Executive Briefings

Food Safety Is Not Peanuts

In his weekly address to the nation on March 14, 2009, President Obama announced he's forming a Food Safety Working Group to "upgrade our food safety laws for the 21st century." This got us thinking. Believe it or not, there are currently 11 government agencies in the United States with oversight on food safety under the departments of the Food and Drug Association (FDA), the Department of Agriculture, the Centers for Disease Control and Prevention, and the Environmental Protection Agency. While the FDA is the primary department, it has historically had more of a focus on drugs than food. So while 11 agencies own a piece of the problem--and forming the ultimate solution--in essence, there is no oversight.

To compensate, manufacturers have historically depended on supplier audits. For example, Peanut Corporation of America had been assigned a rating of superior by the American Institute of Baking in March 2008, giving a false endorsement of food safety to the extended supply chain.

Each year, an increasing amount of raw materials cross international borders. More than 30% of food manufacturing today is done by a third party. In addition, brand manufacturers in food and beverage have increased product claims. Terms like "organic," "free-range," and "allergen free" abound, as do "health" and "wellness." With this increased complexity, oversight cannot be solved by an individual company, a group of companies, or audit groups. The answer lies in more than technology or labeling. Instead, it needs to be an ecosystem play enforced by compliance. That's the only way to get players that don't play well together to work on solving the problem as a team.

In many ways, systems are broken. Public health systems take two weeks to sense a food-borne illness. According to the results from our studies, when there is a health or safety issue, only 40% of food products can be recalled. And it's more than just consumers getting hurt. When a major recall happens, it reduces the shareholder value of the producing company by 7%.

Company write-offs are also substantial. The average cost is $20M, with 14% of companies writing off more than $50M. When a category has a recall, 57% of consumers stop buying the category. In short, product velocity through retail is faster than public health sensing, with major risk to the company.

In the end, we all want to deliver safety to our children in their school cafeterias and our families at dinner. To do this, however, we need to rethink the entire system. We need to redefine the role of government, redesign supply chain capabilities, and more effectively sense and respond when there's a problem. This is one where it will truly take a village. Today, we need to start with city planning.

AMR Research has continuously researched this topic over the past several years. Below is a sample from our library that addresses the problems of food safety and traceability. If we can help advise your company on traceability in your supply chain, e-mail me at lcecere@amrresearch.com.
AMR Research

In his weekly address to the nation on March 14, 2009, President Obama announced he's forming a Food Safety Working Group to "upgrade our food safety laws for the 21st century." This got us thinking. Believe it or not, there are currently 11 government agencies in the United States with oversight on food safety under the departments of the Food and Drug Association (FDA), the Department of Agriculture, the Centers for Disease Control and Prevention, and the Environmental Protection Agency. While the FDA is the primary department, it has historically had more of a focus on drugs than food. So while 11 agencies own a piece of the problem--and forming the ultimate solution--in essence, there is no oversight.

To compensate, manufacturers have historically depended on supplier audits. For example, Peanut Corporation of America had been assigned a rating of superior by the American Institute of Baking in March 2008, giving a false endorsement of food safety to the extended supply chain.

Each year, an increasing amount of raw materials cross international borders. More than 30% of food manufacturing today is done by a third party. In addition, brand manufacturers in food and beverage have increased product claims. Terms like "organic," "free-range," and "allergen free" abound, as do "health" and "wellness." With this increased complexity, oversight cannot be solved by an individual company, a group of companies, or audit groups. The answer lies in more than technology or labeling. Instead, it needs to be an ecosystem play enforced by compliance. That's the only way to get players that don't play well together to work on solving the problem as a team.

In many ways, systems are broken. Public health systems take two weeks to sense a food-borne illness. According to the results from our studies, when there is a health or safety issue, only 40% of food products can be recalled. And it's more than just consumers getting hurt. When a major recall happens, it reduces the shareholder value of the producing company by 7%.

Company write-offs are also substantial. The average cost is $20M, with 14% of companies writing off more than $50M. When a category has a recall, 57% of consumers stop buying the category. In short, product velocity through retail is faster than public health sensing, with major risk to the company.

In the end, we all want to deliver safety to our children in their school cafeterias and our families at dinner. To do this, however, we need to rethink the entire system. We need to redefine the role of government, redesign supply chain capabilities, and more effectively sense and respond when there's a problem. This is one where it will truly take a village. Today, we need to start with city planning.

AMR Research has continuously researched this topic over the past several years. Below is a sample from our library that addresses the problems of food safety and traceability. If we can help advise your company on traceability in your supply chain, e-mail me at lcecere@amrresearch.com.
AMR Research