F&B Industry, café, f&b, bar, restaurant, food and beverage, business insurance

The food and beverage (F&B) industry constantly changes with new regulations, health trends and customer needs. The role of the F&B industry is to produce, package and distribute various food and beverage products. The industry is important not just due to our needs but also due to the economic contribution worldwide.

The industry consists of millions of companies that provide products and services based around food. However, the industry is also full of threats and risks that can ruin a growing business into nothing.

Every brand and company must be aware of these F&B industry threats to survive and grow. These business threats can result in lawsuits, financial loss, loss of trust, business shutdown and more.

Hence, the article will highlight the top business threats for any company in the F&B industry.

What Businesses Are Considered to Be Part of the F&B Industry?

There are countless companies involved in the F&B industry. Many believe it is just restaurants and bars; however, it is any business that produces, packages, sells and distributes all forms of food or beverage.

The different types of businesses include: 

  • Restaurants (fast-food restaurants to high-class restaurants) 
  • Bakeries 
  • Cafes 
  • Bars
  • Food Manufacturers (production and packaging factories)
  • Catering Businesses

The same threats can affect any company that falls under these business categories. They must be aware of the risks and have a strategy to deal with them before it is too late. One of the best approaches to industry threats is to have a range of insurance.

Different insurance policies can cover each threat so that F&B companies can recover and battle the negative impacts.

Biggest Threats to the F&B Industry

Product Quality Issues – Food Safety 

The term products in the F&B industry refers to any item created for customers to consume. Every product in the industry must be safe to consume and should not harm end users. Unfortunately, there are always cases of product defects that harm customers.

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Product defect is the number one threat in the F&B industry, as it can happen to any company. Product defects in the industry can include contamination, labelling issues (failure to warn), defective packaging or use of untested ingredients.

F&B product defects can lead to food poisoning, serious illnesses or injuries. The affected party can sue the F&B business for medical and compensation expenses. The company will always be liable for product defect cases and these threats, especially when selling products in bulk. 

Food safety is a serious issue that most companies are aware of, but accidents do happen. F&B companies must purchase product liability insurance to cover this threat. The insurance will cover the costs of product defect claims that lead to third-party illness and injuries. Companies that sell food products in bulk may also need to purchase product recall insurance. The insurance will cover the expensive costs linked to recalling many products. 

The combination of both insurance helps business protect their liability and financial loss and compensate the affected customer(s).

Public Liability Threat 

Many food and beverage companies depend on customers entering their premises to purchase or dine in. When third parties enter the location, there are public liability risks. Every business with people entering their location must be aware of public liability threats.

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Public liability threats include injuries or property damage to a third party due to the business activity or premises. The injuries could be a slip and fall due to wet floors or long wires. Property damage could include a waiter dropping food and drinks all over a customer’s laptop in a cafe.

Either way, if a third party feels the business activity caused them or their property damage, they can take legal action against the responsible party.

Most companies in the F&B industry need public liability insurance. The insurance will cover public liability claims regarding third-party injuries or property damage due to the business.

Property Damage Threat

Most businesses in the F&B industry operate on specific premises to produce, package or sell their products. Properties include kitchens, factories, restaurants, retail shops, and more. Companies must protect the premises from damage and have specific safety protocols. How much a business may try to avoid damage, the threat is unpredictable and may occur due to uncontrollable situations.

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Property damage to food and beverage premises could occur due to natural disasters, fires, floods or vandalism. These situations are a huge threat as they can force businesses to shut down, repair and change budget strategies.

Some businesses may be unable to reopen due to the repair costs and loss. Hence, property all-risk insurance is vital for any F&B company. The insurance will cover the repair and replacement costs of the damaged property.

Food manufacturers who use various machines may also need machine breakdown insurance. The insurance will cover the costs of repair of expensive equipment that has broken down or been damaged. However, the insurance will not wear and tear damage. 

Business Interruptions

With property damage risks, business interruption threat follows very quickly. While the property is being repaired, there is an income pause, although the business is still liable to pay salaries and pay rent and other payouts. These expenses can add up to a lot when repairs take longer.

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The business interruption periods can seriously affect companies in the F&B industry. The interruption can last months and completely disrupt a company’s balance sheet. It can force many companies to shut down or declare bankruptcy.

The threat outcome can be resolved with business interruption insurance. The insurance will cover financial loss related to business interruption. The insurance will cover income loss, salaries, rent and additional expenditures. Periods of income pause can fluctuate due to property damage, but with insurance, the cover will allow the business to reopen successfully.

Employee Safety Risks

There are many roles in the F&B industry, including chefs, servers, packaging staff, bartenders, and many more. Each F&B employer is liable for their employee’s safety while performing their duty.

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Workplace injuries will also be a significant threat to the F&B industry. Employees may get injured or ill due to their duty or employer negligence. Even if all safety gear is provided, accidents are still possible.

These accidents could include a chef seriously cutting himself or an employee inhaling food chemicals at a manufacturing factory. The employer will have to pay their medical bills, salary as they recover and possible compensation. These costs will differ depending on the seriousness of injury and post-recovery disability.

Every employer in the industry is legally required to purchase employee compensation insurance. The insurance will cover the legal costs an employer must pay their employee regarding a workplace injury. Having employee compensation insurance helps employers and employees when faced with sudden accidents.

Cyber Crimes 

As the F&B industry develops, more technology is integrated into the process. The technology helps produce products but also collects customer data and payment information. Almost all F&B brands are online with websites, and many sell their products online.

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When companies use technology and the internet, cybercrime threats can infiltrate F&B company online duties. Cybercriminals may hack into business servers and steal data. The data can include company secrets, customer data or supplier information.

Cybercriminals can lock businesses out of their website and servers until the company pays a specific amount. Various cyber attacks could affect the F&B industry, especially with the significant amount of information stored.

Every business in the F&B industry must be prepared with cyber insurance. The insurance will cover cyber experts’ advice, threat removal, data recovery, informing third parties and financial loss. The insurance will cover a range of cyber-attacks to help recover. 

Companies may also purchase crime insurance to cover computer fraud and other crimes such as employee dishonesty crimes, third-party fraud and theft.

What Are The Benefits of Having the Right Insurance in the F&B Industry?

These F&B industry threats could affect any food and beverage company worldwide. Each threat could have the power to shut down a business due to financial loss or reputation damage.

Having insurance in the food and beverage industry provides crucial benefits. Firstly, it protects F&B businesses from financial losses due to lawsuits, damages, interruption, equipment breakdown or workplace injuries. Having the right insurance is an excellent financial protection when affected by unforeseen business threats.

Secondly, insurance allows businesses to focus on providing the best product without worrying about threats at every moment. However, this does not mean companies can provide products or services without care. Insurance(s) will only cover threats that were caused due to uncontrollable accidents. 

Having the proper coverage in the F&B industry means having a range of policies to protect your business in the worst times and to continue to grow.


To Learn More about F&B insurance solutions and protect your F&B business from threats in Hong Kong & Asia, contact Red Asia Insurance.