Chain Reaction

JULIE GALLAGHER

As of last week, more than 3,400 peanut products whose origins were traced to the Peanut Corp. of America had found their way to the recall list compiled by the U.S. Food and Drug Administration. Among the affected items are scores of store brands for which retailers thoughtfully chose manufacturers, or ingredient suppliers for chains that produce private labels themselves.

Despite Wegmans' prudent vendor selection process, several of its store-brand items, including Chocolate Peanut Butter Tarts, Peanut Butter Cookies and Sundae Cones, had to be pulled from shelves due to the risk of salmonella contamination of ingredients that were linked to PCA.

The Rochester, N.Y.-based chain requires that its store-brand manufacturers either be inspected by Wegmans' own quality assurance auditors or be certified against one of four Global Food Safety Initiative-endorsed standards, which include the Safe Quality Food program administered by Food Marketing Institute, Washington. Further, the first shipment of any new Wegmans-brand product is scrutinized to make sure it meets product specifications and food safety requirements. The chain does this by performing independent tests in its kitchen lab or, when necessary, by sending products to an independent lab.

“From then on, Wegmans brand specialist Cathy Morse-Lombard monitors comments of customers about the brand's products, and works with buyers and developers to continually improve,” said Mary Ellen Burris, senior vice president of consumer affairs for Wegmans, in a column.

But what the retailer doesn't do, according to Lombard, is check its supplier's ingredient sources, since doing so would present too arduous a task.

“Ingredient sources can change frequently based on availability and cost,” she said. “It would be impossible for Wegmans to check all ingredient sources.”

Indeed, today's supply chains are convoluted. The weeks that it's taken for news of many affected items to make its way through trading partners and onto the recall list is evidence of that. But when it comes to the safety of foods that come from suppliers downstream, there may be some relief in sight.

Industry groups are hopeful that bills in both the House and Senate could strengthen the authority of the FDA to more effectively monitor the food safety supply with risk-based prevention controls, increased inspections and enhanced traceback and record-keeping. If passed, the two bills — called the FDA Food Safety Modernization Act and the Safe FEAST Act (Safe Food Enforcement, Assessment, Standards and Targeting Act of 2009) — would also give the FDA authority to mandate food recalls and expand access to records in a food emergency.

But regardless of whether or not the bills pass, retailers will continue to play an important role in strengthening the safety of foods manufactured by third parties, John Dix, president of Business Development Index, Columbus, Ohio, told SN.

He advises supermarkets to build into their contracts with store-brand manufacturers the requirement that every lot of ingredient shipped from a supplier to the manufacturer be certified salmonella-free.

“A copy of that certification should go to the retailer,” he said.

Dix also encourages grocers to secure the right to make unannounced safety and sanitation inspections of manufacturing facilities, and collect samples for testing.

“They should be visiting a minimum of once a quarter, unannounced,” he said.

In turn, private-label manufacturers should follow the same principles when it comes to inspecting their ingredient suppliers, he added.

But such systems aren't foolproof.

As a certified manufacturer under FMI's SQF food safety program, the Kellogg Co. must know who its suppliers are, where their ingredients come from and the conditions under which they are produced, according to Jill Hollingsworth, vice president of food safety programs for FMI. That includes some type of audit, but not necessarily one performed by an SQF-accredited auditor.

As such, Kellogg's requires regular audits of plants that process ingredients for its food. PCA's Blakely, Ga., facility — which supplied ingredients for Kellogg's Austin Quality Foods Toasty Crackers with Peanut Butter — was no exception. Last year, an inspector from the American Institute of Baking deemed conditions there “superior,” according to reports. Salmonella testing wasn't a required part of the audit, paid for by PCA, which was expecting the inspectors' arrival.

Despite Kellogg's due diligence, damages are being sought on behalf of victims who became sick after eating peanut butter crackers produced by the company with ingredients from PCA. King Nut, which relied on PCA to produce its private-label peanut butter for foodservice distribution, is also being sued. And if a consumer were to become sick from a store-brand item that contains peanuts from PCA, the retailer whose name appears on the product could face a similar fate, explained Bill Marler, personal injury and products liability attorney with Seattle-based Marler Clark.

That's because most states have what's called chain-of-distribution liability, which means that all members of the supply chain are held strictly liable to the victim, Marler explained.

“My practice is to go after the company that is clearly the most at fault,” he said. “But sometimes that company declares bankruptcy, which is the case here, or has limited assets, so I have to work my way upstream.”

Marler is representing about 100 victims whose sickness or death was linked to Salmonella Typhimurium contamination. About 90% of those illnesses resulted from Kellogg's products, while the rest of the victims represented are either nursing home patients who ate King Nut peanut butter, or consumers who tested positive for the strain of Salmonella Typhimurium that's been linked to the recall, but have yet to pinpoint which peanut product led to their illness. As of last week, 683 people in 46 states had tested positive for the strain.

Though PCA has filed for bankruptcy, Marler is confident he'll be able to lift the temporary stay that's been placed on litigation involving the company, sometime this week. He hopes to gain access to between $12 million and $24 million that exists within the personal injury insurance policy PCA holds with The Hartford Insurance Co. That money can only go to victim compensation, but since the amount will not cover all that Marler is seeking, the attorney is also suing Kellogg's and King Nut for the remainder of damages.

The Kellogg's case is different from that of King Nut, in that it manufactured product with ingredients from PCA, while King Nut simply put its name on peanut butter produced by PCA.

Unfortunately for King Nut, “when you put your name on a product, you become its manufacturer in the eyes of the law,” Marler said.

To help mitigate risks related to chain-of-distribution liability, retailers should be mindful of the assets, the danger of bankruptcy and the personal injury insurance held by the store-brand manufacturers from which they source, said Marler. They should also keep in mind that suppliers located outside the U.S. will not be held liable if a consumer were to become sick from a product.

But even supermarkets that cover all their store-brand bases aren't necessarily out of the woods. That's because as a food distributor, they are still part of the strict liability supply chain. In fact, developments that took place last week with PCA insurer The Hartford may mean that Marler will sue supermarkets in certain states.

The insurer filed a declaratory judgement action that some have interpreted as questioning whether it should have to pay damages that were the result of negligence on the part of PCA. Marler described the document as poorly drafted, and therefore difficult to interpret. But if it turns out that The Hartford doesn't have to pay victims' claims, Marler may move further upstream to retailers.

“When it comes down to innocent grocery stores and innocent victims, the law looks at the victim who got sick as slightly more important than the grocery store that got stuck with the product,” he said.

As the litigation proceeds, retailers like Food Lion are working to get replacements for recalled store brands, such as its Chocolate Peanut Clusters, on the shelves. It's leaving the task of choosing peanut suppliers in the hands of its store-brand manufacturers.

“Food Safety is a top priority for Food Lion, and we are working with our current suppliers to ensure that the products we restock meet the high quality and food safety standards our customers have come to expect,” said James Ball, Food Lion's director of food safety.

Like Wegmans, the chain subscribes to the GFSI auditing process, which requires private-brand food suppliers to pass annual food safety audits.

“Part of the annual food safety audits are designed to validate and qualify our suppliers' sources,” he said.