Retailers and consumer packaged goods firms should use Radio Frequency Identification (RFID) tags to aid product recalls and track health issues, according to analyst firm Forrester.

But to put consumers at ease about privacy concerns retailers need to make clear the advantages of being able to trace food, and provide opt-in choices regarding the storage and analysis of collected data.

Firms operating in the grocery supply chain have to be able to identify the origin and destination of food products, and provide immediate information to governments by January 2005, as part of the European Health and Consumer Protection Directorate.

RFID tags provide firms with the best way of doing this, as well as a way of saving money from product recalls, according to Forrester.

"If there's a recall then RFID will help reduce the costs significantly. Rather than having to recall a whole product line, goods can be traced back to pallet or case level," said Forrester senior analyst Charles Homs.

By placing RFID tags on containers and pallets, retailers and manufacturers will be able to bring about large cost savings by reducing the number of goods that need to be recalled.

Warehouse management systems, which store container and pallet RFID tags, will be able to list individual items stored in them, lowering the extent of recalls across distribution centres, retail stores and in transit.

Forrester suggested that Coca-Cola may have been able to save a large amount of the €11m spent recalling 13 million cases in Europe in 1999 if such a system had existed.

While consumers have concerns about privacy, Homs believes that they should also consider the benefits of tagging.

These could include ensuring that genetically modified food, for example, does not turn up unwanted in the shopping basket.

"[But] to put consumers' minds at rest, retailers should have an opt-out clause when they pay by card," he said.