Food contamination and recall costs have become critical factors for the growth and even the sustainability of businesses.

The publicity surrounding such incidents can severely impact a company’s reputation, hinder the maintenance and expansion of commercial relationships, and, of course, affect its financial performance.

“In terms of operational profitability, earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the first nine months of the current financial year amounted to losses of €5.19 million, compared to profits of €1.36 million for the same period in 2012. It is worth noting that the company’s results were negatively impacted by €1.25 million due to product recalls, which were conducted in compliance with the recommendations of the Hellenic Food Authority (EFET) (1)”

The tightening of European regulations, alongside improved monitoring methods and greater consumer access to information, has contributed to the increase in product recalls in recent years.

Recalls serve to protect consumers from harmful products while also placing an indirect obligation on producers and distributors to enhance safety standards during the production process.

Despite complying with hygiene and safety regulations, the majority of businesses in the sector do not adequately prepare for potential contamination or recall incidents.

Crisis Insurance, which typically covers product contamination and recall, provides active protection for businesses in such cases.

Below are some examples of the coverage provided:

Crisis management insurance solutions offer protection for businesses from all direct and indirect losses related to product contamination, including:

• Deliberate malicious tampering, threats, or contamination of products, rendering them unsuitable or dangerous, or even creating the impression of such risks among consumers.
• Accidental errors during production, processing, or packaging.
• Recalls ordered by authorities.

The losses covered include:

Restoration expenses: The cost of cleaning and restoring the product to its original state, restoring the company’s brand reputation, and recovering its market share.

Loss of profits: Due to a decline in the business’s turnover.

Recall expenses: Costs associated with inspections, withdrawals, transport, overtime pay, additional staff fees, rental of storage spaces, destruction of the product, redistribution, cancellation of planned promotions, press releases, and more.