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Odwalla and the E-coli outbreak

What happened?

Odwalla (pronounced "odewalla") is the health-conscious juice company which began a couple of decades ago when Greg Steltenpohl, Gerry Percy and Bonnie Bassett began squeezing fresh oranges on a $200 hand juicer. The company was growing strongly with annual sales rising 30% per year and approaching $90m. The company had established a strong brand with enormous customer loyalty.

On October 30, 1996, everything changed. Health officials in Washington state informed the company that they had discovered a link between several cases of E. coli 0157:H7 and Odwalla fresh apple juice.

The link was confirmed on November 5. As the crisis played itself out, one child died and more than 60 people in the Western United States and Canada became sick after drinking the juice. Sales plummetted by 90%, Odwalla's stock price fell 34%. Customers filed more than 20 personal-injury lawsuits and the company looked as though it could well be destroyed.
What did the company do?

Odwalla acted immediately. Although at the point where they were first notified the link was uncertain, Odwalla's CEO Stephen Williamson ordered a complete recall of all products containing apple or carrot juice. This recall covered around 4,600 retail outlets in 7 states. Internal task teams were formed and mobilised, and the recall - costing around $6.5m was completed within 48 hours.

What the company didn't do was to avoid responsibility. On all media interviews, Williamson expressed sympathy and regret for all those affected and immediately promised that the company would pay all medical costs. This, allied to the prompt and comprehensive recall, went a long way towards satisfying customers that the company was doing all it could.

Internal communications were key: Williamson conducted regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information. This approach proved so popular that the practice of quarterly calls survived the crisis.

External communications were just as vital. Within 24 hours, the company had an explanatory web site (its first) that received 20,000 hits in 48 hours. The company spoke to the press, appeared on TV and carried out direct advertising with the website address. All possible attempts were made to provide up to the minute, accurate information.

The next step was to tackle the problem of contamination. The company's entire approach had been founded on fresh unpasteurised juice because only juice which had been untampered with could have the best flavour. The company decided quickly that this had been wrong. The company moved quickly to introduce a process called "flash pasteurisation" which would guarantee that E-coli had been destroyed whilst leaving the best flavoured juice possible.

Within months of the outbreak, the company had in place what some experts described as "the most comprehensive quality control and safety system in the fresh juice industry." On December 5, the company brought back its apple juice.

Williamson's explanation of how the company found its way is instructive. "We had no crisis-management procedure in place, so I followed our vision statement and our core values of honesty, integrity, and sustainability. Our number-one concern was for the safety and well-being of people who drink our juices." (Source: Fast Company)

Cost and benefit

Odwalla made a rapid recovery. Much of the good will and trust it had built up over the years remained. Sales picked up again quite quickly.

The company did exactly the right things to achieve this. For instance during the lean months, Odwalla refused to lay off any of its delivery people. They were sent out to maintain customer relations - an approach that not only earned the loyalty of the employees, but helped to secure the company's reputation with its customers.

Even the most grievous victim of the crisis gave Odwalla credit. "I don't blame the company" the father of the girl who died said. "They did everything they could".

The company did pay a large cost. Odwalla pleaded guilty to criminal charges of selling tainted apple juice and was fined $1.5m - the largest ever assessed in a food industry case by the US Food and Drug Administration.

So is everyone happy?

Not quite - the company still has some critics who say that it was not quite the victim it would have people believe. Jon Entine, for instance, says that 'investigators now contend that Odwalla had significant flaws in its safety procedures and citrus-processing equipment was so poorly maintained that it was breeding bacteria in "black rotten crud'. Before the outbreak, Odwalla had received letters from customers who become violently ill, but had not addressed the problem.

"Resisting industry safety standards, Odwalla steadfastly refused to pasteurize its juices claiming it altered taste and was unnecessary. Yet, the year before the incident, the head of quality assurance, Dave Stevenson, who was aware of the dangers, proposed using chlorine rinse as a backstop against bad fruit. Senior executives who feared chlorine would leave an aftertaste overruled him. They decided to rely on acid wash although its chemical supplier had informed Odwalla that the wash had killed the E. coli in only 8 percent of tests and should not be used without chlorine."

Conclusion
The overwhelming feeling of people who dealt with the company at the time of the crisis was that here was a community of ordinary people who were devastated at the fact that they had created an episode of poisoning that ended in a loss of life. The company's values spoke of nourishing people - and when the crisis came it was an adherence to honest, straight talking and accepting responsibility that helped to get the company through.

There are critics who refuse to credit the company with any integrity whatsoever - but even these will concede that as an exercise in crisis management, Odwalla stands as an example of best practice that few can match.

The year after the crisis, Odwalla was voted "Best Brand Name in the Bay Area" by San Francisco Magazine. This was the first indication amongst many that Odwalla's reputation had survived.

http://www.mallenbaker.net/csr/CSRfiles/crisis05.html
 
Snow Brand Milk Products Co.

One of the most feared scenarios for any food products company must be an outbreak of food poisoning associated with its products. For Snow Brand, Japan's premier dairy foods company, 2000 was the year when that nightmare came true, in fairly spectacular fashion. The company is still struggling to recover, and has suffered from further problems.

What happened

Large numbers of people, mostly in western Japan, suddenly came down with food poisoning after consuming milk or related products made by Snow Brand. As events played out, it transpired that over 15,000 people had been affected.

The problem was traced to bacteria on the production line of Snow Brand's Osaku factory that processed low-fat milk. The bacteria concerned was Bacteria has been discovered on the production line of a Snow Brand Milk Products Co. factory here that processed low-fat milk believed to have made nearly 5,000 people ill, the company's president said Saturday.

staphylococcus aureus, and it was located in a valve which, although it should have been cleaned regularly, had not been. Inspections of the plant condemned hygiene standards as being appalling.

What did the company do?
By all account, it initially sought to downplay the incident, and gave the impression of being more concerned for its reputation and standing than it was for the victims of the outbreak.

For instance, the company made an attempt to limit the extent of the product recall it would have to make. The Osaka city public health centre issued a recall order for two products, whilst requesting that the firm voluntarily recall other products. This the company was reluctant to do. After the city officials pressed the point, the company grudgingly agreed to the recall, but then requested that the recall order not be announced, but the company could be seen to be doing it voluntarily. The city publicised both the recall and the request.

The company was also held to have sought to cover up information about the full nature of the incident. Snow initially claimed that the valve where the contamination was found was used rarely - in fact it transpired it was used almost every day. They also claimed that the area of contamination was small, about the size of a 10 yen coin - subsequent examination found it to be rather larger than that.Snow asked authorities not to issue official recall

The overall impression - as judiciously reported by the media at the time - was that the poisoning was the end-product of a company rife with corporate arrogance. The President, Tetsuro Ishikawa tried in vain to win support, and was eventually admitted to hospital suffering from the stress of the incident. The end result was that he, and seven executives, resigned in atonement for what had happened.

Cost and benefit
The consequences for Snow Brand have been dramatic and awful. Sales for the company have plummeted as consumer confidence has evaporated. The company was pushed to close five of its factories - including the offending site from the poisoning - and has recently increased this figure to eight.

The company's bottom line is grave testament to the impact it has all had. Snow Brand reported a consolidated net loss of 52.9 billion yen (about $430 million) for the fiscal year ending in March.

Snow Brand enjoyed a market share of around 45 percent before the incident. In the immediate aftermath, it plunged into single figures, and has gradually - with new promotions - recovered up to around 30 percent. It is still languishing well short of its previous level.

The fight back
A key component of the fight back has been for the company to revamp its approach to its social responsibility.

In the first instance, the new President of the company, Kohei Nishi, has made clear statements of regret - acknowledging the mistakes of the past and the determination to move forward.

Improving quality assurance is, needless to say, a key part of the restructuring plan. But at least as importance is a reform of the corporate culture. Steps to be taken in this area include:

* Renew corporate philosophy - making the corporate charter a guarantor of more responsible corporate behaviour.
* Promote customer-focused management - particularly allowing for the two-way flow of information and feedback
* Enhance corporate governance - particularly to appoint outside directors and to increase the speed of decision making
* Restructure risk management function - and conduct practical training

Conclusion

The features that made Snow Brand's initial response to the crisis a failure was that they responded too slowly, failing to move quickly towards a full product recall and to communicate with the public. When it did communicate, it dwelt much more on the impact on financial performance, and not so much on the suffering of the people who had consumed its product.

First, Snow Brand did not move quickly enough; it should have acted faster to assemble the facts and act on them, both in the form of moving toward a product recall and in terms of communicating with the media and the public. Three days passed before either of these happened, following numerous reports and inquiries from public-health centers.

Second, Snow Brand had no structure in place to accurately respond to a crisis, including no method of getting information to top management. Therefore, management was unprepared when it finally did speak to the media and was not armed with all the facts.
They also made the huge mistake of seeking to cover up the bad news. Once such a situation has arisen, all the facts will eventually be revealed, and early and voluntary disclosure by the company is the only way to move forward. Snow's reluctance in this area meant that not only did customers fear that the products would be unsafe, they also did not trust the company to seek to ensure that it would be otherwise.

The message of the company is that it has learnt its lessons and is ready to move forward. History of other such incidents suggests that this will take some time, although the resignation of the previous leadership enables a line to be drawn to some extent.

source: http://www.mallenbaker.net/csr/CSRfiles/crisis04.html
 
Exxon Mobil and the Exxon Valdez

Many companies have faced a crisis during their history, whether due to external forces beyond their control, through their own failings or management problems, or a combination of the two. Only a few, however, come to personify corporate irresponsibility through one pivotal event. Such a one is Exxon's experience with the Exxon Valdez.

What happened

In 1989, the Exxon Valdez oil tanker, entered the Prince William Sound, on its way towards California. In spite of the fact that the weather and sea conditions were favourable and the Bligh Reef clearly marked on the maps, the ship ran aground and began spilling oil. Within a very short period of time, significant quantities of its 1,260,000 barrels had entered the environment.

At the moment of the collision the third mate, who was not certified to take the tanker into those waters, was at the helm. The probably cause was established that the Captain and many of the crew had been drinking alcohol in considerable quantities.

What did the company do?

According to most observers, too little and too late. The action to contain the spill was slow to get going. Just as significantly, the company completely refused to communicate openly and effectively. The Exxon Chairman, Lawrence Rawl, was immensely suspicious of the media, and reacted accordingly.

Shortly after the accident had taken place, and the world's media had piled in to begin extensive coverage, a company spokesman pointed to the existence of procedures to cover the eventuality - procedures which the TV shots showed were demonstrably failing. When asked in Rawl would be interviewed on TV, the response was that he had no time for that kind of thing.

Meanwhile the operation on the ground was getting nowhere fast. Around 240,000 barrels had been spilled, with another million still on the ship. During the first two days, when calm weather would have allowed it, little was done to contain the spillage. This spillage spread out into a 12 square mile slick.

Then the bad weather struck, making further containment almost impossible.

After more than a week, the company was still giving no ground on the request for better communication. The media clamour became so hostile that eventually Frank Iarossi, the Director of Exxon Shipping, flew to Valdez to hold a press conference. It was not a success. Small pieces of good news claimed by the company were immediately contradicted by the eyewitness accounts of the present journalists and fishermen.

John Devens, the Mayor of Valdez, commented that the community felt betrayed by Exxon's inadequate response to the crisis, in contrast to the promises they had been quick to give of how they would react in exactly this eventuality.

Eventually, Rawl deigned to go onto television. He was interviewed live, and asked about the latest plans for the clean-up. It turned out he had neglected to read these, and cited the fact that it was not the job of the chairman to read such reports. He placed the blame for the crisis at the feet of the world's media. Exxon's catastrophe was complete.

Cost and benefit

The consequences for Exxon of its two-pronged disaster - the spill and its environmental consequences, alongside its disastrous communications - were enormous. The spill cost around $7bn, including the clean up costs. $5bn of this was made up of the largest punitive fines ever handed out to a company for corporate irresponsibility.

The damage to the company's reputation was even more important, and more difficult to quantify. However, Exxon lost market share and slipped from being the largest oil company in the world to the third largest. The "Exxon Valdez" entered the language as a shortcut for corporate arrogance and damage.

Conclusion
The features that made Exxon's handling of the crisis a failure included the following:

* The company failed to show that they had effective systems in place to deal with the crisis - and in particular their ability to move quickly once the problem had occurred was not in evidence
* They showed little leadership after the event in showing their commitment to ensuring such problems would never happen again
* They quite simply gave no evidence that they cared about what had happened. They appeared indifferent to the environmental destruction.

source: http://www.mallenbaker.net/csr/CSRfiles/crisis03.html
 
refer: http://www.thetimes100.co.uk/index.php
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