Lyons Magnus, a popular sub-contract producer of alternative food products, including non-milk based products for Oatly and other national brands, initiated a nationwide recall of 53 different beverages because of potential microbial contamination at its California facilities.

Fresno, Calif.-based Lyons Magnus issued a recall for 53 products it manufactures because of potential microbial contamination, according to the Food and Drug Administration.

Lyons Magnus issued the voluntary recall after an analysis showed they did not meet commercial sterility benchmarks, raising the risk of contamination from Cronobacter sakazakii.

Though no illnesses have been reported, the FDA advised against consuming any of the 53 products.

The recall affected popular brands like Stumptown Cold Brew Coffee with Oat Milk, Intelligentsia cold coffee and oat latte and Premier Protein shakes in chocolate, vanilla and coffee latte.

Unfortunately, the effects will have both short-term and long-term effects on both Lyons Magnus and Oatly that will impact growth and profitability for both companies.

The High Costs of A Recall

How much of an economic impact will the recall have? While the exact numbers haven’t been tallied yet we can use recent recalls as guidelines.

• In June, the the J.M. Smucker company issued a recall of Jif Peanut Butter. The estimated direct economic impact-$175-million.
• A recent infant formula recall by Abbott Laboratories cost the company an estimated 325-million

According to food industry experts, the average cost of a recall is $10-million in direct costs. These include:

• Pausing production to carry out recall response initiatives
• Alerting necessary parties within and outside the organization, including regulatory agencies and relevant retailers
• Managing the logistics of removing affected or mislabeled products
• Examining the source of the recall, including issues with suppliers, equipment, processes or contamination prevention plans
• Remediating the identified problems to prevent similar occurrences
• Planning for expanded human resources to handle recall tasks in addition to routine operations

It’s fair to say that Lyon Magnus and Oatly will pay a lot more, with some estimates as high as 50-75-million.

Indirect Costs

Unfortunately the direct costs are just the beginning. Oatly’s stock price plunged 20% the day the recall was announced, wiping 400-million off the company’s net worth, although it should be noted that the stock price has recovered.
Other impacts are still to come.

• Lost sales while production is halted and retailers pull products off the shelves.
• Brand deterioration with consumers losing confidence and switching to alternatives
• Potential Litigation if anybody gets sick
• Higher costs for recall insurance
• Potential compliance penalties from the FDA and USDA

Recalls are happening more frequently today than ever before, for reasons including stricter compliance regulations and supercharged government testing regimes using novel technologies like next-generation sequencing. 

This increased focus on testing by the government has led to a greater discovery rate of contamination, which is a good thing for the public. It means that improvements will be made to yield an even safer food production environment.

Nonetheless, recalls are alarming to your customers, and the last thing you want to risk is their trust in your brand.

At the end of the day, your brand is your primary asset. It is a representation of who you are and how you do business.

When recalls happen, customers lose faith in your brand, which comes with a hefty price tag for your company. If your brand deteriorates due to consumer mistrust, you’re risking business failure.

Are You Prepared?

If your quality programs and initiatives aren’t at the top of your priority list, you’re putting your entire company at risk, both in the short and long-term.

How prepared are you for a recall? can you initiate mock recalls? Are you up to date and compliant with HACCP certification? Is your recall plan in place, up to date and ready to go? 

It’s imperative that you regularly review and update your quality systems and insure that all of your employees are properly trained and your equipment is maintained at the highest standards.

You owe it to your team, your investors and most importantly your customers.

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Technologies International, Inc. has been working with food and beverage manufacturers for 25 years to help companies reduce risk, improve business performance and protect profits. We can be reached at (909)-614-1416 ext. 120 or on the web at https://tech-intl.com
Let’s talk about how you can take your food and beverage manufacturing company to the next level.