Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions

Page created by Josephine Buchanan
 
CONTINUE READING
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
Q1 2020
  RECALL INDEX
  ALL INDUSTRIES
  EMEA EDITION

DATA , TR EN DS & P R ED I C TI O N S F O R E M E A I N D U S T R I E S
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
Welcome to the first Stericycle Expert Solutions Quarterly Recall Index
of 2020.

In this report you’ll find the most up-to-date recall data and insights from
a range of sectors – automotive, food & beverage, electronics, clothing
and toys. It also includes analysis on the macro environment and how this
might have an impact on recall activity.

As we all know, the current pandemic sweeping the world will have a certain impact
on all industry. The magnitude of the impact is at the moment unknown, and some
industries, particularly those with globalised supply chains and a heavy reliance on efficient
manufacturing, will feel the effects more than others.

Consumer confidence has plummeted to levels not seen since the last recession1 according
to a new UK report, with confidence in the general economy also sinking. This negative
outlook is mirrored around the world2, with purchase intents shifting and spending patterns
changing. While some industries, including food & beverage and consumer goods such as
freezers and kitchen equipment experienced an initial spike in sales, the long-term economic
outlook for the majority of industries is not rosy.

With the financial impact set to hit profits, one thing that businesses must not compromise
on is recall readiness. The next few months will see industries change and evolve based
on new regulations, innovation, shifts in consumer preferences and behaviours and the
challenges brought by global supply chains brought to a standstill.

Any organisation takes time to adjust following a period of change – and that’s when
businesses without recall strategies are vulnerable. The following report will provide insight
into how businesses can best prepare and protect themselves in these unprecedented times.

For additional reading and reference, previous Quarterly Recall Index reports (as well as
the 2020 State of the Nation analysis) are available for you to download for free on the
Stericycle Expert Solutions website:
https://www.stericycleexpertsolutions.co.uk/recall-hub/resources/spotlights-indexes

1
    www.marketingweek.com/consumer-confidence-plummets-coronavirus/
2
    www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-coronavirus-effect-on-global-economic-sentiment

                                     Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES                3
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
CONTENTS
                                                           3
                                                   SUMMARY

                                                           6
                                               AUTOMOTIVE

                                                         16
                                          PHARMACEUTICAL

                                                         26
                                            MEDICAL DEVICE

                                                         34
                                               ELECTRONICS

                                                        44
                                                  CLOTHING

                                                         52
                                                        TOYS

                                                        60
                                          FOOD & BEVERAGE

                                                         69
                                                      ABOUT

  Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   5
Q1 2020 RECALL INDEX ALL INDUSTRIES EMEA EDITION - Stericycle Expert Solutions
AUTOMOTIVE
With 133 recalls and notifications across Europe in the first
quarter of 2020, the recall picture is much like the one
we saw 12 months ago. Germany, as is almost always the
case, dominates in terms of country of origin and is also
the main notifying country.

But while many things remain the same, the landscape
has shifted – perhaps irrevocably – due to the pandemic
which has led to automotive manufacturers shutting down
production across the globe. How manufacturers navigate
this period, and how they begin the recovery process in the
second half of the year, is going to be vitally important to the
long-term future of the sector.
While many things remain the same, the
       landscape has shifted – perhaps irrevocably
       – due to the pandemic which has led to
       automotive manufacturers shutting down
       production across the globe.”

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   7
FIRST QUARTER OVERVIEW

No industry is untouched by the crisis which has                                             China, the first country to be hit by coronavirus,
engulfed the globe in the first few months of 2020.                                          exports in the region of $34 billion in motor parts
The spread of COVID-19 – at first in Asia and most                                           to the global industry. That was having a colossal
recently across North America and Europe – has been                                          impact on manufacturers, even before they had to
relentless and this public health emergency has quickly                                      contend with COVID-19 affecting them within their
become an economic one too.                                                                  own borders.

It is hard to think of any area within the automotive                                        Now, the impact of COVID-19 is being felt everywhere
sector untouched by coronavirus. Economic                                                    – and the force is unprecedented. But despite the
uncertainty means that many people who may have                                              industry being in a state of near total shutdown, the
considered purchasing a vehicle will now not be doing                                        importance of vehicle safety is unchanged. Recalls can
so, at least in the immediate term. For those making                                         be challenging at the best of times without expert
monthly payments for their car, they face the very                                           help and it will be particularly interesting to see
real possibility of not being able to afford it as                                           how prepared manufacturers are to handle a recall
their jobs disappear for the duration of the crisis,                                         emergency while restrictions are in place and so much
if not beyond.                                                                               of their focus is understandably elsewhere.

                N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y                         RECALLED VEHICLES BY COUNTRY OF ORIGIN

100
                                                                                             60
 90
 80                                                                                          50
 70
 60                                                                                          40

 50
                                                                                             30
 40
 30                                                                                          20
 20
                                                                                             10
 10
  0                                                                                           0
      Germany

                UK

                        Portugal

                                     France

                                              Belgium

                                                        Italy

                                                                Denmark

                                                                          Poland

                                                                                   Austria

                                                                                                   Germany

                                                                                                             France

                                                                                                                      Japan

                                                                                                                              US

                                                                                                                                   Italy

                                                                                                                                           UK

                                                                                                                                                Spain

                                                                                                                                                        Rep. of Korea

                                   Q1 2020                 Q1 2019                                                     Q1 2020             Q1 2019

                                                                                                               Now, the impact of COVID-19
                                                                                                               is being felt everywhere – and
                                                                                                               the force is unprecedented.”
Q1 2020 SNAPSHOT: KEY TRENDS

                 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   9
AUTOMOTIVE DEEP DIVE

According to The European Automobile Manufacturers            impact the pandemic has had – and will continue to
Association (ACEA), “it is becoming increasingly clear
            1
                                                              have – on the industry and the wider supply chain.
that COVID-19 has led to the worst crisis ever to impact
the automotive sector”. Factory shutdowns have put            While sales are likely to start to grow in a few
the brakes on the production of almost 1.5 million            months’ time, consumer confidence will be at a
vehicles, with grave consequences for workers in the          potentially all-time low. With many people facing an
sector – hundreds of thousands of whom have been              uncertain future when it comes to their employment,
placed on government schemes to cover their wages, at         it is understandable that new cars won’t be at the top
least in part.                                                of their agenda. That means we can expect a surge
                                                              in the number of people retaining their current models
Clearly, shutdowns will take a huge financial toll on         – and with that will come a greater need for repairs
manufacturers. Research by AutoAnalysis suggests
                                            2
                                                              and servicing.
that the shutdown across Europe and North America
will have cost the industry around $100 billion in lost       This may be an area where OEMs can make their mark.
revenues to the end of April. This is not simply an issue     We have noted before the rise in demand for connected
of production. Consumers simply aren’t purchasing             cars, and the current crisis will not stop consumers
in the numbers they once were. Indeed, car sales fell         wanting their vehicles from having the latest tech under
in Western Europe by two-thirds in March, while US            the hood. By anticipating the needs of the consumer,
sales are at the lowest level for a decade. In April,         OEMs can position themselves ahead of rivals when it
new car registrations dropped further by 78.3% to             comes to positioning themselves as the best option for
292,182 vehicles in the European Union, Britain and           people considering repairs and servicing.
the European Free Trade Association (EFTA) countries,
statistics from ACEA showed.

Many OEMs will have concerns over liquidity problems.
Thankfully, there is help being offered. The European
Central Bank, European Investment Bank and European
Commission have all taken significant steps3 to support
businesses affected by the COVID-19 outbreak.
However, while governmental and economic bodies
are finding innovative solutions, the reality is that these
measures will only go so far in arresting the staggering

                                                                 1
                                                                   https://europe.autonews.com/automakers/europes-auto-industry-sees-
                                                                 unprecedented-crisis-following-production-losses
       It is becoming increasingly                               2
                                                                   https://www.theguardian.com/business/2020/apr/06/car-plant-shutdowns-

       clear that COVID-19 has led to                            may-cost-auto-industry-more-than-100bn-covid-19
                                                                 3
                                                                   https://www.fleeteurope.com/en/financial-models/europe/features/covid-
       the worst crisis ever to impact                           19-eu-supports-automotive-industry?a=FJA05&t%5B0%5D=European%20
                                                                 Commission&t%5B1%5D=European%20Central%20
       the automotive sector.”                                   Bank&t%5B2%5D=ACEA&curl=1
Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   11
SAFETY GATE INSIGHT
In total, there were 133 automotive recalls across the
European Union in the first quarter of 2020. That is a
decline of eight on the first three months of 2019, albeit
a negligible one.

As you may expect, Germany led the way in terms of
recalls with two thirds - 66 per cent - being notified by
the country. Behind Germany’s 88 notifications was the
UK with 17, Portugal with 14 and France which had seven.

By contrast, Germany was the leading country of origin
for recalls in the quarter, accounting for more than one
third (37%). That was followed by France (country of
origin in 25 recalls) and Japan, the US and Italy rounding
up the top five - and the UK sitting in sixth on the table.
Behind every recall is a recognised risk type. And, as is almost always the
case in the automotive sector, the main risk type identified was injuries,
which was noted in 110 of the 133 recalls. That was followed by fire,
listed in 12 recalls. Other risk types included ‘fire and injuries’, cited in
eight recalls, followed by environment (2) and electric shock and fire,
which was noted in one recall case.

         RISK TYPE                 Q1 2020 RECALLS               Q1 2019 RECALLS

          Injuries                         110                          107

            Fire                           12                            12

        Fire, injuries                      8                            1

       Environment                          2                            5

    Electric Shock, Fire                    1                            0

Our expectation is that recalls will drop in the second quarter of the year,
a result of production grinding to a halt and new marques not being
released to the public. But they will not disappear. For manufacturers,
this will be a huge concern. Automotive recalls are high in comparison
to other sectors, largely because there is an acceptance that should
something go wrong – be it a faulty brake or unsafe exhaust – the
consequences are potentially fatal. And manufacturers in the sector are
hugely safety conscious, with most recalls being precautionary in nature.
The current crisis cannot allow that mindset to shift.

Implementing a recall will undoubtedly be more difficult during this
period. People will be harder to reach, and lockdowns mean that
carrying out necessary fixes will be exponentially harder. Manufacturers
would be wise to engage with recall specialists who can support them
through these unique challenges – while the public may be forgiving
of a slower response to potential issues, they will not be forgiving of
manufacturers who do not take their safety responsibilities seriously.

Recalls are not a fundamentally negative experience. They can serve to
strengthen the relationship between brand and consumer. But a poorly
handled recall can break that bond, often forever. And with businesses in
a fragile position, that is something they can ill afford.

  Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   13
AUTOMOTIVE ANALYSIS

At the beginning of this year, Stericycle Expert                The impact on the automotive industry cannot be
Solutions published its wide-ranging State of the               understated. Thankfully, governments appear to be
Nation report which took an in-depth look at various            rising to the occasion and supporting industries of all
sectors including automotive – this can be downloaded           types to varying degrees. Once the current period has
for free on our website (links below).                          been overcome, we can look forward to entering the
                                                                ‘new normal’, one where the value of connection has
At the time, we highlighted two major trends. The               never been greater.
first, ‘The Greta Effect’, was the expectation that
consumers, increasingly environmentally conscious,              It will be particularly interesting to see how societies
would put pressure on the industry to address those             are changed by this shared experience. A greater
concerns. The second trend was around smart tech,               sense of community, perhaps an even-greater concern
something which continues to grow in prominence                 for environmental issues. That will see manufacturers
throughout the industry.                                        having to focus even more on addressing the
                                                                environmental responsibility they have, while dealing
It is safe to say that both have been blown out of the          with the economic fallout of the current crisis.
water by the emergence of COVID-19 and the almost
unthinkable consequences it has had on our daily lives.         One thing is clear – the time we are living in now will
Across cities and towns, country roads and motorways,           shape the automotive sector for years and years to come.
traffic has all but disappeared. Working from home
has become the norm and most people are only
using their vehicles to drive to the supermarket for
essential supplies.

Stericycle Expert Solutions’ 2020 State of the Nation report free downloads:

EMEA edition: https://pages.stericycleexpertsolutions.co.uk/2020-state-of-the-nation-spotlight
US edition: http://pages.stericycleexpertsolutions.com/2020stateofthenation

                                             Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   15
Never has the pharmaceutical
industry had a greater weight
on its shoulders.”
PHARMACEUTICAL
Never has the pharmaceutical industry had a greater weight on its
shoulders. There is huge pressure to develop a coronavirus vaccine,
with many believing it is the only way we can fully emerge from the
current crisis.

That task falls to an industry at a time when it, like so many other sectors,
is struggling with issues relating to its supply chain. And as always, the
safety of its products remains of paramount concern. With the latest
figures for Europe showing 78 recalls in the first three months of 2020 –
almost all before COVID-19 took hold – it remains to be seen how the
industry will handle the tumult that lies ahead.

       Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   17
FIRST QUARTER OVERVIEW

Across the globe, billions of people rely on               grow – will companies find themselves unprepared for
pharmaceuticals. And now, with the onset of the            the levels of innovation needed to successfully combat
COVID-19 pandemic, the industry is in the spotlight        COVID-19?
like never before with a vaccine seen as the only way
to restore life as we knew it before coronavirus.          Underlying all of that is a need to ensure the safety of
                                                           pharmaceutical products – brought into sharp focus
And while brilliant minds do their very best to develop    by the latest recall stats which shows there were 78
said vaccine, the industry itself is not immune from the   products recalled across Europe in the first three
chaos the virus has caused. Pharmaceutical companies       months of 2020.
are seeing real problems with supply chains, putting
pressure on them to ensure products continue to reach      Safety of pharmaceutical products will always be
those who need them day in and day out.                    fundamentally important, and despite the supply chain
                                                           issues facing the industry, standards cannot be allowed
Innovation will be required to find a vaccine but,         to slip.
across Europe, spending on R&D has been slow to

                                                                      Pharmaceutical companies are
                                                                      seeing real problems with supply
                                                                      chains.”
Q1 2020 SNAPSHOT: KEY TRENDS

                 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   19
PHARMACEUTICAL DEEP DIVE

While sectors including automotive and electronics are
seeing huge drops in demand for their products – as
consumers look to stop spending during the pandemic
– the issues facing the pharmaceutical industry are
different. The market for new cars or smartphones
may have shrunk dramatically, but the need for
pharmaceuticals remains as strong as ever.

     This crisis has revealed our
     morbid dependency on China
     and India with regards to
     pharmaceuticals.”

With China and India being the world’s largest
pharmaceutical exporters, the coronavirus has disrupted
supply chains for medicinal products across the globe.
In a startling statement, the European Commission’s
vice-president Vera Jourova said that “this crisis has
revealed our morbid dependency on China and India
with regards to pharmaceuticals”.

China, the first country affected by coronavirus, quickly
implemented widespread lockdowns. That had a severe
effect on their manufacturing facilities. While many
companies have stockpiles which may last for up to one
year, they will be concerned that even as China opens
up, it will be some time before manufacturing output
returns to its pre-COVID levels.

India is reliant on Active Pharmaceutical Ingredients
(API) from China - and the knock-on effect1 of slowed
production of those APIs meant production costs
in India increased. In turn, India has restricted the
export of several APIs in a bid to avoid internal supply
shortages – leading to risks of scarcity across the
markets which rely on them.
One of the biggest issues facing Europe is a shortage
                    of medicines used to treat symptoms of COVID-19.
                    According to the European Medicines Agency (EMA),
                    “the continued availability of medicines, in particular
                    those used for patients with COVID-19, is of critical
                    concern for EMA”.

                    There has been a shortage of “vital drugs for the
                    resuscitation of patients including muscle relaxants,
                    sedatives and painkillers, which are being used up
                    rapidly with ‘insufficient or non-existent’ restocking
                    because of the pandemic”.

                    Prior to the pandemic, one of the biggest issues facing
                    the pharmaceuticals industry in Europe was Brexit and,
                    while the issue has taken a backseat in the last few
                    months, it remains of huge significance.

                    Fears that the European market could worsen due to
                    the UK’s exit from the EU have not gone away, and it
                    remains to be seen how the EMA will work with the
                    UK’s Medicines and Healthcare products Regulatory
                    Agency (MHRA) in the years ahead.

                                One of the biggest issues facing
                                Europe is a shortage of medicines
                                used to treat symptoms of
                                COVID-19.”

                    1
                     https://www.europeanpharmaceuticalreview.com/article/116145/covid-19-
                    update-coronavirus-and-the-pharmaceutical-supply-chain/

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES        21
LOCAL COUNTRY INSIGHT

     There were 20 pharmaceutical
     notifications submitted by the
     United Kingdom - more than
     any other country.”

          N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y

25

20

15

10

 5

 0
     UK

                Germany

                               Denmark

                                              Portugal

                                                            France

                                                                         Italy
                          Q1 2020                   Q1 2019

Indeed, it marks a spectacular 900 per cent increase on
the number of notifications reported by the UK in the
same quarter of 2019 – where two notifications were
made. This, perhaps, shows that the country is taking
on more responsibility for notifications as it prepares to
go it alone post-Brexit.

Intriguingly, Portugal saw a significant reduction in
year-on-year notifications. In Q1 of 2019 they were
responsible for 21 alerts, whereas they only made 10 in
the same period of 2020.

In total, there were 78 recall alerts submitted in
the first three months of the new decade. Five
countries made more than ten alerts. In addition to
the aforementioned UK and Portugal, we also saw
Germany, Denmark and France on the list.
It wasn’t simply in terms of notifications where the UK                     Of course, it’s important to reiterate that recalls are
dominated. In fact, they were also the leading country                      not inherently bad. Manufacturers across all sectors,
of origin for pharmaceuticals recalled in Q1 of 2020,                       including pharma, have a duty to ensure the products
with 18 of the 78 originating in the UK. Meanwhile,                         their consumers are using are safe. And recalls play
Portugal halved the amount of pharmaceutical recalls                        a pivotal role in removing potentially unsafe or
originating in the country, going from 20 to 10 year-                       dangerous products from those consumers.
on-year. France, interestingly, saw its pharmaceutical
recalls go from just five in Q1 of last year to 12 in the                   At Stericycle Expert Solutions, we know what a
first three months of this year. Due to incomplete                          successful recall looks like – with a multitude of
recording from Italy’s medical agency, recall data was                      experience in helping businesses get through what can
incomplete at the time of publishing and only covered                       often feel like an impossible task. Clearly, the impact
the period from 1 January 2020 to 19 February 2020.                         of the current global pandemic makes it harder, not
                                                                            easier, to perform a recall.
The leading cause of pharmaceuticals being recalled
was attributed to failed specifications - cited in 11 of                    But the need for recalls has not suddenly gone away.
the 78 recalls in the quarter. This was closely followed                    Manufacturers may feel like they have bigger concerns
by mislabelling, noted in eight recalls, and foreign                        at the moment, but under no circumstances can they
materials/contamination – which was cited in four                           turn their gaze away from ensuring the safety of their
recalls. The remaining 55 recalls were attributed to                        products. To do so could be catastrophic.
‘other’ reasons.

            RECALLS BY COUNTRY OF ORIGIN                                                            TOP REASONS FOR RECALL

                                                                            60
25
                                                                            50

20
                                                                            40

15
                                                                            30

10
                                                                            20

 5
                                                                            10

 0                                                                           0
     UK

              France

                          Germany

                                    Portugal

                                                    Denmark

                                                              Republic of
                                                                 Ireland

                                                                                     Failed Specs

                                                                                                         Mislabeling

                                                                                                                       Foreign Materials /
                                                                                                                           Contamination

                                                                                                                                             Other

                       Q1 2020                 Q1 2019

                                                         Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES       23
One likely consequence of the
current crisis is a change in how
pharmaceutical companies handle
manufacturing in the future.”
PHARMACEUTICAL ANALYSIS

The pharmaceutical industry will be under a spotlight in the coming months
– and potentially beyond – as societies around the world pin their hopes on
a vaccine for COVID-19.

Much focus will fall on the task force established1 by the EMA which will deal
with “the development, authorisation and safety monitoring of therapeutics
and vaccines intended for treatment or prevention of COVID-19”. While
there will undoubtedly be a rush to find a vaccine - not only to save lives but
to enable the full re-opening of economies - it cannot happen without clear
attention to safety.

It is reassuring that the EMA has clearly underlined the importance of the
safety element. While regulatory approvals for any vaccine will almost
certainly be fast-tracked, the impact on supply chains to mass produce the
vaccine will be tremendous.

One likely consequence of the current crisis is a change in how
pharmaceutical companies handle manufacturing in the future. According to
J.P Duffy, a partner at Reed Smith, companies “are going to be looking at
whether it makes sense to have lots of factories in any one market or if they
should be attempting to diversify by building factories elsewhere”.

While that won’t be a quick fix, it’s likely to be something under strong
consideration as businesses attempt to ensure they are protected in the future.

In our recent 2020 State of the Nation report2, we highlighted that while
production increased from €194 million in 2010 to €260 million in 2018,
research and development expenditure only increased from €27 million to
€36 million. The coronavirus pandemic may see that R&D number shoot up
– and if that happens, we hope to see the R&D figure remain higher than it
has been rather than coming down once a vaccine has been found.

1
  https://www.europeanpharmaceuticalreview.com/news/116780/ema-task-force-established-to-co-ordinate-
rapid-regulatory-action-for-covid-19-medicines/
2
  https://pages.stericycleexpertsolutions.co.uk/2020-state-of-the-nation-spotlight

      Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES             25
MEDICAL
DEVICE
The medical device industry, once of most interest to healthcare
and pharmaceutical professionals, has been cast into the spotlight
as the world responds to COVID-19. Equipment shortages, a pivot
towards producing essential protective equipment and relaxing in
regulations has resulted in a hotbed of activity as existing – and
new – organisations rush to fill the gaps in global requirements.

On top of this, a sharp rise in recalls over the past year, with
figures topping 600 in Q1 2020, will be a cause of concern, and
it’s crucial that safety is not compromised by manufacturers in a
race to meet demand.
It’s crucial that safety is not
                              compromised by manufacturers
                              in a race to meet demand.”

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   27
FIRST QUARTER OVERVIEW

Around the world, industries are pivoting to address     While this will benefit the member states’ response
the biggest disruption to life in a generation, with     to the virus by ensuring the rapid production of
none more so than the medical device industry.           safe equipment within the EU, an influx of imported
                                                         devices such as ventilators from countries such
                                                         as China are already raising questions – with a
Manufacturers are facing immense pressure as global
                                                         number rejected by medical professionals.
requirements for ventilators, specialist equipment and
PPE skyrocket, causing huge supply chain bottlenecks
                                                         Safety is paramount for consumer confidence,
and vast global shortages.
                                                         particularly during this fraught time. The first twelve
                                                         weeks of 2020 saw 604 medical device recalls – almost
                                                         double that of the same period of 2019 (309). This
                                                         huge spike can be attributed partly to a 195% YoY

       Quality has been                                  increase in recalls submitted by Germany, which

       called into question as                           submitted 221 recalls. As the world’s third largest

       the reason for 20% of                             medical device market, behind only the US and

       all recalls.”                                     Japan2, Germany is always among the top of recall
                                                         submission tables, however this spike will be a cause
                                                         for concern for industry professionals.

To help ease the pressure across the EU, the European
                                                         Quality has been called into question as the reason
Commission introduced a harmonised standard for
                                                         for 20% (120) of all recalls according to the available
all equipment and devices to adhere to and allow
                                                         data. In Europe, manufacturers can place a CE
companies “an easy and direct access to the internal
                                                         (Conformité Européenne) mark on a medical device
market for their products, while ensuring a high
                                                         once it has passed a conformity assessment. However,
degree of safety for users and consumers”1.
                                                         this becomes trickier to track in a globalised market
                                                         with millions of imports coming from countries around
                                                         the world. To add to the seriousness of this, this
                                                         was happening before we even considered a rise
                                                         in new market entrants from companies who don’t
                                                         traditionally manufacture medical devices and the
                                                         potential complications that brings.

       The first twelve weeks
                                                         One thing is for certain, the medical device story for
       of 2020 saw 604                                   2020 is only just beginning.

       medical device recalls
       – almost double that
       of the same period of
       2019 (309).”
                                                         1
                                                             https://ec.europa.eu/commission/presscorner/detail/en/ip_20_522
                                                         2
                                                             https://www.emergobyul.com/resources/market-germany
Q1 2020 SNAPSHOT: KEY TRENDS

                 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   29
MEDICAL DEVICE DEEP DIVE

The medical device market in the EU accounts for one third of
the global market, with around $122.5 billion (est. 2011) in yearly
revenue. The industry consists of over 22,000 companies all over
Europe that employ around half a million people. According to
The Global Medical Devices Testing Services Market Report,
the market will grow at a significant CAGR of 10.81% during the
forecast period of 2019-20291.

As Europe’s biggest medical device market, Germany is known
for its advanced and sophisticated approach to healthcare,
championing innovation and modern technology to improve
the welfare of its citizens. This early adopter approach, while for
the most part drives positive changes in the market, does leave
Germany exposed to the vulnerabilities that come with new devices –
which may partly explain why its recalls are significantly higher.

Even before the pandemic, the medical device market was
attracting a growing number of tech-giants and software
companies armed with intelligent solutions, including artificial
intelligence and machine learning algorithms. With the world now
exposed to the vulnerabilities in supply chains, these firms are
doubling down on efforts to plug the gaps and produce efficient
solutions. Indeed, GlobalData estimates that global demand for
ventilators this year will be 880,000, about nine times current
global production capacity2.

These new systems, heavily reliant on technology, will be subject
to increased testing measures, and recalls are expected to increase
multi-fold in the future, according to The Global Medical Devices
Testing Services Market Report.

However, in the shorter term, we may see an increase in new
products like ventilators quickly brought to market due to reduced
registration rules following the postponement of Europe’s Medical
Device Regulation (MDR) by one year, to May 2021. This means
that manufacturers are able to quicker meet demand during the
virus, as reported in Bloomberg Law3.

Stella Kyriakides, European Commissioner for Health said: “We
must not waste a second in our fight against the coronavirus. With
the measures we adopt today, we speed up the entry of safe,
essential medical equipment and devices such as masks, gowns
and suits in the EU market. This equipment is fundamental for our
     health professionals – the brave and resilient women and men at
     the front line - to keep saving lives”.

     When the EU MDR regulations are implemented next year, we can
     expect a rise in recalls of new products introduced earlier to the
     market during the virus due to the greater control and stringent
     monitoring of medical devices.

     Perhaps the biggest challenge that lies ahead for the industry is
     defective and sub-par equipment being imported into Europe
     – and how to keep a track of it. Already there are a myriad of
     headlines and reports, including the widespread coverage of
     rejected Chinese-made equipment such as testing kits and medical
     masks designed to combat the coronavirus outbreak.

     The pandemic has also seen an increase in fraudulent goods being
     sold to healthcare professionals, with a recent report revealing that
     speculators and popup brokers are finding customers on LinkedIn4.
     With medical and other institutions that need masks competing
     against each other, they’ve had to go outside their usual supply
     chains into untested waters – and this is where the danger emerges.

     While tech powerhouses such as Twitter, Microsoft, Reddit
     and YouTube have rallied in the fight against misinformation
     spreading online, the advice remains to conduct due diligence
     when purchasing from online sellers, with hotlines to report price-
     gougers set up and arrests already being made.

     With the industry under so much pressure and with so much at
     risk, a recall scenario without a proper strategy in place could
     be devastating for a business. While the challenges of facing a
     recall during a pandemic are significantly heightened, it’s crucial
     for any manufacturer to remain vigilant. With regulations and
     testing temporarily relaxed, the onus is perhaps placed even
     more so on manufacturers to ensure safety remains at the centre
     of all operations.

     1
       https://www.globenewswire.com/news-release/2020/04/28/2023333/0/en/Global-Medical-
     Devices-Testing-Services-Market-2019-to-2029-Focus-on-Tests-14-Countries-Data-and-
     Competitive-Landscape.html
     2
       https://voxeu.org/article/ramping-ventilator-production-lessons-wwii
     3
       https://news.bloomberglaw.com/health-law-and-business/pause-europes-new-medical-device-
     rules-amid-outbreak-industry
     4
       https://www.wired.com/story/linkedin-coronavirus-medical-equipment-ppe-shortage/

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES            31
GOVERNMENT DATA AND ANALYSIS

The first quarter of 2020 saw a total of 604 medical                                course of 2019, so it remains to be seen if this year’s
device recall alerts submitted in Europe – up from                                  decline represents an anomaly or the start of a new
309 in Q1 2019. While this figure may be alarming, it                               trend as new testing processes are put in place.
indicates that testing has become a priority as Europe
moves towards its new regulatory standards for                                      In a similar story to previous Index reports, the
medical devices due to come into effect in 2021.                                    world’s largest medical device manufacturer, the US,
                                                                                    accounted for the country of origin for the highest
Germany topped the list of countries recalling medical                              number of recalled devices, with 133 notices placed - a
devices with 212 alerts placed – up from 75 in Q1                                   slight increase from 2019, which saw 114 placed. It was
2019. While Germany is no stranger to the top of the                                closely followed by Germany (117), again no surprise
chart, placing the most notices over 2019 in its entirety,                          given its status as a manufacturing powerhouse, then
this is a huge spike in the figures. The data suggests                              France (75) and Italy (67).
no one reason can be attributed to the increase, rather
a myriad of incidents covering everything from quality                              Some may have expected future recalls of US devices
control and sterility concerns to software issues and                               to fall following Donald Trump’s March 25 statement
labelling errors.                                                                   that US medical technology companies can’t sell their
                                                                                    products in European Union countries, citing the EU’s
Following Germany in recall instances were Italy (146),                             MDR “specifications”. This statement has raised a lot
Denmark (117), France (68), and Greece (19), which all                              of questions and confusion and is likely not the case.
displayed slightly higher figures than the same period                              The MDR regulation is designed to replace the existing
of 2019. The biggest surprise came from the UK, which                               directive and is not expected to prevent imports from
saw a dramatic decline in notices placed – falling from                             the US, and as such we expect the US to continue to
91 in Q1 2019 to just 12 in 2020 so far. A closer look at                           chart highly in EU recall analysis.
the data shows that the UK placed 405 recalls over the

                N O T I F I C AT I O N S S U B M I T T E D B Y C O U N T R Y                    RECALLS BY COUNTRY OF ORIGIN

                                                                                    140

250                                                                                 120

200                                                                                 100

                                                                                     80
150
                                                                                     60
100
                                                                                     40
 50
                                                                                     20

  0                                                                                   0
      Germany

                     Italy

                                Denmark

                                            France

                                                        Greece

                                                                   Portugal

                                                                               UK

                                                                                          USA

                                                                                                Germany

                                                                                                          France

                                                                                                                   Italy

                                                                                                                           Republic of
                                                                                                                              Ireland

                                                                                                                                          UK

                                                                                                                                                   Switzerland

                                                                                                                                                                 Sweden

                              Q1 2020                   Q1 2019                                              Q1 2020                     Q1 2019
The biggest surprise came from the
                                                                   UK, which saw a dramatic decline in
                                                                   notices placed.”

One country of origin to note is Sweden, which more                                        TOP REASONS FOR RECALL
than doubled the number of medical devices recalled
this year, jumping to 27 in Q1 2020 from just 10 in
                                                                 450
Q1 2019. Sweden is home to a number of production
facilities and offshoots of huge multinational                   400

medical device companies, and its medical device                 350
manufacturing industry is growing – which may account            300
for the rise in recalls.                                         250

                                                                 200
‘Unknown’ or ‘other’ reasons account for a clear
                                                                 150
majority of notification reasons submitted in 2020 so
                                                                 100
far (390), followed by quality issues (120), software
issues (56), mislabeling (24) and products being                  50

outside of specifications (10).                                    0
                                                                           Quality Issue

                                                                                            Software
                                                                                               Issue

                                                                                                       Mislabeling
                                                                                                             Issue

                                                                                                                        Outside of
                                                                                                                     Specifications

                                                                                                                                      Other
Recalls due to software issues have risen by 37%
from Q1 2019, which saw 41 notices. The pandemic
has given rise to technology companies who have
been finding ways to adapt products that have not
historically been used for medical purposes to meet
the increased demand for telehealth, digital health and
                                                                  For seasoned medical device industry professionals,
remote monitoring. This is where we may expect to
                                                                  the advice is not to become complacent as some
see some challenges, as traditionally consumer-facing
                                                                  regulations are relaxed for the time being. The MDA
companies get to grips with a different testing and
                                                                  will still come into effect, and with it a more stringent
regulatory environment and struggle to understand what
                                                                  approach to testing and quality control.
to report, when to report it and how to handle issues.

                                                                  While the above may sound like a cause for concern,
It’s a crucial time for these companies to have a robust
                                                                  it’s worth remembering that more broadly, any
recall strategy in place – particularly in an industry
                                                                  investment and innovation in an industry inextricably
that’s under intense global scrutiny. Regulations
                                                                  linked to the welfare of society is a hugely positive
and testing procedures must be understood, and
                                                                  thing and will in the long-term revolutionise entire
manufacturers must be fully compliant with existing
                                                                  healthcare systems.
industry standards.

                                               Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES          33
The industry faces an uncertain
future as it looks to overcome
this turbulent period.”
ELECTRONICS
China, as always, is the source of most recalls in the sector - an expected
consequence of the sheer volume of products it exports across the globe.
In total, 31 of the 44 recall notifications related to products manufactured
in China which is almost identical to the same quarter in 2019.

However, while those figures are to be expected, the coronavirus crisis
that has engulfed country after country is anything but. The COVID-19
pandemic is hitting manufacturers hard and while electronics remain
in high demand, the industry faces an uncertain future as it looks to
overcome this turbulent period while protecting and positioning itself for
what lies ahead.

      Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   35
FIRST QUARTER OVERVIEW

Far from being simply a public health crisis, we are       Innovation is fundamentally important to the
facing an economic emergency perhaps unlike any            electronics sector, and this is a time which calls
that has come before. It is true that not every sector     for genuine innovation. New products, long in the
will face the same impact, but as the picture unfolds it   planning, may have to take a backseat as businesses
has become abundantly clear that, for most, there are      focus on doing what they can to protect themselves.
dark days ahead.                                           Instead, innovation may come from how manufacturers
                                                           and retailers get their existing products into the hands
                                                           of consumers. After all, most bricks and mortar stores
                                                           are closed and while many retailers can still operate
                                                           online, it is a simple fact that the current crisis has
   Innovation is fundamentally                             made it harder for consumers to buy – and receive –
   important to the electronics                            the products they want.
   sector, and this is a time which
   calls for genuine innovation.”                          And it goes without saying that innovation cannot
                                                           come at the cost of safety. As we’ll see in this report,
                                                           USB chargers remain a problem. As the shutdown
                                                           sees people turn to new sources for buying gadgets,
                                                           manufacturers must do everything in their power to
                                                           ensure these meet stringent safety standards in order
                                                           to protect consumers as much as possible.
Q1 2020 SNAPSHOT: KEY TRENDS

                 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   37
ELECTRONICS DEEP DIVE

From Mobile World Congress to E3, some of the
biggest electronics shows have been cancelled in the
wake of the coronavirus pandemic. This, of course, is
not a problem limited to a specific sector. Indeed,
the stark reality of COVID-19 is that just as no country
is untouched by the deadly disease, nor is any
business sector.

      Everything from smartphones
      and TVs to appliances and
      cars are likely to take a hit
      through 2020.”

A survey1 of global electronics manufacturers and
suppliers presents some interesting insights. 40 per cent
of respondents “believed that consumer electronics
were likely to be the most impacted industry due to the
coronavirus (COVID-19) outbreak”. That was followed
by industrial electronics, with 24 per cent saying it
would be the worst affected by the crisis.

It’s easy to see why consumer electronics is perceived
as being most at risk. As an in-depth piece from Forbes2
states, there has been “controlled panic” which has seen
consumer purchases pivot towards essential items. As
their article states, “everything from smartphones and
TVs to appliances and cars are likely to take a hit through
2020” with consumer sentiment negatively impacted by
worries over the virus and its economic impact.

As that economic impact is felt ever more keenly,
with greater numbers of people either furloughed or
made redundant, we can expect spending habits to
shift dramatically.

With many manufacturers shutting down operations –
or operating at significantly reduced capacity – there
is widespread concern about the financial blow being
dealt by COVID-19.
Thankfully, we have seen robust responses by
                    government and banks to the crisis. The European
                    Central Bank, European Investment Bank and European
                    Commission have all taken significant steps3 to support
                    businesses affected by the COVID-19 outbreak.
                    However, while these may help to stem the tide, they
                    will not be a panacea – with the industry and wider
                    supply chain facing a long road ahead.

                    And while sales will undoubtedly rebound, likely in the
                    second half of the year, it will still take some time for
                    consumer confidence to be fully repaired. Buying the
                    latest mobile phone or upgrading to that big-screen
                    4K TV simply will not be a priority. The hope for the
                    sector will be that, come the major spending months of
                    October, November and December, consumers will feel
                    the crisis is behind them.

                              Buying the latest mobile
                              phone or upgrading to that
                              big-screen 4K TV simply will
                              not be a priority.”

                    Then, the focus can perhaps shift to building on trends
                    we have previously identified, including the rise of
                    smart home devices and 5G, both of which are linked
                    and were set to see huge growth this year – growth
                    that may well have been stymied by events. While links
                    between 5G and the pandemic are baseless conspiracy
                    theories, it will still be interesting to see if there is any
                    impact to its development across Europe.

                    1
                      https://www.statista.com/statistics/1106093/electronics-industries-impacted-
                    by-supply-chain-delays-due-to-covid-19-worldwide/
                    2
                      https://www.forbes.com/sites/tiriasresearch/2020/03/12/coronaviruscovid-19-
                    consumer-sentiment-poses-bigger-threat-to-electronics-than-manufacturing-
                    delays--part-3/#509f874c3cfe
                    3
                      https://www.fleeteurope.com/en/financial-models/europe/features/covid-19-
                    eu-supports-automotive-industry

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES                39
SAFETY GATE INSIGHT
In the first quarter of 2020, there were 44 recall
notifications. China continues to dominate the country
of origin list for recalls in the sector. In the first three
months of 2019, 32 recalls related to products originating
in China - whereas in Q1 of this year it was 31. With
China being the predominant manufacturer of electrical
appliances, recall activity in other countries was low with
second on the list - Poland - only accounting for two in
Q1. Rounding off the top five in the country of origin list
was Belarus, Czech Republic and Turkey.

Leading the way in terms of notifications was Poland,
which submitted 13 notices. This was followed by the UK,
with nine notifications, and then Belgium (5), Finland and
Cyprus (both 3).

                                   RECALLS BY COUNTRY OF ORIGIN

                    35

                    30

                    25

                    20

                    15

                    10

                     5

                     0
                          China

                                      Poland

                                                     Belarus

                                                                  Czech
                                                                Republic

                                                                           Turkey

                                           Q1 2020             Q1 2019
By comparison to the same quarter last year, Sweden                                         was cited in 34 recalls - up on 24 in the equivalent
has more than halved the number of notifications                                            quarter last year.
made, dropping from nine to three. The spike last
year was attributable to a number of poor-quality USB                                       In fact, electric shock was the main risk identified in 77
chargers entering their market - something that is a                                        per cent of all recalls in the sector so far this year - and
recurring issue in the sector.                                                              it was cited in 35 per cent of recalls of USB chargers.

                                                                                            At Stericycle Expert Solutions, we know what a
                             RECALLS BY PRODUCT
                                                                                            successful recall looks like and have supported
                                                                                            thousands of businesses through the complex process.
14
                                                                                            And it’s clear that the current crisis will make the
12                                                                                          implementation of recalls harder, not easier.
10
                                                                                            While much of the world feels like it has stopped, the
 8
                                                                                            need to recall potentially dangerous appliances from
6                                                                                           people’s homes has not. Manufacturers, already under
 4                                                                                          unbelievable pressure, need to step up and carry
                                                                                            out these recalls – while being cognisant that doing
 2
                                                                                            so in a haphazard manner risks breaking the trust of
 0                                                                                          consumers at a time when that trust is more valuable
                                                                                            than ever before.
     USB Charger

                   Battery
                   Charger

                                      Miniature
                                Circuit Breaker

                                                  Laptop Power
                                                        Supply

                                                                         Hair
                                                                 Straightener

                                                                                Hairdryer

                                                                                                                               RECALLS BY RISK

                                                                                            40
                             Q1 2020                         Q1 2019

                                                                                            30

Indeed, USB chargers were the most recalled item
in the quarter. Poland (6) and Belgium (5) submitted                                        20
the most alerts for faulty chargers, with the item
accounting for 46 per cent of Poland’s recall alerts -
                                                                                            10
and all of Belgium’s.

As you may expect in the electronics sector, the most                                        0

significant hazard identified was electric shock, which
                                                                                                    Electric Shock

                                                                                                                     Environment

                                                                                                                                    Electric Shock, Fire

                                                                                                                                                             Chemical,
                                                                                                                                                           Environment

                                                                                                                                                                         Fire

                                                                        Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES                   41
We have significant concerns
that recalls relating to electrical
appliances will rise due to the
COVID-19 crisis.”
ELECTRONICS ANALYSIS

Moving forward, we have significant concerns that recalls relating to
electrical appliances will rise due to the COVID-19 crisis. With most
physical shops closed, we can expect to see more and more consumers
look to the internet to buy the products they feel they need. And when
you consider that many people will have seen a reduction in income, it is
likely that a significant proportion will look to new sources, including online
marketplaces which can often be fertile ground for unscrupulous sellers.

Similarly, retailers – predominantly operating online at the moment – may
not be able to maintain a steady flow of products from trusted suppliers.
That could see them look to new suppliers, running the risk of purchasing
goods which fail to meet safety standards.

The sector at large is reliant on a global supply chain, but we have already
seen some politicians suggest that a more localised approach may be
required to protect countries in the longer term. Should that come to
fruition, it may well be that companies have to find manufacturing
solutions within their own borders in the future. That is likely to have an
impact on the bottom line, in turn impacting consumers and potentially
seeing product costs rise over the next few years.

              Automation has been high on the agenda
              for many years but will surely gain even
              greater prominence.”

One major question is how will manufacturers respond? Automation has
been high on the agenda for many years but will surely gain even greater
prominence as manufacturers look to give themselves added protection
against similar events in the future. Once the current storm is weathered, we
can expect to see major changes to the electronics industry as we know it.

     Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   43
CLOTHING
Data from the first 12 weeks of 2020 revealed a total of 33
notifications placed from eight countries. The most commonly
recalled item was children’s clothing, with the most prominent
reasons including chemicals, choking and strangulation risks. Bulgaria
placed the most notices (12), followed by Norway (4) – which along
with Finland was one of two Scandinavian countries submitting five
recalls for footwear contaminated with dangerous chemicals.

Major trends stemming from the pandemic which may impact on
the recall market include a shift in consumption patterns, drastic
changes to supply chains and manufacturing processes and
manufacturers refocusing efforts to create PPE equipment.
It’s estimated that global demand for
                      PPE has grown by 1,000% in the past
                      few weeks, and with it a rise in not-
                      fit-for-purpose, unregulated surgical
                      masks made from leftover textiles”

Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   45
While historically one of the
     categories analysed with the least
     amount of recalls, the clothing
     industry is perhaps among those
     gathering the most amount of
     attention from consumers.”

FIRST QUARTER OVERVIEW

While historically one of the categories analysed with      and Cyprus just two. It seems Hungary, after a spike
the least amount of recalls, the clothing industry is       in recalls for children’s clothing due to choking risks
perhaps among those gathering the most amount of            in Q1 2019, has taken heed of safety warnings, with
attention from consumers due to the nature of the           recalls petering down across the year and into 2020.
risks, many of which directly relate to the safety of
children. Women and girls’ apparel are responsible          Interestingly Germany, which placed the second
for the largest share of revenue in this market, with       highest amount of notifications in 2019, did not place
the European clothing industry as a whole worth             any in Q1 2020. Whether this is the beginning of a
€168.5 billion in 2018, growing at an average rate of       new downward trend remains to be seen.
5.8% according to CBI. The biggest markets within
     1

the EU include Germany, France, the UK, Spain, the          The main reason for recalls was chemicals (11),
Netherlands and Italy, comprising nearly 72% of all EU      followed closely by strangulation (10). Recalls purely
apparel imports.                                            due to injuries, which topped the charts during Q2, Q3
                                                            and Q4 of 2019, are down to just three. However, this
Analysing recall data for the first quarter of 2020,        mirrors the data collected during the first quarter of
a total of 33 notifications from eight countries was        2019, so it remains to be seen if recalls due to injuries
observed in Q1, down from 35 from ten countries in          will follow the same trajectory as 2019.
the same period of 2019.
                                                            Any trends observed in Q1 are likely to change
The country leading the way in recall notifications is      over the course of the year given that we’re living in
Bulgaria, with 12 submitted, followed by Norway with        unchartered times. Two trends we may see emerging
four. This is a stark change from 2019, where countries     with potential to impact recall alerts include a rise
including Hungary and Cyprus topped the charts in           in local manufacturing, increased automation and
clothing recalls. However, Hungary has yet to submit        reallocation of resources as spending habits shift.
any notifications in the clothing market so far this year
                                                            1
                                                                https://www.cbi.eu/market-information/apparel/what-demand/
Q1 2020 SNAPSHOT: KEY TRENDS

                 Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES   47
According to the European Apparel
    and Textile Confederation the
    COVID-19 pandemic is likely to cause
    a 50% drop in sales and production.”

CLOTHING DEEP DIVE

The first quarter of 2020 sparks the beginning of what will be a year of
significant change for the global economy. While the world is in flux and
markets continue to be characterised by COVID-19, it can be difficult to
predict what may happen over the course of the year as spending patterns
change to reflect new needs and changes in income.

If we look back at 2020 so far, there hasn’t been much       fit-for-purpose, unregulated surgical masks made from
of a shift in terms of the reasons we might expect           leftover textiles. The global market for masks is, as a
recalls to occur. Children’s clothing, leather goods and     whole, relatively unregulated – which could present
footwear all appear on recalled item lists, with the risks   some problems as the clothing and textile industry
we’ve seen crop up regularly in our quarterly Recall         grapples to produce large batches with incorrect
Index reports. However, with the pandemic only being         materials which have the danger of being used by
declared in March, it’s likely the effects will begin to     unwitting consumers and frontline workers. Indeed,
take shape over the next few months.                         counterfeits are rife in places including Hong Kong,
                                                             which saw a government crackdown in January with
According to the European Apparel and Textile                spot-checks on retailers and pharmacies selling masks.
Confederation1 the COVID-19 pandemic is likely               This might be something we see more of in Europe as
to cause a 50% drop in sales and production in               the virus continues to take hold, with The European
the European textile and clothing sector. The UK             Anti-Fraud Office establishing an enquiry into this in
Government has reported that an increasing number            mid-March.
of manufacturers are turning their production efforts
towards helping the national interest, including             Another trend we foresee coming to the fore in the
creating protective face masks for key workers.              coming months is dramatic changes in supply chains.
                                                             Stark warnings of shortages have already come from
It’s estimated global demand for PPE has grown by            Asia, including from the chairman of Ambattur Fashion
1,000%2 in the past few weeks, and with it a rise in not-    India3. Clothing manufacturing powerhouses including
China and increasingly India, Bangladesh and Jordan              towards a slower fashion model with fewer seasonal
have shut down factories and cited unreasonable                  collections – which has the potential to perhaps
demands from UK and US-based retailers including                 positively impact on recalls as consumerism may
extended payment terms and discounts. This is not                decrease and the need for products to be produced
sustainable and has the potential to devastate the               quickly and cheaply does too.
industry with companies unable to pay factory workers
as a result.

Further to this, we can expect to see significant
changes to the manufacturing process as more workers                              We can expect to see
self-isolate, become unwell or are made redundant                                 significant changes to the
– which may result in an increased reliance on                                    manufacturing process as
automation. As well as this, the world is likely headed                           more workers self-isolate,
for a recession, and, as we understand from history, all                          become unwell or are
economic downturns increase automation as less jobs                               made redundant.”
become available. This may result in a rise in recalls
due to risks arising from manufacturing errors in the
longer term as new technologies are adopted.

A major trend we’ve identified in the past is
sustainability, however, as raised in Vogue Business4,
when pressure is on the bottom line, sustainability is
at risk of falling as a priority. We may expect to see
increased scrutiny on supply chains from environmental                1
                                                                        https://euratex.eu/press-release/covid-19-may-cause-important-drop-
organisations as companies put green initiatives on                   in-sales-and-production/
                                                                      2
                                                                        https://pciaw.org/industry-news/government-personal-protective-
the backburner.                                                       equipment-ppe-hub/
                                                                      3
                                                                        https://www.bbc.co.uk/news/business-52146507
                                                                      4
                                                                        https://www.voguebusiness.com/sustainability/will-covid-19-
Finally, one industry analyst noted in fashion industry               coronavirus-disrupt-fashions-sustainability-commitments
                                                                      5
                                                                        https://wwd.com/fashion-news/designer-luxury/will-coronavirus-reduce-
trade journal WWD5 that the industry may move
                                                                      fashion-seasons-collections-1203549445/

                                              Q1 2020 RECALL INDEX: PRODUCT RECALL DATA, TRENDS AND PREDICTIONS FOR EMEA INDUSTRIES             49
SAFETY GATE INSIGHT AND ANALYSIS

The European clothing market has evolved rapidly                                 As to be expected, children’s clothing, including
over the past decade. Consumers are demanding                                    baby bodysuits, continued to pull in the most recalls,
more from retailers, and the big players need to be                              accounting for 60% of those placed. This follows suit
nimble, have a robust digital strategy and get trend-                            from Q1 2019, in which we saw children’s clothing
led products to market – fast. As well as efficient supply                       sets also topping the list. The most common risks for
chains and production lines, clothing retailers are now                          children’s clothing include strangulation and choking,
expected to act as ‘civic brands’ – taking an “active                            as many items are made to expand with growth in
stance on social issues, satisfy consumer demands                                height and weight in young people and so include
for ultra-transparency and sustainability, and, most                             drawstrings and cords.
importantly, have the courage to “self-disrupt” (The
State of Fashion 2019, McKinsey). All of the above can                           As we approach the warmer months, we would usually
result in huge pressure for retailers and manufacturers.                         expect recalls in clothing to rise as the purchase
                                                                                 of summer clothing rises and seasonal sales are
While the number of recalls in the clothing industry is                          launched. However, with overseas holidays sharply
slightly up on Q4 2019 from 27 to 33, they are lower                             declining and the nature of shopping habits restricted,
than the same period of 2019 (35) and markedly lower                             this year may be an anomaly.
than the same period of 2018, which saw 48 recall
notices placed in this category, with the majority                               A sharp rise in recalls due to a chemical risk was
of these (14) placed by Hungary. As we’ve already                                surprising in this category, with 12 notices submitted.
referenced, Hungary has seen recall instances decline                            This is over a third of the total recalls submitted due to
over the past two years.                                                         chemicals over 2019 in its entirety (33). A proportion

                                                                RECALLS BY PRODUCT

               5

               4

               3

               2

               1

               0
                     Children’s
                   Clothing Set

                                  Children’s
                                  Sweatshirt

                                               Slippers

                                                           Baby’s
                                                          Bodysuit

                                                                       Leather
                                                                        Shoes

                                                                                       Children’s
                                                                                  Sports Trousers

                                                                                                      Children’s Shirts

                                                                                                                          Babies’ Clothng
                                                                                                                                     Sets

                                                                                                                                            Men’s Sandals

                                                                                                                                                            Gilrs’ Clothing
                                                                                                                                                                       Sets

                                                                     Q1 2020                        Q1 2019
You can also read