Getting your product on the shelf in your local supermarket is one of the first major milestones many food brands work towards. It’s a huge accomplishment worth celebrating as a key indicator of success. Recognizing that growing your business also means exposing it to risks it may not have faced before is critical.
We’ll cover some of the most significant risks of growing your business in this blog, what you can do about them, and how liability insurance supports you when preventative measures aren’t enough.
Nobody likes to think about what could go wrong, but knowing the risks your business faces arms you with the knowledge and awareness you need to take preventative steps.
Increased Production Volume
The bigger your brand gets, the more your production volume needs to ramp up to meet demand.
This means your supply chain could quickly become more complex. You may need to source ingredients and packaging from new suppliers who can provide the quantity you need.
More suppliers mean more chances for things like allergen cross-contamination or defective packaging.
Whether intentional or not, there’s also a greater tendency to cut corners when it comes to safety and quality control. Producing higher volumes means faster speeds and tighter schedules, which can lead to lapses in protocol that cause foodborne illnesses and contamination.
Risk Prevention Tips:
- Thoroughly vet and monitor your suppliers: To ensure your suppliers are as serious about safety as you are, require them to obtain a certification from a third party like the Safe Quality Food (SQF) Program.
- Identify backup suppliers: It’s always wise to have a contingency plan in place so you don’t feel forced to accept low-quality ingredients or packaging.
- Graduate to a new facility if necessary: If your current manufacturing facility (or your home kitchen) is too small for the volumes you need to produce, don’t push it past its limits. Find a new facility that can comfortably accommodate your growth.
- Get insured: General liability and product liability insurance are designed to cover the cost of medical bills if a consumer falls ill or gets injured from your product. They can also cover your legal expenses like attorney’s fees, settlements, and judgments if you get sued.
Packaging Liabilities
Your product’s packaging doesn’t just matter from a branding standpoint — it’s critical for safety, too.
One small labeling error could result in undisclosed allergens and a recall. In March 2024, Kroger recalled 20,000 pounds of ready-to-mix salad kits because the product was found to contain wheat. This common allergen wasn’t disclosed on the ingredients list.
Luckily, no customers reported adverse reactions at the time of the recall, but they could’ve faced medical bills and lawsuits had that been the case.
Your product’s packaging could pose safety concerns, too. One month after Kroger’s recall, cooking oil manufacturer Primal Earth recalled 2,060 bottles of its avocado oil. Based on reports they received of the bottles breaking easily and leaking in shipping containers, the brand was concerned that the glass the bottles were made with was prone to breakage.
Risk Prevention Tips:
- Invest in quality assurance: Regularly inspect your product’s packaging for defects, like open seals or fragile materials. Determine how effective and protective your packaging is by conducting stress tests that involve dropping, heating, and putting pressure on the packaged product.
- Establish rigorous label review standards: Verify each label’s accuracy at every step of the production process, from design mock-ups to once the label is on the product.
- Treat allergen labeling with extreme care: Approach allergen labeling and handling with the same caution you take to avoid foodborne illnesses. Both can cause consumers to become extremely ill, which they may sue you over. Keep allergens separate on production runs and ensure your facility isn’t using the same equipment to process allergens for a different brand’s product.
- Get insured: If a consumer gets sick or injured because of your product, whether because of an unlabeled allergen or defective packaging, liability insurance can cover the cost of their medical bills and any legal expenses you face if they sue.
Third-Party Facility Use
Whether you’ve already been using one or are about to graduate to this exciting next step, producing your products at a third-party manufacturing facility is huge for your brand.
If you started out making batches in your home kitchen, as many do, the room and capacity of a commercial facility will allow you to increase and streamline production.
There are risks that come with running your business out of someone else’s property, though. One of the biggest is your lack of control over the facility. You may not have as much oversight when it comes to sanitation procedures or cross-contamination prevention.
If your facility violates safety regulations from the Food and Drug Administration (FDA), you can still be sued over the effects of those violations. For instance, if the facility goes against food safety protocol and a batch of your products are found to contain a foodborne pathogen, you could still be sued over this even though it was the facility’s error.
No matter whose fault it is, the reputational fallout from a recall or food poisoning incident will be associated with your brand’s name. People won’t think of the name of the facility when the recall is announced, but they will think about you.
Risk Prevention Tips:
- Thoroughly vet the facility: Before you choose a facility to work with, visit it in person. Never rely on images or videos alone. Ask the facility manager to provide documents like inspection or audit reports and proof of any health and safety certifications.
- Have a strong contract: Your agreement with the facility should clearly define liability for things like labeling errors or cross-contamination. It should also require both you and the facility to carry liability insurance in case something goes wrong, and define who’s responsible for tasks like cleaning equipment between production runs.
- Conduct unannounced audits: Don’t rely on your first visit to the facility to ensure things are running smoothly. Go to the facility (unannounced, if possible) to make sure your procedures are being followed and everything is operating properly.
- Get insured: If you’re named in a lawsuit for cross-contamination, liability insurance can cover your legal costs so you aren’t left to pay them out of pocket.
Overlooking Legal Protections
Remember the Pink Sauce debacle of 2024? For those unfamiliar, a TikTok user named Chef Pii posted a video of her homemade hot pink dipping sauce, which went viral across the platform.
Online sales skyrocketed, but when consumers got their hands on it, support turned sour. The label listed misspelled ingredients, there was no color consistency across the sauces, and many turned up on doorsteps reeking of rancid milk.
It quickly became evident that no government or regulatory oversight had been applied to the pink sauce before it was sold directly to consumers, making the product unfit and unsafe to sell.
While this is an extreme case, it underlines the importance of knowing what’s required of your food product before putting it on the market. Not knowing the law is not a valid legal defense if you’re caught violating it.
Risk Prevention Tips:
- Consult an attorney: Working with a legal professional familiar with the food industry is an excellent way to avoid violating the law while you scale your business. They can advise you on all the requirements you need to meet before your product is compliant.
- Legally protect your brand: If you aren’t careful with your branding, you run the risk of getting sued by another company for infringing on their intellectual property (IP). because of your brand’s name, logo, or packaging. Trademark these features if you can to avoid potential costly legal disputes.
- Familiarize yourself with labeling requirements: The FDA’s food labeling guide has everything you need to know about complying with federal laws, from your ingredient list to how you can legally refer to your product. Take the time to read through it and get accustomed to these requirements, and visit the FDA’s site every year for important updates or changes.
- Get insured: Getting sued for copyright infringement or a labeling error that hurts a customer can put you out tens — if not hundreds — of thousands of dollars. Liability insurance can cover that cost, so you don’t have to.
Liability Insurance: The Secret to Safe, Sustainable Growth
Practicing risk prevention strategies like the ones mentioned above is a crucial step towards decreasing the chances of something going wrong as you grow your brand. However, it’s not possible to reduce that chance to zero. Things slip by, people make mistakes, and unforeseen events catch you by surprise.
If something does go wrong, FLIP has your back with top-rated liability insurance trusted by over 40,000 food and beverage entrepreneurs.
The last thing you need while scaling your business is an expensive incident like a consumer suing you over a foreign object in your product or defective packaging that injured them. FLIP’s food manufacturers’ policy includes general liability and product liability to cover costs like these, so you aren’t left to pay them out of pocket.
FLIP is also offering an exclusive deal to RangeMe Premium and Pro members: get an exclusive, one-time discount of $ 25 off your annual policy when you enter code “rangeme” at checkout.
Grow your brand safely and securely. Get food manufacturing insurance from FLIP today and enjoy peace of mind at every milestone. [Get $ 25 Off Your Policy With Code “RangeMe”]