Food Protection Trends - May/June 2017 - 155

800
700

Number of recalls

600
500
400
FDA
USDA

300

Taken from USDA, 2016
and FDA, 2016

200
100
0
2010

2011

2012

2013

2014

2015

Year

Figure 1. Number of food recalls by USDA and FDA, 2010-2015

contamination in their prepackaged ice cream bars. At the
time of the initial recall, there had been ten confirmed cases
of listeriosis over a four-year period. Over the next several
months, as the FDA investigated, Blue Bell issued several
more recalls (22). Because of the loss of revenue after
stopping production, Blue Bell laid off approximately 1,450
employees, furloughed 1,400, and reduced the pay for those
who were left and were in charge of cleaning the facilities to
prepare them to reopen (35).
Food safety and food manufacturing of all fruits and
vegetables, dairy, and seafood is regulated by the Food and
Drug Administration (FDA) and 80 percent of all other
foods, except those containing more than 5 percent of meats,
poultry, and certain egg products, which are regulated by the
USDA and the FSIS (25). As indicated by Fig. 1, the FDA
issued approximately six times as many food recalls as the
USDA in the time period from 2010 through 2015 (19, 52).
The number of food recalls by USDA doubled from 2013 to
2015, which the USDA attributed mainly to a rise in recalls
for undeclared allergens present in foods (52).
Recalls are classified into three groups: Class I, Class II, or
Class III. A Class I recall is reserved for products with a high
probability of causing serious health effects or death; a Class
II recall is implemented when temporary or treatable adverse
health conditions may occur, and Class III recalls are used
for products not likely to cause any health concerns (20).
Class I recalls are the most common for all food products, as
indicated in Figs. 2 and 3. This suggests that the majority of
recalls pertaining to food products, may be life threatening
to the consumer (35). While Class I recalls comprised the

largest number of FDA recalls in 2015, Class II recalls were
almost as numerous because of undeclared allergens in food
products, as indicated in Fig. 2 (23). All classes of recalls by
USDA increased between 2014 and 2015 (Fig. 3), which is a
cause for concern for both the manufacturer and consumer.
COMPONENTS OF RECALL COSTS
The foregoing examples provide anecdotal evidence that
recalls can be costly. Researchers have also conducted formal
studies to better understand all of the components that
can be attributed to recall costs. One method of attributing
these total costs is the event study. This approach uses
evidence from financial markets to infer the effects of recalls
on company profitability. Thomsen and McKenzie (49)
measured stock market reactions to meat and poultry recalls
and found that Class I recalls typically result in significant
and adverse stock price movements for meat and poultry
firms. Salin and Hooker (46) examined several specific recalls
and found varied stock market responses; one company in
their study, Odwalla, experienced a drop in its stock price
amounting to about 30 percent of shareholder wealth in the
days following an apple juice recall.
Researchers have similarly examined recalls or release of
unfavorable product safety information in contexts other
than food. Broder and Morrall (9) found negative stock
market reactions to firms implicated in fatalities. Zhao et
al. (60) found large negative stock market reactions for
Chinese firms implicated in product recall situations. Several
researchers have assessed stock market reactions to airplane
accidents (7, 8, 12, 13, 28, 31, 39). Other researchers have

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