Reputational insurance cover is more important than ever for food producers thanks to regulatory and customer changes, as your reputation is what makes people buy your products, a Gallagher specialist has said.
Stephen Elms, National Head – Food Production at Gallagher, said that stand-alone reputational insurance cover is important for food producers as they face a number of challenges on different fronts.
“Whether it is customer complaints on social media, responding to something like the strawberry crisis or an environmental or data breach issue, food producers should look to use reputational insurance to help re-build their brands if something should go wrong,” Elms said.
“The industry is well aware of the impact a negative reputational event can have on a brand following the Nanna’s/Hepatitis recall of several years ago.”
In 2015 Nanna’s Berries, a Patties Food brand, saw its reputation tumble following a product recall which linked berries to an outbreak of Hepatitis A in New South Wales and Victoria.
Following the recall, Patties Foods revealed that the event cost the business an approximate $14.6m reduction in profits. While the majority of costs were linked to the recall and disposal of berries, highlighting the importance of product recall insurance, Patties Food spent close to $25, 000 on social media coverage in the aftermath of the event to try and stem the negative press circulating around the group at the time.
In the most recent Allianz Risk Barometer, an annual study on the biggest risks facing business sectors, food producers named loss of reputation or brand value as the second biggest risk facing their industry.
Reputational insurance can provide cover for a variety of threats, such as:
- Negative mainstream or social media coverage
- Poor risk management or food safety practices
- Environmental concerns
- Data and security breaches
- Associations with external third parties that bring your brand into disrepute
It is inevitable that a loss of sales and profit will occur after an event or adverse media report as has been seen for companies as wide ranging as Malaysian Airlines, Target and Volkswagen.
Reputational insurance provides benefits to assist companies that lose business or share value in the event of a reputational event. It can also be used to engage a team of specialist crisis managers to help guide your business through the aftermath of an event to limit the damage to your brand or business.
From a regulatory perspective, the Food Standards Act adds pressure from a reputation perspective. Any issue with food needs to be notified in the public domain which can bring a negative impact on a brand.
“A good brand is so important as competition within the industry continues to rise,” Elms said. “For food producers, reputational insurance can help protect them and provide stability in the face of a crisis.