05.15.05
ISSN:1528-3836
© 2005 Jonathan Bernstein
Circulation: 4,000+
Estimated Readership: 14,000+
JUST A THOUGHT
If you have to say it ten times to be understood, it's not the listener who's at fault.
Jonathan Bernstein
CRISIS MANAGER UNIVERSITY
Editor's Note: Mallen Baker operates a website that I consider to be a treasure house of superb information about corporate social responsibility, and has graciously allowed me to bring you this case history. The article was written in 2000 about a Japanese crisis that had just occurred.
Snow Brand: What Not To Do When It All Goes Wrong
By Mallen Baker
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 (see update below).
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, over 15,000 people were affected.
The problem was traced to bacteria, staphylococcus aureus, found in the low-fat milk production line of Snow Brand's Osaku factory. The bacteria was located in a valve which should have been cleaned regularly, but was not. Inspections of the plant condemned hygiene standards as being appalling.
What did the company do?
By all accounts, the company 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 by the city so that the company could be seen to be doing it voluntarily. The city publicised both the recall AND the company's request!
The company was also charged with covering 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 was used almost every day. They also claimed that the area of contamination was small, about the size of a 10 yen coin (Editor's Note: 23.5mm/0.93"). Subsequent examination found it to be rather larger than that.
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 important 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
Snow Brand's response to the crisis was a failure because they responded too slowly, were reluctant to institute a full product recall, and even more reluctant to communicate with the public. Three days passed before either of these happened, despite numerous reports and inquiries from public-health centers.
When the company 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.
Clearly, Snow Brand had no structure in place to appropriately 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 the company is currently attempting to put forward is that it has learnt its lessons and is ready to move forward. A 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.
Update
Some companies never learn. Snow Brand was in trouble again at the beginning of 2002 with the revelation that it had deliberately mislabeled beef to be able to submit claims against "Mad Cow" government subsidies.
Mallen Baker of Mallenbaker.net is the publisher of Business Respect, a free email newsletter on corporate social responsibility. You'll find more interesting articles and useful information at his website, www.mallenbaker.net.
Product Review: PR Tools 2005
by Jonathan Bernstein
Want to know how to:
- Manage vocal external critics?
- Keep tabs on what's said about your company online?
- Avoid traps in internal communications?
- Run a media training program?
- Understand the basics of writing a crisis communications plan?
You'll find more than 60 "how to" guides on topics such as those, above, in "PR Tools 2005" from the League of Communications Professionals, www.lacp.com. Those above are ones I focused on because of my focus on crisis management, but the guides actually cover the gamut of basic PR functions, administrative and operational.
If that's not enough, "PR Tools 2005" also satisfies the endless craving of PR professionals -- particularly younger practitioners and those who own or are part of small firms -- for templates. More than 25 templates, which include, in the crisis management arena:
- A media training guide
- A communications plan template
- A corporate message map
Almost all of the documents are provided in both PDF and MS-Word formats, making it easy to adapt or expand them for your own uses. The time you'd spend trying to put together a collection of training and reference material like this merits, in and of itself, the $249 price tag.
I can see an agency or corporate PR staff using this material for the basis of an ongoing junior staff training program, or good refresher training for all staff. Sometimes going back to "PR 101" and "PR 102" isn't a bad idea. I hate to admit it, but some "mature" practitioners like me didn't even attend PR training, because PR was not an available major when we went through school, so I found material here that was new information to me despite my time-in-service.
As I've written extensively in the area of media training, I got nit-picky with one of the how-to guides offered in the topical area offered on the "PR Tools 2005" CD-ROM and gave that feedback to Tyson Heyn, principal of LACP, who told me my recommendations would be integrated into the CD-ROM in the near future.
To see a full list of the documents on "PR Tools 2005," go to: http://www.lacp.com/prtools/indexs.htm.
PR Tools 2005, $249.00, www.lacp.com
CRISIS MANAGER BUSINESS ANNOUNCEMENTS
CD-ROM: Crisis Management & The Law
How PR Pros & Lawyers Can Work Together Effectively
Featuring Jonathan Bernstein, Richard Levick and Ed Novak
On February 23, 2005, Jonathan Bernstein played talk show host and expert commentator in a one-hour teleseminar featuring internationally renowned litigation PR expert Richard Levick and one of the country's top white collar crime attorneys, Ed Novak. This CD-ROM is a "must have" to play for the executive staff of any organization, for practice group meetings at law firms, or for the entire staff of any PR agency.
Go to www.thecrisismanager.com to read more details about and/or to order this CD-ROM, and to learn of other educational and training materials produced by Jonathan Bernstein.
Keeping The Wolves At Bay
Keeping the Wolves at Bay remains, to my knowledge, the only commercially published media training manual in the world. It can be purchased in PDF or hard-copy form at www.thecrisismanager.com, and its pages can be modified to make it your "name brand" media training manual if you are an agency or organization that frequently conducts training. If the latter subject is of interest to you, write to: jonathan@bernsteincrisismanagement.com.
PLAIN ENGLISH DISCLOSURE
Bernstein Crisis Management, Inc. has formal or informal co-promotional and mutually beneficial business associations with a number of the services we mention periodically in this newsletter. No, we can't go into details because that's confidential, proprietary, etc. But our relationship is NOT "arm's distance" and you should know that, since we regularly write about these services as we use them for crisis and issues management or other purposes. That said, you should also know that Bernstein Crisis Management sought the relationships because its staff is convinced that these services are the best of their kind for Bernstein Crisis Management's needs and those of its clients. If you have any questions about these relationships, please contact Jonathan Bernstein, (626) 825-3838.
ABOUT THE EDITOR & PUBLISHER
Jonathan Bernstein is president of Bernstein Crisis Management, Inc., www.bernsteincrisismanagement.com, a national crisis management public relations agency providing 24/7 access to crisis response professionals. The agency engages in the full spectrum of crisis management services: crisis prevention, response, planning & training. He has been in the public relations field since 1982, following five-year stints in both military intelligence and investigative reporting. Write to jonathan@bernsteincrisismanagement.com.
Bernstein Crisis Management, Inc. is located at 1013 Orange Avenue, Monrovia, CA 91016. Telephone: (626) 825-3838.
GUEST AUTHORS
GUEST AUTHORS are very welcome to submit material for "Crisis Manager." There is no fee paid, but most guest authors have reported receiving business inquiries as a result of appearing in this publication. Case histories, experience-based lessons, commentary on current news events and editorial opinion are all eligible for consideration. Submission is not a guarantee of acceptance.
LINKS
When I find a site that I think will be useful to my readers or site visitors, I put it on our Links page. If you have a site that would be of specific use to crisis managers and want to discuss a link exchange or other cooperative effort, please write to me, jonathan@bernsteincrisismanagement.com.
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