Product recall case study: Collagen catastrophe
Collagen supplement recalled after customer chokes on piece of plastic
A nutraceutical company has been manufacturing a collagen supplement in various flavours since 2018. Their sales have been steadily increasing to their present day forecast of £10m. In the last few years, their core range has been stocked in major retailers alongside direct-to-consumer sales.
The brand was caught off guard when a customer called to complain that they choked on a piece of plastic in the collagen powder as their co-manufacturer recently assured them that everything at the manufacturing plant was in good order. As the investigations began, the severity of the issue began to escalate as the company received an influx of calls and emails. Meanwhile, it was desperately trying to determine the true extent of the issue.
After a short time, the co-manufacturer managed to find the culprit – a conveyor belt in the production process had been fraying, leaving fragments of material in the collagen powder products that had been shipped out to retailers and customers. The co-manufacturer established that the machinery was last checked around 28 days ago, and to be sure of product safety all product lines produced within this time should be recalled.
Recall
The nutraceutical company immediately issued a recall notice and got in touch with affected customers and retailers to try to mitigate the situation. A significant amount of product was impacted by the recall, with around £1m worth of product recalled from shelves. For consumers who purchased directly from the company, a temporary hotline was set up so they could get in touch about the recall event, which cost £100k for set-up and staffing. The company also spent £750k on reworking the recalled collagen product through a sieve process to test if it was fit for sale.
To limit the fallout, the brand spent £50k on crisis communication experts and £200k on rehabilitation costs to limit the impact on business interruption. While this had some success, the nutraceutical company still suffered from £200k loss of sales as a direct result of the product recall event.
In total, the company lost £2.3m.
Luckily, the nutraceutical company was able to mitigate its financial loss because it had a product recall policy with CFC. CFC’s product recall coverage provided them with a vital first party indemnity policy when they needed it most.
Product Liability
One customer affected by the product issue was a self-employed music teacher. Regrettably, when consuming the product, a piece of plastic fragment damaged their oesophagus. Given their occupation, they suffered a loss of income over a 6-month period as they were unable to use their voice without pain for prolonged periods of time.
While the initial claim was for injury caused by the product, the product liability line of the coverage also provided indemnity for physiotherapy sessions to assist with the teacher’s return to work, as well as the loss of earnings throughout the 6-month period. The combination of these payments amounted to just over £120k.
Since the nutraceutical company also had a life science policy with CFC, CFC’s dietary supplement product was able to provide them with comprehensive liability cover against third party claims.
There are many exposures facing a manufacturer of supplements. A comprehensive offering that covers not just product liability, but also product recall, will help protect companies when the manufacturing process doesn’t go according to plan.
To find out more about CFC’s product recall policy, please contact the team at productrecall@cfc.com.
Did you know our life science team offers research and development, medical device and dietary supplement products? To find out more about CFC’s life science offering, please contact the team at lifescience@cfc.com.
*The companies and circumstances in this case study are fictional, but the scenarios are realistic and reasonable based on our experience.