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Keep Your Beverage Out of Court with Proactive Claims Management

Beverage Claims Management

By Erin Marvin-Barnes, CSCP, Senior Supply Chain Analyst, BevSource

Every stage in the beverage production process presents an opportunity for something to go wrong. Whether it’s a spoiled ingredient, an error in the production process, defective packaging, or a lost shipment, it’s not a matter of if, but when, you’ll face an unexpected issue that results in a claim.  

What is a claim?

A claim occurs when something falls outside of the specifications you have for producing and distributing your beverage and requires corrective action. While more often than not these errors are caught before affecting the end consumer, they can still cost your beverage company time and money and put your product and your customers at risk.

The Four Main Types of Claims

The four main types of claims are packaging claims, ingredient claims, production-related claims, and freight claims. 

Packaging Claims

A packaging claim can result from receiving damaged packaging from the vendor or a packaging failure, such as a glue or liner failure. Other common packaging claims are triggered by incorrect artwork or out of specification colors on packaging.

Sometimes, the wrong size materials arrive. For example, you may receive a twist cap for a pry bottle or a 4 pack wrap for a sleek can instead of a standard sized can. Packaging can also be damaged due to handling at the manufacturer, in transportation, or during production.

Ingredient Claims

Ingredient claims can stem from receiving or ordering the wrong ingredient to receiving ingredients that are outside of the specifications required for your beverage. For example, the taste or color of the raw material ingredient could be outside of specification, or the specified levels for Brix, TA, or ABV could be out of range. The ingredient could be expired or fail its micro inspection. Ingredients that are spoiled, damaged, stored incorrectly, or spilled/misused during production could also generate a claim before, during, or post-production.

Production Claims

Production claims can be related to either the liquid or the packaging of a beverage. Sources of production claims on the liquid side range from finished liquids that are out of specification, to incorrect carbonation levels, or excessive liquid and packaging loss.

On the packaging side of production, your primary packaging could leak, possibly due to bad seams on your cans, damaged cans, or a combination of multiple other sources. Incorrect packaging might be used, for example the wrong colored end used on your finished can. Inaccurate date codes or pallet descriptions are also potential sources of claims. Insufficient pallets with incorrect configuration, missing corner boards, or insufficient shrink wrap, can also generate a claim.

Freight Claims

Products that are lost or damaged during shipment or that miss their required delivery dates can require you to file a claim. Improper shipping conditions that affect the quality or shelf life of your product can also result in claims.

Incidents and areas outside of these four categories can occur and trigger an investigation and clam. Some examples are an expired finished good or incorrect invoicing. Even though experiencing a claim at some point is inevitable, it doesn’t mean you should sit back and hope for the best. There are several steps you can take to prevent as many claims as possible and prepare to handle the claims you do experience effectively. 

Steps for Handling a Claim

1. The best defense is a good offense.

The best way to handle claims is to avoid them. Implement and carefully follow processes, checklists, and checkpoints to spot and prevent potential sources of errors or inaccuracies. Sending an experienced representative to production is one of the best ways to avoid mistakes. A second set of eyes that knows your product can save you from the pain and inconvenience of a claim.

BevSource representatives have caught everything from ID codes that are one letter off which would have resulted in incorrect SKUs to inaccurate date codes that would have affected the product’s shelf life. After spotting a potential source of error, you can put in extra checks in place to ensure those errors don’t happen in future production runs.

2. Act fast.

The longer you sit on a potential claim, the less likely it is to be resolved, and the more potential damage there could be for your product and brand. For example, if you find out there is a “leaker” on one of your pallets, it’s only a matter of time before that leak will damage the products around it. Check your production run retains and sound the alarm as soon as something is off. Don’t wait. Move to mitigate damages as quickly as possible.

3.Get your documentation in order.

To resolve a claim, you need to figure out exactly what happened. This requires unbiased data from a legitimate source. Start at the beginning of your supply chain and gather and organize the data you need to put the puzzle together. Some questions to ask include:

When did the claim happen?
How was the claim detected?
How widespread is the claim?
Do you need physical samples?
Do you have or need pictures?
What are the time/date code stamps?
Do you have retain samples to check?
Do you need to do a taste panel?
Do you need to send the product offsite for testing?

4. Assess Damages and Determine next steps.

In addition to gathering more data, you may need to take further action to mitigate damages. Do you need to issue a distributor notice or a product withdrawal from the market or put your product on hold? Determine and take the next right step to avoid further risk. Is there a Federal Excise Tax (FET) that needs to be reimbursed? Does a Notice of Intent (NOI) need to be filed? Is there another production that needs to occur? Have you notified all of parties involved?

5. Work Collaboratively for the Best Resolution.

Once you have identified what happened and the damages, you can determine what action and compensation you require from the responsible parties. The resolution will be a balance between getting compensated, ensuring the error doesn’t happen again and preserving the relationships with your production and distribution partners.

Pick your battles, present your case, and be reasonable and creative in coming up with a solution that works for all parties involved. The goal is to find a way to keep your business moving forward to become stronger and more profitable in the long run.

Although beverage claims are never fun, preparing for and working through them provides an opportunity for you to build a resilient beverage brand. Stay vigilant and proactive in identifying and responding to risk, and you can turn what could have been a disaster into an opportunity for learning and growth.