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Policy makers within the US Department of Agriculture (USDA) complement the role of meat and poultry plant managers in food recalls. The increasing frequency and scale of recalls raise questions whether sufficient attention is placed on these events. Three measures of recall effectiveness are introduced to evaluate this public-private crisis management process. Managerial and technical variables are compared to these measures of effectiveness. Results from regression models suggest that recalls carried out by the smallest sized plants, those that took place after Pathogen Reduction/Hazard Analysis Critical Control Point implementation, and recalls involving processed products are more effective. Little evidence of differences was found in the effectiveness of the crisis management process between meat plants compared with poultry plants or for plants that are part of a larger firm. Despite USDA’s stated focus on recalls with more severe public health consequences, there is no evidence that Class I or microbiological recalls are more effectively managed.

Effective crisis management within the food system requires prompt and complete responses to food safety problems to ensure consumer confidence. As an example, meat and poultry recalls in the US have been subjected to increasing scrutiny over recent years with concern being voiced about the appropriateness of a predominately voluntary process. The Federal government has a limited ability to require firms to conduct recalls. Yet it is in the best interest of firms to pursue proven crisis management practices to reassure their customers. It is unclear if all firms recognize this situation or if additional policy is required to strengthen government oversight or control. Given this environment, various bills have been presented to the US Congress, particularly following large recalls of nearly 19 million pounds of ground beef over concerns of contamination with Escherichia (E.) coli O157:H7 and 27.4 million pounds of chicken and turkey products potentially contaminated with Listeria monocytogenes in 2002. 1 The Food Safety and Inspection Service (FSIS) of US Department of Agriculture (USDA) is the main regulatory agency responsible for the safety of meat and poultry products. In 1998, FSIS set up a working group to evaluate its recall policy and provide recommendations. The group’s findings emphasized how to strengthen risk communication channels between the agency, firms and related parties and how to maximize product recovery (Axtell et al., 1998). Nevertheless, a subsequent report by the US General Accounting Office (GAO) suggested that further action was necessary (GAO, 2000). This paper uses the database of meat and poultry recalls maintained by FSIS covering 1994–2002 to test for effectiveness of crisis management, using new benchmark measures that focus on the timeliness and impact of the process. Only with an effective recall process can the public health effects of food safety problems encountered by firms be minimized. Several studies have examined FSIS meat and poultry recall events, mainly to consider the economic and financial incentives provided by recalls to encourage private food safety controls. Lusk and Schroeder, 2002, Marsh et al., 2004, Salin and Hooker, 2001, Thomsen and McKenzie, 2001 and Wang et al., 2002 examined the effect of meat and poultry recalls on firm’s stock price, market returns, consumer demand and societal reactions. Teratanavat and Hooker (2004) present a summary of key trends in the FSIS recall data set. Shiptsova et al. (2002) examined the effect of recall costs on profitability and competitiveness of the beef, pork, and poultry industries using data from 1995 to 1999. Other studies provide descriptive statistics and summaries of the US Food and Drug Administration (FDA) recall data for microbial contamination and undeclared allergens, see Wong et al. (2000) and Vierk et al. (2002) respectively. However, no study has yet been conducted which analyzes the relationship between recall effectiveness, as defined from a policy perspective, and possible explanatory factors. This study constructs three measures which indicate the overall effectiveness of this public-private crisis management regime. The measures are not intended to estimate the cost of a recall but to assess the extent to which consumers are protected by current practices and, if not, to recommend policy improvements. Several characteristics, which may influence recall effectiveness, are included in an attempt to reveal useful information for firms and policy makers to help assess whether recall strategies need to be adjusted for different cases. These measures are unique to the literature on the economics of food safety.

Three measures are presented and used to test hypotheses about food recalls. This research advances our knowledge about food safety crisis management efforts undertaken by meat and poultry plants presenting statistical indicators that can be used to benchmark the process. Only limited conclusions can be reached in terms of overall performance and factors that explain the effectiveness of recalls. The results provide supporting evidence that PR/HACCP implementation facilitates meat and poultry recalls but this alone does not suggest that the recall process has become more effective over time. Despite its past efforts in enhancing public health, FSIS still needs to find ways to improve the recall process, perhaps by placing even more emphasis on and re-allocate resources towards higher risk recalls (Class I, biological hazards), as they may cause more negative health consequences for consumers. It is important to understand whether the regulatory system has different impacts on firms of different sizes. The initial hypothesis was that the overall food safety system is scale-neutral with respect to occurrence of recalls. PR/HACCP provides flexibility for firms to design their process control plans, but smaller firms may experience more difficulties compared to larger firms in executing the recall process in a timely way. Neither of these premises were supported by the evidence. There was no statistical evidence that recall cases at large plants had shorter durations than cases at smaller plants. Further, the results contradict the hypothesis that management at larger plants carry out recalls in a more effective way than smaller plants. Both the recovery rate and the ratio of recovery rate to duration are higher for very small plants compared to small plants. Though not statistically significant the negative sign on the parameters for large plants in Table 2 and Table 3 suggest they may be less effective than small plants in recovering product in a timely manner. FSIS should therefore pay more attention to and help facilitate those recall cases from large plants in order to improve the effectiveness of the overall crisis management process. Once again this would re-allocate resources to higher risk recalls, given the expanded scale and wider distribution of products from larger plants. While these findings suggest that difficulties remain for larger facilities, this result requires further analysis. The impact of corporate management on recall effectiveness especially for cases in which multiple plants are operated by a single firm would be one way for such research to proceed. The major challenge facing those interested in statistical work on food recalls is that the data collection is divorced from the hypotheses of interest to business managers and regulatory authorities. Incomplete information on recalls is collected at the plant level, yet the unit of analysis for an understanding of business incentives should be the firm. Corporate ownership and business linkages may have changed during the period examined, which means that it will take further work to develop the most appropriate tests of hypotheses which more completely explore incentives for effective crisis management. Implementation of PR/HACCP is an ongoing process, and not all of the dynamics are captured with the timing variables used here. For example, the official notices of the final regulatory changes to come under the PR/HACCP program were published beginning in 1996, and it is possible that some plants adopted PR/HACCP or other quality control systems prior to the final implementation date. Nevertheless, the post-PR/HACCP period used here starts with the required date of implementation. New microbiological testing technologies have allowed for more precise and speedy detection of problems, and when combined with evolving “zero tolerance” directives by FSIS it is reasonable to presume that this influences the prevalence of recalls and other factors that are not measured well in the data used here.