Poor quality control can have ongoing repercussions for food and beverage brands. In addition to the financial impact of recalls, reputational damage which leads to a drop in sales, is also a strong possibility.
ETQ polled food and beverage companies in 2024 on their approach to quality and how they cope when things go wrong. In this blog, we dive into the data to uncover the true cost of poor quality, both financial and reputational.
Recall Costs & Financial Burdens
Of the organizations surveyed, 73% have experienced a recall in the past five years. For most, the costs reached into the millions. The majority of respondents (48%) reported costs of $5m-$10m from a single recall, while 37% were hit even harder, reporting costs of $10m-$50m. This shows how dramatically a single recall could affect a business’s bottom line.
On top of the direct cost of recalls, there are other financial burdens associated with recalls of poor-quality products. For example, a business may have to delay a product launch, shut down a factory, or lay off employees.
According to those surveyed, the biggest impact of recent recalls has been employee layoffs (33%). This was closely followed by downtime caused by plant shutdowns (29%). Many of these businesses have had to manage the negative effects of the recall on brand reputation (24%) and customer satisfaction (24%). On top of this, 24% also experienced increased remediation costs, while 17% were forced to delay product introductions.
Brand Reputation
22% cited brand reputation as the biggest impact of poor quality. A drop in how people perceive the brand can make it more difficult to secure new customers. This impacts revenue, but it can also increase costs, as businesses often increase marketing budgets to attempt to repair their reputations.
Customer Satisfaction and Loyalty
Along with impacting brand reputation, quality issues can also affect the loyalty of existing customers. In fact, 24% of food and beverage companies said recalls had an impact on customer satisfaction. On top of the difficulty securing new sales, once-loyal customers might choose to jump ship because of ongoing quality issues.
A product recall or instances of declining quality will decrease customer satisfaction scores. In addition to impacting sales, improving these relationships and rebuilding customer trust will have costs.
Worker Safety Concerns
Of the food and beverage companies surveyed, 27% stated that poor quality had the biggest impact on plant injuries and worker safety. When production processes aren’t up to standard, the result is often a drop in quality. However, these substandard processes can also lead to safety issues.
Manufacturers that do not focus on plugging quality control gaps can compromise worker safety. For example, if a batch of ingredients is subpar due to poor quality procedures, or if an organization is not agile enough to scale to meet new demands, quality suffers, the ability to manage and respond to audits drops and workers may need to intervene manually. This may increase their risk of injury from machinery or repetitive strain.
Layoffs and Operational Disruptions
According to the research, 33% of respondents reported layoffs due to quality issues. This is alongside the operational delays caused by plant shutdowns (29%). This disruption is further impacted by a drop in morale following downtime and layoffs, resulting in a less efficient workforce.
Quality as a Strategic Initiative
49% of food and beverage companies identify quality as a critical corporate strategy. With investment into this area of the organization, it’s possible to move from reacting to quality issues to proactively looking to avoid them. This strategy can reduce risks by identifying potential problems before they occur. For example, detecting faulty packaging early can prevent a recall at a later date. This approach not only protects consumers but also strengthens brand reputation through consistent delivery of quality products.
Role of Automation and Standardization
An automated quality management system, as used by 91% of respondents, can help prevent costly quality failures and aid in an organization achieving continued compliance as it grows. Used alongside standardized processes (adopted by 87% of respondents), this ensures consistent production and minimizes human error.
Together, automation and standardization streamlines quality checks, reduces variation and allows faster detection of potential issues. This ultimately enhances overall product reliability and customer trust.
Food and beverage companies should implement proactive quality management practices to avoid the direct costs associated with poor-quality products.
Enhance Supplier Quality Management
With 67% of respondents confident in their control over suppliers, it’s clear how important these relationships are in maintaining quality. Standardizing internal production processes is a good first step, but these standards should also be extended to suppliers.
If a supplier isn’t producing ingredients to the standard expected by the manufacturer, this can lead to issues in the production line. Consistent quality from suppliers is key, which is why it’s important to ensure they have clear standards to follow. Frequent audits help monitor supplier performance and maintain accountability.
ETQ Reliance® has built-in tools to help set these standards, manage supplier relationships and conduct audits.
Invest in Employee Training
To monitor its impact, 89% of survey respondents track quality as part of profit and loss reports. Because poor quality products can have far-reaching consequences across an organization, frontline workers must be properly trained to spot issues. The earlier an employee can identify a problem, the more straightforward it should be to correct it.
Regular training can empower employees to spot issues as early as possible. It can also help reduce the cost of human error. Workers trained on quality standards and the technology to support their role are less likely to make mistakes. This also allows them to work with tools such as ETQ Reliance to identify potential noncompliance issues.
The Business Case for Quality Management
The cost of poor quality can go far beyond a product recall. With a financial, reputational and internal impact, it’s important to consider quality management a strategic investment. By taking a proactive approach to quality, food and beverage manufacturers can safeguard brand reputation and worker well-being.
Read the full report now and learn how an automated quality management system can help your organization decrease recalls, remain compliant as you scale and meet new demands.
