Kids falling ill after drinking Coca-Cola, dioxins in pork in
Belgium, Mars taken to court after a mouse was found in a Topic bar. All
these recent cases have put food safety high in the public
consciousness.
The outcry following such stories can be so huge that food and drink
companies which fail to deal with a crisis in a way the media and public
perceive to be professional and responsible can face the prospect of
losing customer confidence, market share, or even going out of
business.
This month, the Turnbull Report is expected to be published by a
committee set up by the Institute of Chartered Accountants of England
and Wales, and backed by the London Stock Exchange, which will require
companies to demonstrate that they are effectively assessing and
managing the risks their businesses face. Managers who fail to do so
could find themselves in court.
The report is part of a general move in industry towards greater
accountability, and companies will need to show that they are
safeguarding shareholders’ investment and the company’s assets.
A recent survey by Lloyd’s of London and the Association of Risk
Managers showed that risk managers were most concerned about the lack of
insurance cover for intangible risks such as loss of reputation.This
suggests the PR industry has an important role to play in helping
companies identify and manage risks that could damage their
reputation.
’Our hope is that the Turnbull Report will force companies to
demonstrate more actively that they are prepared for crisis,’ says
Jonathan Hemus, director of Reflex, Countrywide Porter Novelli’s crisis
management service.
So just how well prepared is the food and drink industry to face a
crisis?
According to Chris Woodcock, director of Razor PR, the prognosis is
encouraging.
’Food companies are ahead of the game in thinking about the risks that
face the business when going through their annual planning cycle,’ he
says.
But Coca-Cola’s handling of its recent crisis (see panel) suggests that
even the largest companies might not be as well prepared as they would
like to think. Hemus has no doubt that the key to effective crisis
management is preparation.
’Almost three-quarters of the work we do is in the preparation stage
rather than fire-fighting,’ he says. ’Almost all the food clients buying
into Reflex are assessing risks. We’re going in and methodically pulling
the business apart and identifying risks and how likely they are to hit,
and the effects if they did.’
As recent food scares show, the initial problem is in identifying risks
and recognising them when they occur.
The issues facing food and drink companies are wide-ranging, from
product contamination to marketing. David Brotzen, director of issues
and crisis management, Europe at Hill and Knowlton, says: ’We are
increasingly seeing softer issues such as pricing having the potential
to become a crisis.’
Bob Marsh, managing director at RHM Technology, who acts as crisis
management co-ordinator and chief trainer for RHM Group, which includes
companies such as British Bakeries and Rank Hovis, has identified a long
list of risks which could affect the business. These include extortion,
bomb threats, and the interruption of supply of a product or
service.
It is not possible to prepare for every eventuality. While the reasoning
behind risk management is to ensure the business remains in a state of
preparedness, a crisis can very quickly take its own course and no two
crises are the same. But companies which have the building blocks in
place are one step ahead.
Each company in the RHM Group has a crisis team and manual and undergoes
regular training and updates, with procedures reviewed at least once a
year by the main board.
Gordon Storey, head of external relations for Mars Confectionery, says
the company follows a similar line. ’We have good crisis management
systems which are well tested, and we keep it simple. We don’t have
thick manuals because nobody reads them during a crisis.’
Geoffrey Hyde, director of crisis at Burson-Marsteller, says all his
clients acknowledge the value of simulations and desktop exercises. ’I
can’t think of any client which has not run a simulation in the last two
years,’ he says. ’Crisis management requires a totally different way of
thinking. You need to train people so they are used to working in
strange scenarios.’
At the RHM Group, all senior managers are required to go through crisis
simulation exercises. They have to deal with a simulation involving TV
cameras and radio reporters and work with two major retailers who test
their own procedures at the same time. Marsh says: ’A lot of pressure is
put on so people get an idea of what it would really be like.’
In contrast, Mars is unconvinced about the value of full-scale
simulations.
’To do simulation exercises, particularly involving third parties, is
hugely expensive, and the one time we did it, the company we used was
not capable of matching us intellectually. We didn’t find it very useful
because all they said at the end was that we were very good,’ says
Storey.
He believes that senior managers are well enough equipped to handle
crisis situations. ’My experience is that senior managers do not need a
lot of training to manage a crisis because they can use their skills and
business experience,’ he says. Senior managers at Mars do, however,
receive general media training.
According to Martin Langford, head of new business at B-M, preparing for
a crisis should involve looking at how to rebuild a brand if the worst
should happen. ’The time to rebuild is the same time you’re going
through the deluge of media calls,’ he says.
However, the same people cannot be expected to deal with the crisis and
rebuild the brand, as the skill-set and focus is completely
different.
Langford, who recommends using some of the company’s top marketing and
repositioning people, adds: ’If you have a level of trust with
consumers, you should not allow a crisis to get in the way.’
He advises clients to verge towards over-communication rather than
hiding the troubles. ’You need to do research throughout the crisis and
see how consumers are reacting to what you’re doing,’ he says. ’Then you
have a good idea of how consumers are reacting and whether they believe
what you’re saying.’
Burson-Marsteller has worked with five companies on the dioxins issue,
and not one has suffered a fall in market share. ’In the majority of
cases we’re able to restore a brand, or even increase its market share,’
says Langford.
PR has a leading role to play in countering crises and rebuilding public
perception and trust in the brand. For as long as food scares continue
to hit the headlines, PR practitioners will have plenty of work on their
plates.
GM FOODS FORCE SUPERMARKETS TO TAKE DRACONIAN MEASURES
One of the biggest issues in the food industry this year has been GM
foods, which have provided supermarkets with plenty of PR
challenges.
Sainsbury’s set up a GM information line in February and within two
days, 3,000 calls had been received. But the first supermarket to
respond to the tide of public opinion was Iceland, which announced as
early as May 1998 that it would be banning GM ingredients from its
own-brand products.
Marks and Spencer followed suit a year later, at the same time
introducing its own helpline. At the end of June this year, M&S
announced it had eliminated GM ingredients from all its food brands,
with the exception of 21 grocery products. Sainsbury’s made a similar
announcement in July.
In March, a consortium of seven food retailers in Europe was established
to work with industry experts to establish validated sources of GM-free
crops, products and derivatives. In August, M&S announced that it was
working to ensure the feed used to rear livestock was also GM-free.
Tesco has been criticised for its ’weak’ policy, but corporate affairs
manager, Alan McLaughlin, says: ’Our policy is to remove GM ingredients
where we can, but label very clearly where we can’t. People may
criticise our position, but it is honest. There would be a backlash if
we were shown not to have been honest.’
Both M&S and Sainsbury’s are confident their claims about being GM-free
are true. But if there were any problems, both say they would act
swiftly.
M&S food press and PR manager Sue Sadler says: ’If we found a product
with GM ingredients, we would take it off display, destroy it and make
sure it didn’t happen again. We would do a recall, advertise in the
media and invite people to bring back the product for a refund. We have
a very clear crisis management plan in place.’
LOCAL ILLNESS GAVE COCA-COLA A GLOBAL CRISIS TO DEAL WITH
It may be one of the biggest brands in the world, but Coca-Cola’s recent
crisis in Europe showed that even a well-loved brand can quickly lose
public confidence if it is perceived to handle a crisis badly.
After Belgian schoolchildren reported sick after drinking Coke, the
drinks brand was quickly faced with a worldwide, rather than local,
problem.
’Crises go global a lot more quickly now. Perhaps Coke felt this was a
Belgian issue, but it was doing damage to their reputation in Europe and
throughout the world,’ says Jonathan Hemus, director of Countrywide
Porter Novelli’s Reflex service.
The company was unfortunate as consumers in Belgium had become
sensitised to food safety issues after recent scares involving
dioxins.
But Razor public relations director Chris Woodcock believes that
Coca-Cola could have coped with the situation better. ’Their lack of
communication left the media domain wide open for scare-mongering and
speculation and made a deep dent in the trust of consumers who would not
have thought to have questioned the integrity of the brand just hours
earlier,’ he says.
When the company did come up with an explanation for the illnesses in
Belgium and France, it put the sickness down to odd tastes and smells
and claimed there was no threat to public health. Initially it
voluntarily recalled and destroyed 2.5 million bottles and cans. Almost
a week later, the Belgian government reacted to growing public concern
by ordering the company to recall all products which could have been
contaminated.
Belgium health minister Luc van den Bossche said on TV: ’It’s a bit
disturbing that a big firm with worldwide fame did not take far-reaching
measures more spontaneously and more promptly.’
Indeed, Countrywide’s Hemus believes that taking an active rather than
passive stance is essential to any form of crisis management. ’There’s a
real need to take control of the situation, particularly in the food and
drink industry. One of the reasons Coca-Cola didn’t handle the situation
as well as it might was that it wasn’t seen to control events. It was
reacting rather than setting the agenda,’ he says.
Ten days after the first reports of illness Coke chairman Doug Ivester
did go to Belgium to make a public statement about the issue. A week
later, he held a press conference and the next day Coke took out press
ads apologising for letting the people of Belgium down.
By this time, the damage had been done. Sales have suffered, and Wall
Street analysts have estimated second-quarter earnings of 40 cents a
share compared with 47 cents the previous year. The recall cost Coke
USdollars 103 million.
But Ian Muir, Coca-Cola external affairs manager in the UK, defends the
company’s crisis action. ’We withdrew the products that needed to be
withdrawn immediately and other products were later withdrawn on
government instruction,’ he says.
He also stresses that the company has media action teams set up on a
country-by-country basis. ’We treat anything and everything that would
adversely and seriously affect the company and its brands as a risk,’ he
says. ’We have regular meetings and simulations, which were set up well
before the Belgian issue.’
