Running a CPG brand is hard enough, but what do you do when things go wrong? Securing CPG specific business insurance is a critical step towards mitigating unforeseen risks. What happens if you don’t get insurance? Russ Taylor from SecureCPG  share some real stories (names obscured for privacy) of what can go wrong when you don’t have the right insurance.

1. Beverage Company’s Canning Issue costs $100,000:

A beverage company came to us when they had 100,000+ units of product that became unsellable. The cans appeared to be corroding at first glance, but further analysis by an independent 3rd party revealed that the issue was not corrosion but a seaming problem that occurred during manufacturing. This defect caused the beverage to leak, leading to the deterioration of the cans. Unfortunately, the company’s insurance policy did not include coverage for inventory or property damage, leaving them without financial recourse to cover the losses. On top of that, the co-manufacturer didn’t agree with the assessment, and believed the issue was caused by corrosion, which would alleviate them of liability. Because of the lack of a contract in place they were not named additional insured to their co man’s policy. There really is no recourse for them to use the insurance that is at their co manufacturer to cover the loss. Now, they’re looking at paying $100,000 out of pocket to remove and destroy the product that they lost.

2. Product Thawing and Refreezing Incident:

Refrigerated and frozen products have the highest claim rate because of the complexities of moving product that needs to remain at temperature throughout their supply chain. Several brands have encountered instances where their products thawed and then refroze while being transported from the contract manufacturer to retail shelves. Sometimes it passes through multiple companies, warehouses, and trucks, making it hard to discern exactly where the product loses it’s integrity. In one example the thaw refreezing issue was not discovered until the product reached the retailer, posing significant risks of a recall. The brand had to meticulously trace the manufacturing and distribution process to pinpoint where the products lost it’s integrity. Of course, no one along the supply-chain wants to take responsibility, so unless you have proof, it’s tough to find the evidence of where the problem happened. Now as the brand, if you have spoilage insurance, then your policy would cover the loss no matter when it happened.

If you’re a CPG founder, make sure you’re working with an insurance broker who understands the specific issues that can happen to food and beverage brands. A well-conceived insurance plan is fundamental to the long-term success and sustainability of your CPG brand.

SPONSOR: I wrote this in partnership with SecureCPG a modern insurance agency that works with emerging brands to get the best coverage at the most affordable price. They work with founders on general liability, workers comp, product recall, cyber liability, and more.