Peanut processing plant in Georgia. Image credit: excerpt from photo by Nicole Bengiveno/The New York Times
In their initial coverage of the latest peanut butter fiasco Fallout Widens as Buyers Shun Peanut Butter the New York Times documented a large sales drop in reaction to the news of salmonella in Georgia-made peanut butter products (using Mexican peanuts and minimum-wage workers as basic ingredients). In a followup story, Peanut Case Shows Holes in Safety Net, the Times dug into what went wrong with the food inspection program overseen by FDA. Plenty of blame to be spread around.
A good start by the Times; but, they missed the part about where brand owners, the FDA, investment analysts, and business school professors share the blame.
The US Federal Bureau of Investigation (FBI) is on the case now..
Via an AP report carried by Yahoo News, "FBI raids Ga. plant at center of salmonella scare" we learned that:
The FBI executed search warrants at both the plant in Blakely, Ga., and at Peanut Corp. of America's headquarters in Lynchburg, Va., according to a senior congressional aide with knowledge of the raids...The Justice Department has opened a criminal investigation and more than 1,550 products have been recalled.
All the risk eggs left in one basket.
FBI aside, root cause goes to several corporations making the choice to "out-source" production to a single, large Brand-X contract manufacturer. As a result, the incident being investigated could potentially detract from the reputation of multiple brands, as well as directly impact multiple distributors, retailers, and consumers.
The local advantage.
Contrast the outsourcing hazard with the parallel one posed by an 'old fashioned' business model, where peanut products are made in small volume, at multiple, small processing factories; and those processors are each owned, or at least overseen directly by a single brand owner. Bottom line: a contamination incident at a single small peanut processor exposes a much smaller population to the hazard of salmonella.
Benefits to large scale management system, and combined oversight
That said, by making all such products in a single contract manufacturing site, assuming a tight management system overseen by collaborating brand owners, and assuming that private sector oversight is coupled with periodic inspections of the shared facility by FDA, the outsourcing model could theoretically reduce the cumulative risk to society over what can be done by supervising multiple smaller processors! (Epic fail on that scenario, however, as the de-regulatory push by free market fundamentalists has apparently diminished FDA capabilities.)
Considering that salmonella contamination of peanut butter has happened before, you would think corporations would protect their respective brands with all, or some combination of, the following.
* diversify production to smaller contract manufacturers where controls can be overseen.
* bring manufacturing in-house, where controls and practices can be directly supervised
* send employees or consultants to audit against best practice requirements of FDA.
The issue transcends food products.
When the making of components or final products of any sort are outsourced, product managers have little knowledge of how well things are done unless contracts specify oversight by brand owners. Lack of oversight is a big reason why China is so filthy polluted now, for example, and a contributing reason why it will not be able to improve rapidly, even if the world economy stabilizes soon.
Question:- How is it so many companies in multiple industry sectors ended up pursuing the outsourcing model?
Answer: because business school professors taught product and brand managers to do it.
Stockholders have a role to play too.
There are sound money reasons to do better. As a friend remarked:
I would bet that if we could get numbers on how much money they saved outsourcing their peanut production to 'cheap' commodity companies that cut corners - it would pale in comparison to the cost this impact is having on their brand and the amount of money now needed to assure people peanut butter is safe to eat..
FDA announced this week that the CEO of Peanut Corp of America has been removed from the Agency's 'Peanut Standards Board.'
Bob Dunn's Brazos Riverblog has posted a copy of what looks to be an FDA inspection report of a Peanut Corp of America facility, conducted early in 2009. Made sure you have already had dinner before reading it here.
Peanut butter spread across the archives.
"Waste of Packaging" Finalist: Individually Packaged Peanut Butter ...
Director of Consumers Union says, Peanut Butter Epidemic Should ...
Time For the Annual Irradiated Food Drive