Developing A Strategy For Crisis Management
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An upcoming panel discussion at the Nutritional Law Symposium in Utah and a call from a reporter about the Maple Leaf Foods issue in Canada have me thinking a lot about crisis management. How a business responds at the outset of an alleged food-borne outbreak determines its fate in many ways.
Implementing a strategy from the start is a must to minimize the impact of a crisis. Yet the million- or billion-dollar question is, how do you develop the right save-the-business strategy when events are overwhelming and occurring at light speed? You need to bring together quality assurance, legal and food safety personnel (epidemiologists, microbiologists and other food safety experts) who can respond immediately to find the source of the outbreak and work with public health officials. A business must ascertain at the earliest possible moment the source and scope of the crisis. Once a business understands whether an outbreak is limited to a particular outlet or product line, and how many people might be affected, it can formulate a public relations, recall and legal strategy to limit exposure.
The key is execution. Everyone on the crisis management team must work in sync and understand their roles. And the secret to execution is preparation. Long before a crisis, a team (usually a combination of personnel from outside and inside the business) should be in place, rehearsed and ready. History is full of lessons: Some businesses executed crisis management well and emerged from dire crises stronger than before; others were unprepared, and their brands have long been forgotten.
Irradiation - Evaluating the Investment
With a fair amount of fanfare , last week the FDA approved irradiation of iceburg lettuce and spinach. For restaurant owners, the question is whether they should invest in this process.
Like pasteurization, irradiation may provide an added level of protection from food-borne illnesses such as salmonella and E. coli. When used in combination with other state-of-the-art food handling practices, irradiation should dramatically reduce the chances of transmitting food-borne illnesses to consumers.
The FDA estimates that irradiated fruits and vegetables will cost two to three cents more per pound than nonirradiated products. Irradiation does not substitute for any other food safety practices or investments. Indeed, without added precautions against cross-contamination or field-to-fork regulation of the supply chain, irradiation provides little benefit.
Perhaps more significant than cost is the question of consumer acceptance. The good news is that the FDA does not require labeling of irradiated foods by restaurants (as it currently does for supermarket products). Yet some organic foods advocates are passionate about what they believe to be harmful effects of irradiation and are already lobbying restaurants and consumers to steer clear of irradiated foods.
At this point, arguments against irradiated foods are similar to those against pasteurization and appear to be grounded more in emotion than in science. In weighing issues of consumer acceptance and lowered risk to human health, businesses should understand that unlike economics and politics, in food safety, perception is not reality. Failure to irradiate will likely result in more personal injury claims and a significant threat to the business and the brand.
More on Compensation for Tomato Growers
I wrote recently about legislation introduced in Congress to compensate tomato growers for their losses during the recent and protracted Salmonella Saintpaul investigation. While the legislation has not yet advanced, Cindy Skrzycki from Bloomberg.com is also covering this issue and wrote a great article "Tomato Growers Seek Payback on Samonella Scare."
According to the Bloomberg article, even Bill Marler, the leading plaintiffs' attorney in the area has sympathy for the growers and believes that compensation may be warranted (though he believes its premature).
The Bloomberg article explains well how tomato growers (many of whom are small businesses) have no where else to turn:
"The U.S. Department of Agriculture runs crop-insurance programs that cover disasters from floods and hurricanes, not crops ensnared in recalls. Some companies have recall insurance, but they're not likely to collect unless there is a recall -- not a warning or an advisory."
Government Assistance for Rotten Tomatoes?
I recently received a call from a reporter about legislation introduced by Representative Tim Mahoney (D-Fl), that would provide “emergency assistance to growers and first handlers of tomatoes.” The text of the bill, HR 6581, as referred to the House Agriculture Committee reads as follows:
SECTION 1. EMERGENCY ASSISTANCE FOR GROWERS AND FIRST HANDLERS OF TOMATOES.
(a) Emergency Assistance - There is hereby appropriated to the Secretary of Agriculture $100,000,000, to be available until expended, to make payments to growers and first handlers, as defined by the Secretary, of fresh tomatoes that experienced crop or market losses, or both, as a result of the Food and Drug Administration Public Health Advisory issued on June 7, 2008.
(b) Payment Amount - The amount of the payment made to a grower or first handler under this section shall not exceed 75 percent of the greater of--
(1) the value of the unmarketed tomatoes; and
(2) the actual loss incurred by the grower or handler.
The reporter asked whether those intended to receive financial assistance under the bill would be compensated some other way, such as insurance payments. She also questioned the fairness of this legislation.
The answer to the first question—will producers receive insurance payments—is most likely no. Some producers and sellers maintain recall insurance (or perhaps some form of business interruption insurance). As discussed previously in this blog, recall insurance may not cover events that are not “recalls.” In this case, FDA never requested a recall. Even for forms of recall insurance that may offer coverage for events other than a recall, insurers may argue against coverage because it turns out that there is no evidence that tomatoes were the culprit of the Salmonella Saintpaul outbreak. The bottom line is that few, if any, producers or sellers may receive insurance payments for their business losses (estimated to be in the hundreds of millions of dollars).
Although many “fault” FDA, tomatoes have been linked to previous outbreaks. FDA’s warning about tomatoes was the food equivalent of rounding-up the usual suspects.
Yet, government relief may still be justified and, therefore "fair." Events leading to the losses suffered by producers and sellers (many of whom are small businesses) were fortuitous and beyond their control. While relief may not be justified because of some "fault" by the federal government, government relief may be justified as “disaster relief.” If relief is justified for agriculture wiped out by floods or other acts of God, why is not fair for those same farmers and producers to be compensated for this kind of disaster?
