There hasn’t been a high-profile food product recall in the UK since the fatal listeria contamination at Good Food Chain/North Country Cooked Meats over a year ago. Overall it has been a pretty quiet time for the sector, but food recalls hit the headlines again yesterday when Diageo announced a recall of its new alcohol-free version of Guinness, only two weeks after the product was launched. There is no suggestion that anybody has come to harm, so presumably the story derives its prominence from:
- The fact that Guinness is a very well-known, global brand; and
- The amusing/embarassing (depending on your point of view) occurrence of this incident so soon after the product launch.
On the flip side, the incident has given the new product a lot of publicity – surely I am not the only person who was unaware that the product had been launched until yesterday – so may even ultimately turn out to be beneficial?
More generally, it’s not clear if routine product recalls such as these really have any long-term impact on food companies. There is an argument that customers nowadays tend to take these things in their stride, so long as they are handled reasonably well. It is also fair to say that both food manufacturers and retailers have become very good at managing these incidents. It’s hard to find any specific data on the food sector, but a 2009 study of over 150 consumer product recalls found that “proactive recalls” (initiated before any safety incidents had been reported) reduced firm value by an average of 0.6%. However, the same study found that “passive recalls”, mandated by regulatory authorities after safety incidents had been reported, had no significant adverse impact! Certainly there has been no discernible impact on Diageo’s share price since the announcement, but we will be continue to follow the story.