Podcast - Why Recall Planning Matters for Every Food Company

Kristina Merritt: Welcome to our "Legal Bites" podcast series. Today we have an opportunity to sit down with Ryan Gooley, Director of Business Development – Food Recall at Sedgwick. My name is Kristina Merritt, and my co-host is Charles Weiss. Ryan, thank you for joining and sharing your time with us.

Ryan Gooley: All right, thank you, Kristina, appreciate it and looking forward to the conversation.

Charles Weiss: Ryan, can you just tell us briefly sort of like the elevator speech, so to speak, about what it is you do, what your role is? Because certainly before I began working in this field and thinking about it, it did not occur to me that there would be a food recall person at Sedgwick.

Ryan Gooley: Yeah, no, absolutely. So yeah, kind of a quick background about myself and our organization. I mean, I've been in the industry and helping companies plan for, prepare and really respond to product recalls and product safety issues for over 20 years. The company's been around for over 30 [years]. We've been part of Sedgwick for the last five years as well, but every day our business unit and what we do is we respond to product safety matters, helping companies [to] plan for it, but then more importantly, implement and manage product recalls, both domestically here in the U.S., but also globally around the world across all the major industries out there, not just food.

Charles Weiss: Fantastic. So I want to sort of level set for our listeners. Usually when people think about a recall in the food industry, they think of something really bad. You know, something spectacular, maybe life-threatening listeria contamination, or something in the local news that the investigative reporter found an entire colony of rats running around at the bakery or something like that. We know that most recalls are far more prosaic and don't involve that kind of thing. And often their products are not recalled all the way down to the consumer level that people are told take this off the shelf and throw it away or return it. So when we've put aside the sensational ones, what are the two or three drivers of the types of recalls that you see and have to help people with most often?

Ryan Gooley: Yeah, I mean, obviously the ones that everyone hears about are those that make the national news and are considered Class Is, which are really important and for brands to be thinking about, but there is significantly a larger number of recalls that occur that are lower risk, lower hazards, but are still part of that kind of Food and Drug Administration (FDA) and United States Department of Agriculture (USDA) regulations for initiating a recall. So some of those things can be things like low-risk mislabeling issues, or quality control Good Manufacturing Practices (GMP) violations that don't necessarily cause or elevate to that higher risk, but nonetheless they still occur. And you see that going on with everything, could be mild packaging issues to a defect or [a] minor formulation issue that causes that product to be out of spec or out of the regulatory guidelines and requirements for that product. So companies are forced to take action from that standpoint as well.

Charles Weiss: I know one of the things that I see, just following things on the FDA website, are recalls driven by undeclared allergens, where the label is required to say contains soy or contains wheat or one of big ones. Is that something that you see commonly coming up?

Ryan Gooley: Yeah, 100 percent, and in undeclared allergens and the other category that it would kind of fit into is foreign material issues. Those can range from being a Class I scenario or classification to Class II or even Class III, depending upon the actual issue with it. But people think it's like, well, is it a formulation issue? Is it a labeling issue? Was it a supplier issue? Did they put the wrong product packaging on the line? So everything was meant to be allergen or contain allergen and they put the non-allergen version of the packaging on the product because a lot of times, especially when you're dealing with allergy products, sometimes there's, you know, think of like chocolate chips, for example, or chocolate chip cookies. You have ones that are just chocolate chip cookies and then you have the other ones that contain a version of nuts or something like that. And all of a sudden, the wrong packaging goes on there. Nothing wrong with it, but it causes a recall. So is it an allergen issue or is it really a manufacturing labeling issue? And then the other area that a lot of times that allergens come into play is issues from suppliers where the formulation changed on an ingredient or there was cross-contamination on an ingredient and it wasn't caught and the product tested positive for that allergen and it was never meant to be in the product as well.

Charles Weiss: Got it. So I want to talk about what companies can do before there's a recall. And we're going to be talking a fair amount about pre-planning and how to avoid this and then how to deal with it, if and when it happens. So, I'm thinking about from the standpoint of a food company that there's two aspects here, and the one would be on the operational side, you know, which is, confirm the identity of your ingredients and make sure you do the cleaning between runs properly and those sorts of good manufacturing operational issues. Then I think on the planning side, which is to have a plan in place before the need arises so you can deal with a recall. Because I guess if you make enough stuff for long enough, you may inevitably be faced with this. So in terms of sort of these two areas, the operational food manufacturing side, and then the planning risk management side, is that a good way to think about it from your perspective?

Ryan Gooley: Definitely. I mean, operationally, I mean day in and day out, companies, their goal should be to always make good, safe products so you never have to go through a recall. And there's a lot of things that companies should be focusing on that standpoint. But then you do have to plan for the, not the if, but the when of a recall [coming] up. And I think you know you can look back at history, it doesn't matter the industry or the company, are you a startup? Have you been around for a hundred years? Have you not had a recall or an issue in 50 years of being a business? There's so many things going on in today's world that it's a matter of when, not if a recall comes across the company's plate that they have to manage and respond to. Sometimes those are things that are 100 percent preventable and there's a lapse or a gap in their processes or procedures that cause a product to be potentially susceptible to a recall, or it could be things like a supplier where you would never have known that you had an issue with the product until afterwards. I mean, more recently, you've looked at cinnamon and different types of applesauces or other products that have been recalled because of cross-contamination of heavy metals in it. You can go back to issues within peanut butter products in the past, or melamine and pet food products going back even further. So inevitably some of these things come up that you just didn't know about or think about as a potential hazard. And all of a sudden now you're in the middle of it. So companies need to always be planning and be preparing for it with the goal that obviously you want to minimize or prevent it, but be ready to respond if or when a situation comes up.

Kristina Merritt: Great. Thanks, Ryan. So very simply, what is a recall plan, you know, for someone or for a new company? What does that kind of document actually do when something goes wrong? And if you were to build this plan from scratch, what are the must-have components that you would suggest to include?

Ryan Gooley: So a recall plan is just that. I mean, it's a plan, it is a strategy, it's a guidance document. It's required a lot of times from kind of a standard operating procedures (SOP) standpoint or a GMP manufacturing standpoint. But that document is there to kind of help guide an organization and to train their employees on how to manage these situations. And frankly, a really good, robust recall plan covers a variety of things that may not be specifically to the recall. Typically, what I would recommend, kind of the five main core areas of a recall plan includes their internal incident investigation services, so complaints, investigation, testing protocols and responding to those potential incidents. And then it really then has a section there that kind of outlines how and when to make a decision to recall and prepare for a recall or a market action. And then a process that really defines what that recall implementation process looks like, including notifying their consignees, and then the follow-up actions and activities that they need to perform to ensure that the recall was effective. And then at the fifth standpoint would be kind of the termination or the closeout of the recall. There's documentation and reporting obligations throughout that whole process, but there's also kind of a lessons learned, corrective actions or preventive actions that need to kind of go with that process and making sure that you can then say, OK, we've done everything, we've done our due diligence, we fixed the issue, we can kind of close out this matter and move forward. So that's kind of the high level of what I think goes in there. And obviously there's different components that fine tune that. And I think, depending upon the size of the organization, how they're managed and how they're structured. Do they manufacture everything internally? Do they use co-manufacturers? Are they multi-plant, single-plant facilities? Do they have international distribution? All of those things can create a more customized plan. So there are templates out there. I think the FDA on their website has some guidance and some templates, but that is just that. It's a starting point for those types of activities. It's not a just fill in the blanks and call it good. We have a recall plan, you need to make sure that it's relevant and implementable for each particular organization.

Charles Weiss: Is that something that you and your colleagues help clients with if they come to you either directly or I guess through an insurance company saying, hey, we'd like to work on this? Is that part of the services you provide?

Ryan Gooley: Yeah, absolutely, we help companies, and that's part of the planning stage of what we do, is reviewing those, providing recommendations, working with them to kind of enhance that to make sure that everything is included in there. And then also the other piece, which I know I think we'll talk about here in a bit, is kind of doing mock recall or recall training simulation exercises to walk through that process, because the best way to learn about a recall and what you need to do is to plan and implement a scenario or a practice session before actually trying to implement a plan in a real-life scenario and situation.

Charles Weiss: Right. And that's something that we talked about before we started recording about a mock recall and the exercise and how to do it properly and how to do one that you may be able to say, well, I did a mock recall, but it wasn't necessarily the kind of exercise that really helps the company prepare for it. So can you talk about that, about how to do the exercise in the most effective way? That if and when you actually need to do it, you're prepared as possible.

Ryan Gooley: Yeah, absolutely. So what I would say, if you work in the food industry and no matter where you are in leadership or across the organization, I can guarantee you, if you ask your food quality or your food safety team, do you do mock recalls? The answer should be yes, because it is required for the industry as a whole from suppliers to your retail customers to even FDA.

But what a mock recall is typically in those scenarios and situations is really a traceability exercise, where you're taking a particular product or an ingredient and being able to trace it through your supply chain, which is important to be able to do. But from our standpoint, when you think about, are you ready for a recall and can you as an organization respond to that? That is only one part of being recall-ready or being prepared for a recall. What we look at, and so what I would call what we would do is more of a recall simulation where you develop a scenario and situation and you leverage real-life product but [in a] hypothetical scenario or situation, and test that process as if you had just been involved in that process and having to make cross-functional determinations and decisions on what product is impacted. How are we going to respond, drafting communication, what level of risk is associated with this particular scenario and situation, and making sure that the different roles and responsibilities that are outlined in your recall plan can actually be done. And the people that are assigned or designated as the responsible party for those can actually implement the services and activities that they need to do.

I'll digress for an example of one scenario in which we were involved in helping a company plan for and do a recall simulation. We got into that scenario and their primary person that is responsible for doing their lot tracing and ship to history – their product shipment history of where they distributed the product to – had been out of office unexpectedly due to a personal matter. So they had two different people in their organization. They're like, oh, I can step in and run it. Both individuals ran their traceability exercise and came back with different amounts of finished product, different amounts of customers that were being involved. So it was a real eye-opening for those organizations that said, we don't have a good standard way of tracking this. Had they not had this scenario, they would have not realized that if you ran the report from a different perspective or mindset, you could inadvertently either recall too much product or potentially in what I would consider a more worse scenario is initiate a recall with not the full scope of product and do a narrower recall and then have to go back days or weeks later and have to expand your recall and re-notify all your customers because when the report was ran, it omitted some of the product that actually did make it out into marketplace. So those are just real-world examples of how doing a real simulation can help companies be more prepared, but also identify where there's gaps in their process and how they can button that up before they're faced with a real situation.

Charles Weiss: Do the recall exercises start with the question, which is, do we need to do a recall at all? You know, is this a problem that rises to the level of we need to do a recall, or is this something that maybe doing a recall would be an overreaction? Is that usually something that's in the recall plan, or where is that? Because you know to your point, you don't want to overreact and do one that's not necessary, but you also don't want to fail to act if you need to do one. So where does that usually get addressed in the planning stage?

Ryan Gooley: That really gets addressed in the planning stage and kind of that first phase of what I said as far as an incident investigation. All of your potential complaints or product safety prior to quality issues should be documented, and the team should do an investigation to determine is there a reasonable probability that this scenario or complaint could rise to further action to a product recall, to a product safety issue, and is it reportable or not. And so documenting that through that process helps guide the organization to make that informed decision. But you need to have a standardized process in which you're investigating those, documenting those and doing kind of a proper health hazard assessment or risk assessment associated to the complaint based upon the information that's known, both that comes in in those complaints or those notices, as well as from your internal documentation and record keeping.

Kristina Merritt: Thanks, Ryan. Let's move on to mistakes and lessons learned. What are some common missteps you see companies make around recalls?

Ryan Gooley: So, I mean, obviously the most common thing is having to meet a complete gap in their processes that caused a recall. I mean those, that's kind of an obvious one. But I would say what some of the more common, but maybe not anticipated issues is really, you know, obviously not being prepared, not thinking that this could happen to them. Just kind of that ignorance is bliss or we make good product and we've never had a recall in the past, so we're low-risk [or] there's not a chance that we're going to have it. I mean, in our world, we've seen bottled water be recalled. So, I mean, you name it, anything out there can be recalled. The other piece, and this is kind of what I just kind of alluded to, is not fully understanding the scope of a recall. It's very natural in human behavior and risk balance is to try to minimize the size and scope of the scenario, which is important to do, but if you do that without all the facts or without good defensible documentation from, let's say, like a sanitation control, to sanitation control document and you'll break in their procedure, you do too small of a recall or scope, you may have a broader issue that you need to see or that you may need to act on. And the agencies are involved in that, they're going to push back and ask the company to do a broader recall.

The other areas that I would say is lack of clear communication or not providing clear communication upfront at the start. And it's always a challenge to do that because some of these scenarios and situations aren't clear and you don't have all the facts when you need to initiate a recall and start communicating, but it's important to make sure that you're communicating in a clear manner that's not contradictory, you're not downplaying the potential hazard, and that you're also providing clear direction on what you're asking organizations or individuals to do if they have impacted product. So a lot of times we see scenarios where a company may initiate communication out to their supply chain that says, we're recalling XYZ product. If you have it, stop distribution and notify down. But it doesn't tell them what to do with the product or how to arrange for the product to be returned or disposed of, or how to get compensation. And that similar kind of gaps we see in public press releases or direction to consumers or end users as well. So that's one of those areas that causes confusion. So you're having to require more back and forth, more questions, and then it quickly overwhelms an organization because they didn't provide all that information up front. And so everyone that they communicated to can't act and they're asking for more information.

And the last bit that I would say that's common is recalls take a lot of resources internally within an organization. So they oftentimes can be unprepared or underprepared from a resource standpoint and being able to manage that because typically when a recall happens, it doesn't impact the entire organization or the entire distribution or products that a company manufactures. So the day-to-day operations, the day-to-day responsibilities that 99 percent of the recall team has, those don't go away now that you're adding a lot of additional resources and requirements to those teams. And so they're not able to scale and respond to it. And therefore companies are either perceived as not being able to respond to the recall effectively because they have high hold times, long times in which consumers or people aren't getting responses, but then it also impacts the business on the day-to-day side, which can implicate and amplify the damages or the impact to the business that the recall had. So making sure that you're resourced appropriately and that you can scale or bring in external resources, external partners to help you manage through that situation.

Charles Weiss: Which naturally brings us to our next topic, which is recall insurance. I think we'll probably do a separate podcast just on that, because when we were preparing, you explained to me that that's far more involved and interesting, and I really appreciate it. But can you describe for the listeners of the basics of what that is and, and how it works and where you would look for that if you are a company in the food industry?

Ryan Gooley: The recall insurance specifically around product recall or product contamination has really been evolving, I would say, over the last, at least 10, 20 years, I think. You have product liability insurance or general liability insurance for general stuff, but that does not typically cover product recall, and if it does, it's usually a very small carveout. So, a lot of companies are going to an added policy that's specific to product recall and product contamination issues in addition to their normal lines of insurance. And that there is really designed to help cover your full set of expenses, both your out-of-pocket expenses, your loss sales, a variety of other things, and expenses related to replacing the product or getting the facility back up. So depending upon what's involved, those policies really cover a variety of other things that general liability policies would not do. And so it's really important to think about that. A lot of companies and a lot of retailers require product recall insurance. And we've seen companies do everything from add a small added policy to their general liability (GL) policy versus doing more comprehensive policies that include a variety of expenses and coverage from that standpoint.

So I definitely recommend, even if you think you have or you know you have recall insurance or recall policy insurance, it's always good to go back and make sure that you understand what your policy covers and also what it does not cover because there's always exclusions. And that's where a lot of times you get into this, OK, we have this policy, this is covered. And then you realize, no, there's certain exclusions that aren't covered or it needs to meet certain criteria — i.e., it may need to be a government-mandated recall. So if you voluntarily do something and it's not defined as a government-required recall or mandated, it may not be covered. So I think it's really important so that you understand what's covered, what's not, and that if your policy has been there in a while, even a couple of years, think how much of the organization has changed, grown, added products, added distribution, that policy may not be adequate for your business today. So you need to always go back and kind of reassess from that standpoint.

And then a lot of times I would say for those policies as well, the benefits, there's some benefits that go with that policy if you don't use it, or even if you have it, such as a lot of them will have a pre-incident policy associated to it, so a percentage of your premium can be leveraged for doing a recall plan review, bringing in a crisis consultant like us or someone else to help you develop and run a recall simulation, look at gaps or look at potential areas where you might be able to further invest to reduce the risk of a recall. The policy is there to help protect you in the event that you had a recall. Obviously no one wants to do it. So you're buying, you're getting the policy so that you've got peace of mind financially that if something happens tomorrow, you've a policy there to help you manage through that and have a lesser impact on the business. The insurance carriers are there writing it with the whole hope that you don't have to use the policy. So they leverage and incentivize organizations to use some of that premium to try to find ways to prevent a recall from occurring in the first place. So it's a win-win for everyone. It gives you that peace of mind and that security. You can reduce your premium out of pocket by leveraging some of those funds for activities that help you that you might otherwise be paying for anyways.

Charles Weiss: I will just add that if you have recall insurance, make sure that enough people know about it because certainly you don't want a situation where the risk manager's on vacation, you go through a recall. The risk manager comes back from vacation and says, hey, how did the insurance work out? And you say, what insurance? And you've done the whole thing without giving notice or getting coverage. I've seen that not related to the food industry or recall insurance, but other situations where not enough people know about the existence of a certain kind of policy. A company could trigger it and could get coverage but inadvertently never does and then it's too late. So make sure the people know about it, right?

Ryan Gooley: Yeah, and most of those policies do have an obligation to notify at the very start to let them know so that they can get engaged for proper documentation and evaluation of determination of coverage or not. So if you work, whether it's in-house or with an insurance broker, whoever works with you and make sure that you understand that and yes, understand what's included in there, what the requirements are, across the organization know who's there. So, for example, if your policy has those pre-incident funds, your risk manager, your finance person that maybe replaced that policy, they're not going to leverage those pre-incident funds, but your food safety or your manufacturing quality operations team may not even know that those funds are available and budgets are tight, so why not use some of that free money that's there in those policies if you have that for the people that can actually benefit from that.

Kristina Merritt: That's really insightful, Ryan. And it goes back to our earlier conversation regarding communication mistakes. So thank you. Moving over to some practical takeaways for listeners. If a listener is thinking, we probably aren't as prepared as we should be, what is the first concrete step you would recommend that they take this week?

Ryan Gooley: If you've got a listener out there that's not sure, have a conversation with the other stakeholders in the organization. Help validate, is this a concern or not? Start the conversation. It's so easy to get caught up in your day-to-day business of manufacturing products, selling product, innovating product, meeting the needs of your customers and your employees. But this oftentimes is one of those things that just gets put to the back burner. Make a conscious decision not to do that, have the conversations, get a game plan in place, and then work to figure out where are there gaps or where are there external resources that can help you be more prepared. We talked about insurance as well. Regardless of the size of the organization, larger organizations typically are more adapt to having plans in place and having the resources established, probably because either they as an organization have gone through a recall, or individuals on their team have gone through a recall and they learn from that and have prepped. For your smaller organizations, your mid-size organizations that maybe are a little bit more lean, you're not going to have all the resources in-house, but what you can do up front is start identifying where you could leverage external resources. Whether that be outside counsel to be brought in that helps specifically with these issues because your general counsel that might help you with contracts or purchasing agreements or other things like that, maybe isn't the right person that has the experience in dealing with FDA regulatory matters. So maybe you need to add outside counsel for that, or a public relations (PR) firm that can help you manage through the crisis communications plan and get things ready in place. In the food industry, one of the big areas is having a third party such as like Sedgwick or someone to help manage call volume. So should you ever have a spike in call volume activity, you know who's the people that can help, you can call to add to your team quickly, and getting that rolodex of those resources and experts is another area that I would say, no matter who you are, make sure that that's up to date and that you have the resources there to help you manage through that situation.

Charles Weiss: And then sort of building on Kristina's thing about what could a company do this week if they think we're not as prepared as we should be, where does a company that says, we have something in place, but we really want to go deeper? We think this is something that we have worked on, but maybe not well enough, carefully enough. We need to update it. What's the best way for them to start that conversation, either with [a] professional like you or someone else, or internal resources, I guess if it's a great big company and those resources may exist in-house.

Ryan Gooley: I mean, for those, especially that maybe don't have the resources in-house, I mean, reaching out to someone, I would say, an area that oftentimes is untapped. Like I said, if they do have the insurance policy, tapping into the crisis consultants that are associated to their recall policy. And if they don't want to do that, which I can understand as well, if they're part of any type of professional organizations or trade associations for their industry, reach out to those organizations and see what resources they have available as well to help that company through that and with that planning and understanding for what they can do to improve their readiness and response from that standpoint. So there's a lot of resources out there, sometimes it's just a little bit of trying to dig into it and figure out where you can add on to things like that. So an organization that I've become a part of, but I know a lot of organizations out there, it's called IAFP or the International Association of Food Protectionists, I believe. And for relatively low cost for a food safety person to be able to join that organization and the resources that are available for just general food safety knowledge and experience, plus kind of the recall side is a great resource out there. But there's plenty of other resources depending upon the industry and what associations companies are a part of.

Charles Weiss: Got it. Anything you'd like to add before we wrap up?

Ryan Gooley: No, I think this has been [a] great conversation. It's an important topic to be thinking about, and a lot of times, like I said, it's not something that companies think about until they're faced with an issue. And so having the conversation and having the thought and bringing it to the forefront is always better to do it now versus when someone's sitting there with their head on fire and not sure how to respond to an issue and they've got an organization or a regulatory body breathing down their neck trying to move forward with the recall in a expeditious manner.

Charles Weiss: Got it, thank you.

Kristina Merritt: Thanks, Ryan. With that, we will wrap things up for this episode of our podcast. If any of our listeners have ideas for an episode or if you might want to be a guest, we would love to hear from you. Our guest today has been Ryan Gooley, Director of Business Development – Food Recall at Sedgwick. Thanks.