For many around the world, Christmas is an exciting time of year. This is why many manufacturers will be thinking well ahead of time to prepare themselves for a major sales period. Products manufactured for seasonal events can represent a significant portion of income for many manufacturers, and a disaster at the wrong moment could have devastating consequences.
Business Interruption
Product recall costs can often be misjudged with focus primarily on the costs incurred on a first and third-party basis. This often results in first part indemnity being overlooked.
Standalone product recall policies include cover for business interruption, providing cover for future loss of sales for a defined indemnity period while the product is unavailable for sale, or production is forced to halt. The value of this shouldn’t be underestimated.
The loss of sales impact
For growing companies, protection against loss of sales can prove to be a vital element of cover to keep a business afloat. If profit margins continue to be impacted, business interruption cover can prove to be a lifeline for companies in crisis situations.
For a company forecasting significant growth, a product recall event could have a catastrophic impact, throwing them off course. Whether its stalled research and development, cancelled contracts or reduced public interest in the product, product recall events can produce a significant drop off in sales that can be difficult to mitigate.
A loss of contract can be devastating for a business, especially if there is heavy reliance on a single customer, and the cost can often be much more than recalling the product itself.
How this can impact seasonal products?
The importance of business interruption increases further when we consider companies with seasonal product lines. When a product recall event causes production to shut down at the wrong time of year, it can have a disastrous impact on a company’s financial results; for instance, if chocolate eggs are unable to be produced before Easter or cranberry sauce before the festive season. This phenomenon is not unique to food manufacturers – it could also be applied to packaging being produced for seasonal celebrations or spooky decorations for Halloween. Durable products are also exposed to the same risks when it comes to loss of sales on seasonal goods.
For more information about CFC’s product recall policy, please contact productrecall@cfc.com
