COVER STORY
Allergic to Allergens
– Covering your Risk
Leading New Zealand insurance underwriter Dinesh Murali is warning
Kiwi food manufacturers about allergen contamination, and says the
threat of food recalls as a result of undeclared allergens is risky.
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The New Zealand manufacturing sector is experiencing
strong growth and is a standout on the
international stage. Our New Zealand climate
and abundant natural resources make food
manufacturing a good strategic choice. Last
year, there were around 40 food and beverage
recalls registered with the Consumer Institute
magazine. Until recently, microbial contamination
and foreign matter contamination were the
most common reasons for recall.
In 2014, out of a total of 26 recalls, most were
due to foreign matter contamination, including
plastic, metal and glass. Recalls due to undeclared
allergens have increased since 2015.
In 2017 14 out of 41 recalls were due to undeclared
allergens, the highest to date.
This is quite a different trend compared to the
United States, the European Union and Australia,
where undeclared allergens have been the
most common reason for triggering a recall.
Recalls triggered by undeclared allergens in
these regions sit at around 40% of the total
recalls. Earlier last year, lupin was added to the
list of allergens that must be declared as part of
labelling. According to Food Standards Australia
New Zealand, food businesses have until this
May to meet mandatory allergen declaration
requirements for any food products containing
lupin. An interesting trend within allergens is
that until 2014, the majority of the undeclared
allergen recalls were from nuts and egg, but
recently they have been predominantly due to
milk, soy and gluten. It is unclear whether the
rise in these new allergens is because of increased
awareness via the likes of social media,
management of certain allergens is better than
others, or poor quality control with raw materials
in the ever-expanding global supply chain.
The answer is probably a combination of all
these factors, along with the new food regime
and the growing list of allergens. New Zealand
regularly sources ingredients and produce from
overseas suppliers and out-sources manufacturing
processes. This supports an efficient global
supply chain but it also poses new challenges
and risks in relation to quality control. For food
manufacturers, the best tool and strategy
should be to address these issues with their
risk management processes. However, no risk
management and quality control system can
guarantee a flawless outcome, given human
error and the occasional variable output from
suppliers and contractors. Small-to-medium
enterprises are also more vulnerable than bigger
companies, due to their limited resources
available to manage a recall. Beyond the direct
financial impact, they can also suffer significant
reputational damage if they do not have the
resources and expertise to be able to manage
these critical issues when they arise, such as a
product recall of a contaminated product. Delta
Insurance’s manufacturing liability wording is
designed to assist food and beverage manufacturers
manage recall events, and their
losses related to the recall event and protect
the balance sheet. Delta provides an exclusive
cover for manufacturers who are facing major
challenges in relation to recall of contaminated
food and beverage products, and this cover can
also be packaged with other coverages such as
cyber liability.
Jane Lancaster is a founding
partner of consultancy service
Catalyst, based in Christchurch.
Dinesh Murali is
casualty manager
for Delta Insurance
undeclared allergens, microbial contamination,
foreign matter and others such as biotoxins, contaminants
and labelling errors.
In 2017 in Australia, at a total of 50, food recalls
were lower than for a few years. However, it was
the opposite for New Zealand with 53 recalls,
and the first time New Zealand has had more
food recalls than Australia. Usually New Zealand
has around one third of the recalls that Australia
has. The pattern of notified causes for recalls is
similar in both countries. In past years, undeclared
allergens have accounted for about a third of all
recalls, microbiological contamination another
third and foreign matter one sixth. However, this
year for both Australia and New Zealand, 50%
of the recalls were due to undeclared allergens.
This is the highest it has ever been, climbing from
18% in 2007. The allergens featuring in recalls are
typically the presence of milk, gluten and soy, with
fewer recalls for egg, nuts and sesame.
What can be learned
The recalls are simply numbers of consumer
level food recalls. They bear no relationship to
the severity or size of the incident, but they may
provide evidence of patterns of failure in food
systems. For instance, with respect to recalls due
to allergens, there are two apparent causes:
Production failure, for example poor raw material
control, entering an incorrect label code for an
in-line printer, or putting product into the wrong
pack altogether.
Design failure, where the labelling didn’t match
the ingredients. For example “dairy free’ on the
front, but dairy product is in the ingredient list.
Similarly for ‘gluten free’. This appears to be a
major reason for allergen-related recalls.
It is surprising that these simple system failures
continue to impact on consumers’ health and
perceptions. If we use the allergen labelling
failures that reach retail as a proxy for the likely
level of failure of label design and manufacturing
systems, then there is still room for significant
system improvement.
What needs to happen
And finally, we find it perplexing that many of the
recalls should have been obvious either in production
(such as wrong label on a product) or in
design (such as a dairy-containing product being
dairy-free). Is it necessary for the company to design
systems that attempt to cover every potential
occurrence or defect? This approach may be
burdensome but may actually be needed if people
in the supply chain are not going to notice defects
that are obvious after the event. After every recall,
or near miss, the review of the food system has to
ask that question.
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