Reputation threat causes surge in product recalls

21 February 2007
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21 February 2007 | Antony Barton

Companies' concern for their reputation caused product recalls in the UK to increase by up to a fifth in some sectors in the past year.

Such concern saw at least one supplier, Cadbury Schweppes, delay the release of supplies and change the way it puts goods into the supply chain to incorporate extra safety testing.

Recalls leapt by more than 20 per cent in the consumer goods sector, with the number of product recalls across all sectors increasing by 8 per cent to a total of 179. There were 71 food product recalls last year, down by 7 per cent.

City law firm Reynolds Porter Chamberlain (RPC) compiled the figures from published sources covering all UK sectors. It said the recalls reflected companies' need to protect their reputation from the harm caused by faulty goods. The reasons for the recalls varied from mislabelling to the discovery of glass, wood and moths in food. There was no suggestion of a general drop in product quality.

Mark Kendall, partner at RPC, points to the salmonella outbreak at Cadbury Schweppes last year as an illustration of the dangers of not taking pre-emptive action. As reported by supplymanagement.com, the confectionery giant was forced to withhold supplies when up to 37 people fell ill after eating its products. Sales were further hit by subsequent customer concern. It now operates a system of "positive release", whereby no supplies are fed into the supply chain until laboratory tests have been completed on stock samples.

Kendall said corporate reputations had become more fragile as more customers used the internet to publicise information about faulty products. He said: "The Sony laptop battery debacle, which saw nearly 10 million battery packs recalled, is a perfect example. The growth of sites like YouTube meant millions of consumers saw videos of a computer spontaneously catching fire due to the fault."

Swift recall and insurance cover are essential when concerns arise, according to Kendall. He said that as consumers become more litigious, companies are more likely to recall products when the risk of liability is only slight.

SMfeb2007

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