollars, most of which will be covered by insurance.

But recalls have a larger cost that remains hidden to most people who read these stories. Most, if not all of the costs from recalls and lost sales are not covered by insurance. Recalls trickle down into small food businesses and these costs affect their bottom lines. When recalls occur, especially ones like the most recent peanut paste recall, people can and do lose jobs and businesses can and do shut their doors.

What’s so bloody frustrating is that something like this could have been prevented. It SHOULD have been prevented. Industries deal with risk assessment all of the time.

Wait. Let me rephrases that. Businesses deal with risk assessment all of the time. They weigh the pros and cons of risks versus rewards and create of plan of action However, it takes only one lazy or greedy business who either unintentionally or intentionally takes the risk who can take out an entire industry.

h/t Marion Nestle