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Beyond Peter Pan: How ConAgra's Pot Pie Recall Bakes In Hard Lessons for Supply Chain Management

From peanut butter to bikes, product recalls are breaking records. Will your supply chain be ready when you have to run it backward in order to track, trace and collect a recalled product?

By Kim S. Nash

October 22, 2007 — CIO — At lunchtime one day last January, Jill Hein, an Iowa mother of eight, took a jar of Peter Pan peanut butter—the kind with Peter, in his feathered cap, on the label—out of her pantry. She opened the lid. Everything seemed fine. No funny odor. No odd color.

Hein fed the Peter Pan to one son and one daughter. Within hours, they were cramping and vomiting. Hein’s 3-year-old boy, Bowen, had to be taken to the emergency room the next day. Hein ate some herself two weeks later and was hospitalized for dehydration. And renal failure.

Alone or with jelly, peanut butter is as classic as Elvis, who preferred his on white bread, mashed with bananas and fried. Americans eat 700 million pounds of crunchy and creamy each year—enough, the Peanut Advisory Board says, to coat the floor of the Grand Canyon.

Hein never expected a simple peanut butter sandwich to go so wrong.

Neither did ConAgra Foods, the $12 billion conglomerate that makes Peter Pan.

One of ConAgra’s oldest and best-known brands, Peter Pan brought in $109 million in sales last year, says Information Resources, which tracks retail spending. ConAgra also supplies some of Wal-Mart’s Great Value house brand and sells peanut butter toppings to companies like Carvel and Sonic, bringing total peanut butter sales to $147 million last year. But when an outbreak of a rare salmonella strain was traced to ConAgra peanut butter, the company would have to try to get it all back.

The Peter Pan recall eventually involved 326 million pounds of its own and Wal-Mart’s peanut butter, plus 99,953 cases of toppings. So far, ConAgra has spent more than $78 million dealing with an estimated $1 billion worth of potentially infected product. Its peanut butter sales were down 63 percent in fiscal 2007, the company says.

No one knows how much ConAgra will need to spend to re-establish trust in its product. Hiring Tinker Bell to ask people to clap if they believe in Peter Pan won’t fix this.

Why Recalls Depend on the Supply Chain

Peanut butter isn’t ConAgra’s only recall trouble, either. The company has had to call back hundreds of pounds of ground beef in the past few years, and this month ConAgra’s Banquet pot pies were recalled when at least 211 people in the U.S. got salmonella poisoning, which the Centers for Disease Control and Prevention links to the pot pies. That recall is ongoing.

But it’s not just ConAgra. Recalls are blooming like flowers in spring: Dole’s e.coli bagged salads; Metz Fresh’s salmonella spinach; REI’s faulty children’s bikes; Mattel’s lead-painted and choking-hazard toys, just to name a few. Federal records show at least 628 recalls so far this year, and another 941 in 2006. (For more, check our History of Famous Recalls.) Globalization accounts for some of this surge. Many U.S. companies depend on overseas production, where quality controls are difficult to monitor. And it’s not just hard goods like toys from China. Food, too, arrives by container ship from other countries, and sometimes it’s contaminated. So far this year, for example, more than 8,660 cartons of cantaloupe from Costa Rica have been recalled for salmonella risks, according to U.S. Food and Drug Administration (FDA) records.

But mainly, things go wrong. That’s business. That’s life.

“One risk every company faces is a recall,” says Jane Barrett, an analyst at AMR Research in Boston. So if recalls are inevitable, a CIO must help create a supply chain ready to cope with them, she says, by quickly providing the relevant data to facilitate the process. And a recall conducted under pressure from federal regulators, an angry public and plaintiff’s lawyers tests every supply chain management decision a CIO makes.

 

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