Notifications in the Toy Industry is No Child s Play

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1 Notifications in the Toy Industry is No Child s Play Stericycle European Recall and Notification Index TOY RECALL TRENDS 1

2 Quarterly Recall and Notification Index The diverse environment of the European economy creates interesting trends across multiple sectors of the market. Product safety notifications fell in Europe during. Despite a summer drop off in production, the decline versus the same period last year suggests something more. Tighter regulations in some industries have affected the manufacturing processes and the number of faulty or unsafe products is dropping. The Toy industry is getting to grips with recent EU regulations. The Toy Directive has been in place for 3 years, but manufacturers haven't caught up with the new verification processes and many products are being rejected. As design and manufacturing processes inevitably catch up, the number of products requiring safety notifications will decline. The Stericycle European Recall and Notification Index examines these trends by analysing the output from organisations RAPEX and RASFF. The subsequent conclusions help explain what s happening in the region across Food, Consumer Goods and Automotive industries. Product safety notifications fell in Europe during DROP IN COMPARED TO Q % 2

3 Toys and Children s Items With child safety so prominent, it should come as little surprise that toys are most commonly subject to recalls and safety notifications within the consumer goods sector. EU Toy Safety Directive protects 80 million children in the EU During 2013 they joined clothes at the top of the list and during 2014 have consistently seen the highest number of notifications, reaching 33 per cent of all consumer notifications in Q3. The regulations were re-designed in 2009 and came into effect in The re-design expanded the definitions around toys and harmonised the safety procedures. There have also been regular updates and re-definition, with the latest coming into effect in October 2014 (EN71-1), addressing concerns around the impact of the noise emitted by toys. The Toy Directive implemented an assessment framework to analyse risks from various chemical, physical, mechanical, electrical, flammability, hygienic and radioactivity hazards that the toy may present. In, the most common safety infringement was due to chemicals (44 per cent), then it was choking risk (36 per cent). The EU testing can be assessed by self- or third party verification. In the last three years, toys have increased from 17 per cent of all consumer recalls up to 33 per cent of the consumer sector. Design, development, sourcing and manufacturing processes all need to catch up. Toy Hazards 44% Chemicals Clothing Hazards 48% Injuries 36% Choking 31% Strangulation 7% Injuries 15% Chemicals 4% Burns 3% Environment 4% Microbiological 2% Choking 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 3

4 The Value of Brand The toy industry is a highly seasonal one across Europe. According to the Toy Industries of Europe (TIE), per cent of annual toy purchases take place in November and December. This is even higher in regions such as Spain, where 50 per cent of sales happen in December alone. Toy manufacturers can ill afford safety issues in the run-up to Christmas. Also, around 60 per cent of toys on the market are newly developed, which makes the process more challenging. While France, Germany and UK are the biggest toy markets in Europe, sourcing has moved around the globe in recent years. Traditionally rooted in China (Hong Kong) production has spread into other East Asian countries, but also back into Europe. Toy production has come back to Europe for 3 reasons Better quality assurance Value of goods doesn t offset transport costs from China Stay in control of production processes (flexibility) Proximity brings cost and control benefits particularly in the way that it speeds up decision making and awareness of problems. This is important in an industry where the products themselves change so frequently. Manufacturers do not have long periods of time to fine tune production lines. The strict standards need to be met immediately and seasonality dictates that they re met for high volume output. 4

5 Regional Variances Spain is a top 20 manufacturing nation by output, with several very strong toy manufacturing centres. It is also the source of the most toy recalls. It s understandable that Spain s greater output ranks it highest, with 34 per cent of toy recalls. The Czech Republic is not a top 20 producer, but has a similar record for safety notifications, with 29 per cent of toy recalls. The cause of this ranking is the type of industry in the Czech Republic. Plastic dolls saw 53 notifications in Q3 that s 34 per cent of all toy notifications. The Czech Republic was the source of 28 of them. In several cases, the heads of the dolls contained one chemical deemed a safety risk in any toy, and another deemed a risk in any toy that may be placed in a child s mouth. It s impossible to say whether the oversight was a lack of awareness of regulations, or simply a manufacturing mistake. What is certain is that toy manufacturing in Europe must remain cost competitive. If it doesn t, it will be moved again. This pressure can cause oversight from manufacturers. The Czech Republic has been able to establish an automotive manufacturing industry that attracts the biggest global brands. Its position as a reliable and cost effective centre for the manufacture of cars should be an example for the toy industry as it matures. Toy Recalls in Clothes Recalls in Plastic Dolls Other Toys Children's clothes Other Top 3 Recalls by Country Top 3 Children s Clothes Recalls by Country Czech: 28 Spain: 8 Slovakia: 4 Spain: 35 recalls Czech: 29 recalls Hungary: 35 recalls Hungary: 43 recalls Bulgaria: 34 recalls Cyprus: 22 recalls 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 5

6 Clothes and Childcare products In the third quarter of 2014, 117 of the 142 clothing recalls and notifications related to children's clothes. That means that children's toys and clothes accounted for 57 per cent of all consumer safety notifications in the period. Children's toys and clothes accounted for 57 per cent of all consumer safety notifications in The biggest sources of the notifications for children's clothes were Hungary (37 per cent), Bulgaria (29 per cent) and Cyprus (19 per cent). The textile and fashion industry in Hungary is predominantly made up of small and medium businesses, which bring flexibility and speed to an industry denied that by Chinese producers. However, lack of scale makes it harder for them to compete on cost alone. Additionally, clothing is not one of Hungary s primary industries, so does not receive government support. It is fighting against high levels of competition, largely on its own. Safety issues often accompany high pressure manufacturing. Across Europe, the most common causes of safety notifications were for injury risk (49 per cent) and strangulation risk (31 per cent). 6

7 Fast Growth Leading to Inconsistent Safety Bulgaria declared itself the fastest growing clothing manufacturer in 2007 following a 152 per cent growth in textiles output and a 109 per cent growth in clothing between 2000 and But it has since come up against similar pressures to Hungary. Relying on small and medium companies to handle the shift in trade from China brings significant manufacturing challenges. The nations involved in clothing notifications are relative newcomers. They have recently won EU accession with its more stringent directives grown multiple industries as a result of lower tariffs and accepted migration of manufacturing from the Far East. As the landscape settles, manufacturers familiarise themselves with regulations and they naturally mature, safety notifications across the EU could decrease. Lessons Learned Germany is Europe s largest economy and a top five manufacturing nation in the world. It is also a leader in product safety. It has reduced its safety notifications for consumer goods. In Q2, it accounted for 13 per cent of the region s notifications, which dropped to just seven per cent in Q3. The development of the EU Toy Directive was guided by German national standards and there are still verifications that apply in Germany but not within the wider EU Directives. Clearly with more stringent checks, Germany s children are safer. As a large producer, it s expected that Germany will issue more safety notifications. But its manufacturing record will be skewed as it s not operating on a level playing field with every other nation. The country s output dipped in Q3, falling more than expected, even when adjusted for seasonal variance. There is a correlated decline in safety notifications, but Germany, especially when related to toys, has a safety process that other nations can learn from. Of the 34 consumer product notifications originating from Germany, only three related to childrens clothes or toys. Countries across Europe can learn from each other when it comes to safety in childrens clothes and toys. From a safety standpoint, more mature manufacturing nations can help to nurture newer ones. The overall trend for notifications, though, is a downward one, which should be encouraging for everyone Stericycle ExpertSOLUTIONS TM All rights reserved. 7

8 The Recall And Notification Scorecard Overall Total Recalls/Notifications Year on Year DROP IN Q YEAR ON YEAR -9% Quarter on Quarter DROP IN Q ON Q -7% Q Q Food The food industry saw its best quarter for recalls and safety notifications for two years. There was a sizeable drop from the previous quarter, which was higher than most, but for the second year running, a high second quarter was followed by a lower third quarter. The UK, Germany and Italy remained the primary sources for recalls. Seven of the eight top categories for food recalls were the same as the previous quarter. Those categories were: The Top Food Recall And Notification Categories 1 23% Fruit & Vegetables 2 14% Nuts, Nut Products & Seeds 3 10% Fish & Fish Products 4 + 9% Dietetic Foods, Food supplements & fortified foods 5 8% Meat and Meat Products (other than Poultry) 6 6%* Herbs and Spices *new entry 7 6% Poultry Meat & Poultry Meat Products 8 3% Cereals and Bakery Products Total Food Recalls/Notifications Year on Year DROP IN Q YEAR ON YEAR -5% Quarter on Quarter DROP IN Q ON Q -12% Q Q

9 Consumer The consumer goods industry has kept a steady rate of recalls and notifications throughout It s even seen a slight decline across the year. Despite the slight drop overall, Hungary s total notifications grew, making it the highest source of recalls and notifications, just ahead of Spain and Bulgaria. Almost two thirds of notifications are either for toys or clothing/textiles. The top five categories account for 80 per cent of all notifications. Those categories are: Toys 33% Clothing, textiles & fashion 30% Electrical appliances & equipment 9% Lighters 4% Cosmetics 4% Total Consumer Recalls/Notifications Year on Year DROP IN Q YEAR ON YEAR -14% Quarter on Quarter DROP IN Q ON Q -0.6% Q Q Automotive The number of automotive recalls and notifications in Q3 went up by 19 per cent from the previous quarter. More notably, the first compulsory recall of 2014 was handed down in Greece. This ended a streak of two quarters with entirely voluntary notifications. Unsurprisingly considering its high output, Germany remained the highest source of these notifications, with 30, double its Q2 level. Germany has held that position for the previous five quarters. The categories of notification included all kinds of vehicles, and split up in this way: 5 Other items 5 Motorbikes 5 Vans, LCVs, 35 Cars including tyres Bus etc 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 9

10 Stericycle ExpertSOLUTIONS and the Stericycle Recall & Notification Index Explained Stericycle ExpertSOLUTIONS is a global leader in product recalls, retrievals, returns, audits and sustainability services. ExpertSOLUTIONS offers bespoke solutions for a wide range of industries that are designed to aid companies in protecting and enhancing their brands. The Compilation of the Stericycle Index The European Recall and Notification Index gathers and tracks cumulative data from the primary European agencies that track recall notifications in the region. This data is segmented into multiple definitions of notifications and alerts, but collated into a central figure for the purpose of analysis. The data used for this report is current as of October RAPEX Rapid alert system for the exchange of information on measures taken to prevent or restrict the marketing of dangerous consumer products with the exception of food, pharmaceutical and medical devices, which are covered by other mechanisms. RASFF The RASFF provides food and feed control authorities with an effective tool to exchange information about measures taken responding to serious risks detected in relation to food or feed. The Rapid Alert System for Food and Feed tracks all food and drink recalls. For more information please contact: Farzad Henareh European Managing Director, Stericycle ExpertSOLUTIONS info@stericycleexpertsolutions.com UK Tel: International Tel: + 44 (0)

11 2014 Stericycle ExpertSOLUTIONS TM All rights reserved. 11

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