More demanding - and cynical - consumers are expected to continue driving the pace of product recalls this year, analysts say.
And while consumer dissatisfaction is rarely the cause of a product being pulled from shelves, companies are finding that many class-action proceedings are being launched within days of a recall announcement.
Businesses need to act responsibly following a recall, says Penny Bonner, leader of the new recall and crisis management practice at Ogilvy Renault LLP. "They need to deal with it quickly and efficiently to protect the safety of the public and the future of their business," says Bonner, a senior partner at the Toronto-based law firm.
After being hammered by a dramatic increase in product recalls in late 2007, businesses are being told that it's unlikely the number of recalls will drop this year, as shoppers become more aware and more connected.
Crisis management, industry officials say, will need to become a more important part of the corporate tool box and companies that have response plans are being advised to make sure they are up to date.
"We're seeing recalls almost every day now and it can be devastating for a company that has to withdraw a product from the marketplace," says Bonner.
While Ogilvy Renault has assisted companies for years on product recalls - providing legal advice related to recall liability and class-action lawsuit issues - Bonner says today's business climate requires a formalization of the practice, which is designed to complement the work performed by a public relations firm in a crisis management situation.
"Issues they cannot deal with are items such as, 'Are we legally required to do a recall? Do we have to notify the government?', and the myriad insurance questions raised by a recall."
As Ogilvy Renault moved further into the legal field of recalls and crisis management, "we found there was a greatly increased demand from our clients," says Bonner.
Growing consumer knowledge and pressure is helping increase the focus on recall and crisis management. A series of recalls in the pet food industry and the toy sector in 2007 helped sharpen that awareness.
"I think that there are many things to which consumers are more sensitive to today. They're more knowledgeable and more careful," says Bonner.
Edleman Canada, a public relations firm based in Toronto that has a crisis and issues-management practice that includes product recalls and product failure concerns, says the world has become more interconnected.
"You can see a cellphone picture or video (on sites like You Tube) before a company can even respond," says CEO Freda Colbourne. She says businesses should be prepared before a recall or crisis occurs.
Companies must know what risks and vulnerabilities they face, along with having protocols in place to contact the right people right away.
But having a plan is not enough, she adds. Simulations must be run to make sure a crisis response will run smoothly.
Colbourne notes that as manufacturers continue to cut costs by outsourcing production, it gets harder to manage all parts of the supply chain - and that can contribute to an eventual increase in recalls.
"It puts a real onus on the people who own the brand and the reputation to audit their supply chain and really know who all the people in the supply chain are," she says. "It's much more important now to be doing unannounced audits on your supply chain."
But crisis management specialist Allan Bonner (no relation to Ogilvy Renault's Penny Bonner) notes that everybody bears some responsibility.
"Everyone wants a lower price," says Bonner, president of Toronto-based Allan Bonner Communications Management. "The manufacturers want to (save money) so they will manufacture in China to get the best price possible.
"It's not necessarily some monster in a plant who is nefarious. Everybody through the entire chain of command has some responsibility."
The presence of lead paint led to 41 toy recalls in Canada last year, with some brand-name products being pulled off store shelves. Those toy recalls have shattered the beliefs of some parents who believed the toys - most made in China - to be safe.
Leigh Poirier, executive director of the Ottawa-based Canadian Toy Testing Council, says she can't recall a situation like this in all her years of experience. "What was surprising through this whole process was that people were not aware that the majority of toys were produced offshore. They didn't realize that at first," she notes.
Lead is toxic if ingested by young children and can cause adverse health effects.
"Kids are a vulnerable sub-population and you'd think we could get it right with kids' toys. Do we really need lead in kids' toys?" asks Tracey Easthope, director of the Environmental Health Project of the Ecology Center.
The centre is a Michigan-based non-profit organization that tested 1,200 popular children's toys for toxic chemicals and more than 3,000 components of those products. It found lead in 35 per cent of the toys tested.
Easthope says consumers need to compel the federal government and toy manufacturers to eliminate dangerous chemicals from toys.
But crisis management officials note that such recalls do not mean that companies will have to lose market share or worse, find themselves out of business.
"I think in many cases they can hold onto market share, if it's a good product," says Edleman Canada's Colbourne. "People expect you're going to do the right thing. If the company is not doing the right thing and puts the blame on somebody else or doesn't talk about what they're doing, they're going to have a harder time."
Colbourne adds she personally would be more likely to buy toys from companies that have properly handled a recall "because they're going to continue to make sure the quality is good."
Ogilvy Renault's Bonner agrees doing the right thing is the best strategy for recall-affected companies in the face of a more educated, more skeptical buying public.
Total Recall
The federal government recently announced the Food and Consumer Safety Action Plan, described as a comprehensive set of proposed new measures that will make Canadians safer by legislating tougher federal government regulation of food, health and consumer products.
The proposed legislation will change the government's approach to regulating product safety.
New measures will include: l Mandatory product recalls when companies fail to act on legitimate safety concerns.
l Making importers responsible for the safety of goods they bring into Canada.
l Increasing maximum fines under the Food and Drug Act from $5,000 up to current international standards.
l Better safety information for consumers and guidance to industries on building safety throughout their supply chains.
(Laura Severs can be reached at laura@businessedge.ca)
