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Companies in Crisis - What to do when it all goes wrong

Odwalla and the E-coli outbreak

What happened?

Odwalla logoOdwalla (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.

Links

E.Coli poisoning leads to Odwalla juice recall - CNN
FDA Report Indicates No E. Coli O157:H7 Found at Dinuba Plant
FDA to make juices safer from E.Coli
Intoxicated by success: How to protect your company from the inevitable corporate screw-ups - article by Jon Entine

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