Crisis In Odwalla Corporation
The Odwalla corporation, a fruit juice producer based in California has always been a staunch supporter of natural products, though sadly those natural products created a deadly risk to at least 71 people in the fall of 1996.The company was linked to a large number of products containing apple juice that was tainted by the deadly e-coli O157:H7 bacteria.
The death of a 16-month-old child in Evans, Colorado was the first of many illnesses that were directly linked to the company’s products, most of which contained tainted apple juice.In fact the company ended up recalling 70% of its total product on the shelves in the United States and Canada.
(Mogel, 2002, p. 222) The outbreak had been swift and the company is often praised for its quick and particularly humanitarian response to the situation. The marketing campaign they embarked on with the help of a marketing crisis management team is actually award winning.
At the time of the crisis, Odwalla appeared to do everything right. It responded to what it called a freak occurrence by pulling the suspect juice and offering to pay medical expenses. The quick recall and its warm and fuzzy image prompted favorable comparisons with Johnson and Johnson for its handling of the Tylenol incident.
The initial response to the problem is crucial to the marketing arena as it is a way in which businesses can see in a recent strategic situation the ways in which marketing can affect crisis management positively for a company in dire straits. Though the eventual court rulings and the findings of an inquiry did not match the public personification associated with the crisis marketing it did save the company from almost sure disaster that would likely lead to the company folding in disgrace. Certainly if the information that was discovered during the investigation, made by the courts had been available to the public during the crisis the company and its founders would have lost everything.
Odwalla pleaded guilty to criminal charges of selling tainted apple juice. It paid a $1.5 million fine, the largest ever assessed in a food industry case by the Food and Drug Administration. Federal investigators now suggest that Odwalla had regularly accepted blemished fruit and ignored warnings by its own safety team. Moreover, as sales plummeted 90 percent, company officials maintained an inside/outside strategy: covering up company malfeasance while positioning Odwalla as a victim along with those who it had poisoned.
Though the ethics of the situation are suspect from a business standpoint they were crucial in the future success of the company. Industry standards have since changed a great deal and Odwalla quickly stepped in line with industry standards for pasteurizing its product, something that they had long resisted but eventually in 2002 became an FDA requirement excluded only by tough labeling laws, warning consumers of the unpasteurized nature of a product. Though there are still suspicions associated with the situation, the right answers to tough crisis marketing can be found in the case studies of the situation.
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 mobilized, 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.
The intended public’s of the communications associated with the e-coli crisis all received the information the company intended to convey, including eventual fault in production, though this was after the crisis had been dealt with and didn’t receive much air time.
The intended publics received notification of the recall and everything that was being done to ensure that the problem would stop there, including new plans of action for flash pasteurization as well as a new policy associated with new industry wide changes eventually implemented by the FDA.
The FDA began implementing further guidelines that required juice producers to show a specific reduction of bacteria in their juice. It is this law that has now, after years of discussion and public comment periods, come into effect. This is not a “pasteurization” law, it is a bacteria reduction law that requires juice producers to reduce the bacteria in their juice and to develop a HACCP (Hazard Analysis and Critical Control Point) system that ensures they keep records that would among other things, enable proper recalls and trace backs if the need arose.
The industry has since implemented a great deal of the new standards and come into compliance with a system that will greater protect the public. In a sense the outcome could be considered the legacy of the crisis as Odwalla has continued to be a leader in the field of food safety technology implementation that is often used as a model for other crisis situations.
The success of the story can be seen in a recent work detailing the award Odwalla and its crisis management marketing firm received:
An independent AOL survey showed that 86 percent of online respondents supported Odwalla and would return as consumers. Other surveys showed 94% of those polled were aware of the E. coli outbreak; 96% of those aware approved of Odwalla’s handling of the crisis…Odwalla successfully reintroduced products after the recall, and continues to introduce new products at a normal rate… (Mogel, 2002, p. 226)
Additionally the financial as well as consumer confidence issue is still one that is reviewed by industry leaders as they are more likely in today’s climate to create at least a minimal plan for the potential of such a problem within their own business. Odwalla also showed specific crisis management skills, with the help of their crisis consultants in their ability to quickly reach their internal as well as external public’s as they instituted an internal open door policy accompanied by a collective meetings that are still held today to keep the internal public abreast with current needs and shortfalls in the company, as quickly as possible.
“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.” (“CSR case studies in crisis management: Odwalla,” 2006, at: http://www.mallenbaker.net/csr/CSRfiles/crisis05.html)
Financial markets responded to the communications effort; stock price was $19 prior to the crisis, dropped to $9 immediately after, and has risen to $13. (Mogel, 2002, p. 226)
All the intended publics were clearly communicated with the best possible outcome the company could have foreseen at the beginning of the crisis. One point of intrigue is also associated with the avenues that were used in this crisis, during the information age.
One important element in this crisis management situation is that even as early as November 1996, Edelman and Odwalla took full advantage of the Internet to give reporters and consumers immediate access to information about the recall. Although Odwalla did not have a corporate or promotional Web site, the company’s crisis-related site was up and running within 48 hours. Based on its experience in the Odwalla case, Edelman PR has developed an online response product that enables clients to establish crisis preparedness sites on their Intranets. (Mogel, 2002, p. 227)
The technology of the day was utilized to its fullest, in addition to a multimedia campaign explaining to those who had the product that was recalled to dispose of it and also telling customers and those affected of their intention to produce accountability with regard to the crisis.