Food Recalls Cost Millions — and Companies Aren’t the Only Ones Paying the Price
In recent weeks, there has been a major recall of beef and food safety warnings on romaine lettuce.
The romaine lettuce E. coli outbreak caused lettuce prices to triple in some grocery stores.
Recalls also cost food producers millions — sometimes billions.
In late November, the Centers for Disease Control and Prevention released an alert on romaine lettuce due to its link to an outbreak of E. coli. And on Tuesday, Dec. 4, the United States Department of Agriculture announced a recall on approximately 12 million pounds of beef due to possible contamination from salmonella.
As a consumer, your first thought is likely how food recalls could affect your health — but they can also affect your wallet. Here’s a closer look at the amount of money these problems are costing.
Foodborne Illnesses Cost the U.S. Up to $93.2B per Year
A 2015 study by Ohio State University associate professor Robert Scharff found that medical costs, productivity losses, and losses due to death or lost quality of life caused by foodborne illnesses cost the U.S. $55.5 billion to $93.2 billion annually.
Salmonella is the most costly, with a high incidence of illness and a relatively high cost associated with it compared with other foodborne illnesses, according to Scharff. He also made note of the fact that these illnesses are a widespread problem.
“These numbers reflect the fact that one out of every six people becomes ill every year from foodborne illness,” Scharff said. “That’s a pretty big number.”
Also See: 19 Costliest Diseases in the US
Lettuce Prices Soared Following the E. Coli Outbreak
Prices of iceberg lettuce increased by 168 percent following the romaine lettuce recall, and prices of Boston, red leaf and green leaf lettuce also spiked, according to a CNBC report.
“Consumers will see an impact on the shelf,” Peter Vail, vice president of merchandising and procurement for Associated Grocers, told the Bangor Daily News. “We’re seeing prices for iceberg lettuce and salad kits triple […] because of limited supply and strong demand.”
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Food Safety Recalls Cost Most Food Companies $30M
It’s not just consumers who take a financial hit, but food producers as well. A joint study by the Grocery Manufacturers Association, Covington & Burling LLP, and Ernst & Young found that for 77 percent of food, beverage and consumer product companies who experience a recall, the cost can be as much as $30 million. That figure includes sales losses and direct recall costs.
But some recalls cost significantly more. A 2010 recall of shell eggs from one egg producer cost the entire shell-egg industry over $100 million in a single month. And a 2009 salmonella contamination of peanut butter cost American peanut-containing product producers a shocking $1 billion.
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How Food Recall Costs Break Down
The initial costs of a recall to a company are the direct costs, Food Dive reported. These costs include:
Notifying retailers and regulatory bodies
Pulling products
Storing or disposing of products
Additional labor needed to conduct these tasks
“Interestingly enough, that typically ends up being the smallest cost out of all of them in many cases,” Kevin Pollack, SVP of marketing, inside sales and commercial operations at Stericycle Solutions, told the site.
Other costs of a recall include litigation costs, government fines, lost sales and damage to a brand or reputation.
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This article originally appeared on GOBankingRates.com: Food Recalls Cost Millions — and Companies Aren’t the Only Ones Paying the Price
