Losing Consumers’ Trust

Last week their was a recall of 143 million pounds of beef in the USA. Lets take a short systemic view at what is going on. The public has an interest in a safe food supply which is difficult to enforce through caveat emptor (buyer beware). So this is a natural situation for government regulation (to protect the public interest) – plus it relates to public health which is another natural for government regulation.

The USDA regulates the industry and puts in place rules as new threats emerge. So a few years ago they instituted rules that if an animal can’t walk after the USDA pre-death inspection they be re-inspected “largely as a precaution against bovine spongiform encephalopathy, or mad cow disease .” It seems hard to argue with that plan. If the pressures to maximize profits (assuring every cow is processed) exceed the desire to take precautions to ensure the safety of customers the risk of losing the trust of consumers is great.

There have been several instances, that have been made public, which call into question how effective the system is at preventing self interest from endangering the food supply. That then calls into question the safety of all meat that is part of that system. Many in the industry seem not to realize that they will be judged by the failures of any in the industry. And in my view, it is in their interests to have strong protections industry-wide.

The export market for meat is large. For political reasons some countries aim to protect local farmers and ranchers (the USA is a huge subsidizer of farmers and ranchersSugar Industry Quotas). And when the system continually shows that bad practices are allowed to continue it makes it a very easy decision to not allow the import of meat. Why would a country want to import food from a system that fails to follow food safety standards (especially if politically that is what they want to do – this provides them a pretty darn good reason to do what they want).

People are emotional about their food safety. It is not just the final results that matter but the impression given. And the impression I think many see is that those involved in the food industry often place money about a mission to feed the world.

I think it is a mistake for any company to focus on only money rather than a larger purpose. But that is especially true if customers have an emotional connection to your product that requires customer to trust you care about them.

Reinspection of downed cattle was key issue in beef recall

The California plant at the center of the current controversy, Westland/Hallmark, is now shut down, and the San Bernardino district attorney has filed charges against two employees. One, Daniel Navarro, was taken into custody and has posted bail. The other, Luis Sanchez, remains at large.

The plant can no longer operate because the USDA withdrew its inspectors after the Humane Society of the United States provided video of animal abuse at the plant and the USDA learned that some animals, so-called “downer cows,” were slaughtered without reinspection. Without USDA inspectors on site, the plant is not allowed to operate.

Beef Recall Latest in a Bad Year

The record recall, announced on Sunday and prompted by an explicit video taken by an undercover Humane Society employee, has generated outrage from members of Congress and other American consumers.

But the primary concern has been for public health. Had the meatpacking plant followed government notification rules, the USDA says, some of the meat never would have seen the light of day, much less the inside of a gastrointestinal tract

In fact, the United States just completed what is arguably the worst year for beef safety in its history. In 2007, there were 21 beef recalls nationwide for possible E. coli contamination, the most in five years; the amount of beef recalled—33.4 million pounds—was a new record.

Cafeteria workers use their intuition to boycott recall beef [broken link was removed]

Something didn’t look right. That was the consensus of Oxford Central School cafeteria workers on a shipment of beef they received two weeks ago. Their decision not to serve the beef to students turned out to be a victory for trusting your intuition. The school district learned this week the beef was part of the Hallmark/Westland Meat Packaging recall. School administrator Bob Magnuson is grateful for their actions.

Not a very common action I would guess. But I would also guess that action will increase greatly now that people can point to examples like this and say – we don’t think this is in the best interests of the children. Do you, Principal, want to order us to serve this even though we think it is dangerous?

Related: Curious Cat Economics Search – Economics related posts on our blogs: Management BlogScience BlogEconomics Blog