An extract recall can have long-lasting implications, from financial strife to reputation damage (and more).
The botanical extraction process involves placing solid plant material in a solvent to remove the soluble components. Extractors must take great care to label products correctly and remove harmful pathogens to avoid potential and damaging product recalls.
When lawmakers or the general public compel a manufacturer of any kind to recall a product—no matter the reason—there’s always a cost incurred by the company.
For starters, there’s the direct cost associated with refunding consumers for the recalled product, along with lost profits from sales and the cost of the raw materials and labor that went into the production.
But, of course, all of these financial losses are assumed by the manufacturer.
And recalls can cost a company more than mere dollars and cents. Depending on the nature of the recall, companies could face damage to their brand and reputation. Once the public loses its trust in a company, it can be challenging to get it back.
There’s also a legal side to the equation.
Legal action from the licensing or regulatory body overseeing that state’s program (for example, the Department of Health) could further the devastation, leading to even more financial losses and tarnishing a company’s image in the court of public opinion.
The botanical extract industry shares many of the recall concerns of other sectors, including the food industry. This blog will examine the direct and indirect costs of a botanical extract recall while presenting some case studies and words of wisdom along the way.
The Monetary Cost To Extractors
There are several traditional and trusted methods for extracting botanical ingredients, along with technological advancements that continue to drive the industry. Today, extraction methods present more sustainability and efficiency than ever before, producing high-quality products that are safe for consumers in a timely fashion.
But even though the industry has made incredible strides and extractors take great pains to avoid costly errors, everyone involved in the extraction process must remain diligent to avoid recalls. One only has to look toward the food industry for an example of a company’s financial losses from recalls.
According to a recent study, food recalls carry enormous costs, often to the tune of more than $10 million annually, with close to one-quarter of these recalls costing more than $30 million each. This financial hit usually breaks down like this:
- Deploying a crisis and recovery team
- Pulling the product from stores
- Recovering stock from warehouses
- Recalling products from consumers
- Issuing notifications to retailers, partners, consumers, and regulatory bodies
- Investigating the cause of the recall
- Managing the recall with suppliers and retailers
- Disposing of the recalled product
But that’s not all.
Financial costs associated with a recall can have more long-term and far-reaching effects. The interruption of business that’s inherent in a product recall can lead to downtime and lost sales.
The costs that go hand-in-hand with this part of the crisis can include:
- Facility shutdown
- Facility cleaning
- Cancelation of contracts
- Staff layoffs
- Re-establishing operations
- Hiring and training new employees
These types of financial losses are not limited to the food industry. As many of the same processes exist in the botanical extraction industry, the risk of recalls is all too real. But as we teased earlier in this article, recalls can damage more than your bottom line.
The Brand/Reputation Cost To Extractors
A recall can change the perception of a brand with consumers.
This cost may be hard to quantify, but a company’s reputation is always on the line. In this case, it’s crucial that the manufacturer is completely transparent about the recall and is proactive about handling the incident. This approach can help minimize the damage to the brand and overall reputation.
Consumers will tell you exactly how they feel with their buying capital.
If they have any hesitations regarding the quality or safety of a product, they will spend their money elsewhere. This means that if your company’s name is linked to a poorly handled recall in the consumer’s mind, the effects could drag on for years—if not be a permanent drag on your reputation.
To again borrow an example from the food industry, a poll of consumers found that a whopping 21 percent of respondents would never buy any brand made by a recalled product’s manufacturer.
Of course, this type of consumer reaction largely depends on the product recall’s size, scope, and severity. Specifically, these three key factors mainly influence how a recall could shake a company’s reputation:
- The Size of the Recall: How many consumers were affected?
- The Company’s Reaction: Did the company make the necessary announcements to consumers?
- The Type of Product: Who did the recall affect the most?
The answer to those three questions can tell you a lot about how your company’s reputation fares in the face of a botanical extract recall and how quickly your brand will bounce back.
Labeling & Packaging: A Leading Cause of Recalls
In the extraction industry, errors in labeling and packaging are a significant source of concern and one of the factors that can cause a product recall.
For example, in one sector of the botanical extract industry, more than three-quarters of total recalls were issued because of errors in labeling and packaging—this accounts for about 140,000 units of the recalled product.
One way to prevent this type of recall is to institute SOPs (Standard Operating Procedures) for packaging and labeling and ensure a compliance officer verifies the label’s information.
In addition, proper integration of product testing in an extraction facility’s daily operations can instill a set of checks and balances in the system. This helps ensure that labels are correctly affixed to the correct product and that no extraction leaves the facility without being double-checked.
How To Avoid A Botanical Extract Recall
The number one way to avoid the dangers associated with a botanical extract recall is to reduce your risk – in as many ways as possible.
Risk reduction comes in many forms.
For example, extractors can mitigate the recall risk by training employees, implementing strict controls, and investing in the proper equipment built exclusively for the extraction process.
Highpoint manufactures high-quality stainless steel hydrocarbon extraction cylinders built exclusively for the botanical extraction industry. This purpose-built technology dramatically reduces the risk of contamination during extraction. This, in turn, helps mitigate risks—giving extractors the power of control and the tools to avoid product recalls.
