Insuring against the surge in plant-based product recalls
In the food industry, increasing demand for vegan and vegetarian products means product recall events are on the rise. So, how can manufacturers secure against this expanding risk?
Over the last decade, the vegan and vegetarian markets have skyrocketed, with ethical and environmental concerns being leading causes for the surge in demand. According to Straits Research, the global vegan food market was valued at USD $16.45 billion in 2022. It is projected to reach USD $36.02 billion by 2031, growing at a compound annual growth rate of 9.1% during the forecast period (2023-2031).
Food manufacturing companies that previously focussed on meat-based products are now diversifying their product lines, in a trend that shows no signs of slowing. Birds Eye, Cargill and Hilton Foods have already entered the vegan and vegetarian market, targeting what is a highly profitable opportunity for their companies to expand.
At the same time, opening vegan and vegetarian production lines in production plants that also handle meat opens the door to cross-contamination. If the manufacturer fails to prevent a cross-contamination between meat and vegan/vegetarian products during the production process, they could be obligated to issue a recall, leading them to incur significant costs including reimbursement, rectification and business interruption.
In 2018, both Sainsbury and Tesco were subject to a Food Standards Agency investigation, following product recalls in relation to plant-based products. It was widely reported that laboratory tests found traces of pork in Sainsbury's "meat free" meatballs, while traces of turkey were discovered in a Tesco vegan macaroni ready meal.
Typically, product recall insurance policies provide cover if, during the production process, an unintentional error has occurred which would or has resulted in the insured product causing bodily injury. But in many cases, a cross-contamination between meat and vegan/vegetarian products would not cause bodily injury. This means the policy would fall short of providing indemnification to the client in the event of a recall.
With reputations at stake, food manufacturers can act now to bridge the gap. The right insurance policy can extend cover to reimburse clients for product recall costs even if the insured product does not qualify as being vegan or vegetarian due to the inclusion of animal-based ingredients. CFC’s animal by-product endorsement goes one further. Clients are not only eligible for product recall costs, but they will also have access to reimbursement in relation to business interruption, rectification, crisis services and rehabilitation costs.
You can find more about CFC’s animal by-product endorsement in the case study here. Or, you can get in touch at productrecall@cfc.com.