Two companies, two disasters, two very different responses.
Within weeks this summer, two Toronto-area companies each faced a crisis that had the potential to severely damage, or possibly even ruin, their businesses. The responses have been a study in contrasts.
On Aug. 23, a Toronto Maple Leaf Foods plant was confirmed as being involved in the outbreak of the food-borne illness, caused by the bacterium Listeria monocytogenes. A day later, Maple Leaf upgraded a precautionary recall of 23 of its products, issued the previous week, to all 220 packaged meats from the plant, which has been shut down. The company has estimated the recall will directly cost it at least $20 million, with further costs expected due to lost sales and advertising to rebuild its image.
The company has been highly visible since the crisis hit. The firm's CEO, Michael McCain, held press conferences and posted an apology on its web site. A company spokeswoman did interviews in a wide range of media. The firm also ran TV spots and took out advertisements in newspapers.
"This is a corporation with more than $5 billion in sales, they made $200 million in profit last year, so, therefore, they're a company worth billions of dollars. They're clearly trying to protect themselves," Rotman School of Management marketing professor David Soberman recently told CBC.
Another expert praised the company for using McCain prominently in its communications with the public.
"I think for the chief executive to be on camera about it is the most effective way, and probably the only thing that should be done in a situation like this," said retail strategist Don Watt of DW+Partners Inc.
Watt believes the Maple Leaf brand will recover quickly from the crisis.
"I think there may be a little hit, but … I think the recovery will be quite rapid. I think the reassurance is there. The fact that [McCain] took it off [the market] quickly mitigates any risk to consumers. They should feel confident the stuff that caused the problem is gone."
Propane plant explosion
A blast at Sunrise Propane's plant in North York, Ont., on Aug.10 forced about 12,000 people from their homes, and led to two deaths, one presumed to be missing Sunrise employee Parminder Saini, and the other, firefighter Bob Leek. Damage and cleanup costs are pegged at $2 million.
The company has been keeping a very low profile, issuing only a couple of public statements.
"In order to avoid prejudicing themselves, or to create problems for themselves later if there are legal proceedings, they're not saying very much," said Soberman.
| Some other notable corporate responses to product crises:
1. Johnson & Johnson's response to the case of tampered Tylenol is widely cited as the gold standard response to a crisis. In 1982 in Chicago, seven people died after taking extra-strength Tylenol that had been laced with cyanide. The company yanked the product off the shelves across the U.S. It would ultimately introduce three-way, tamper-proof pill bottles. Within a year, Tylenol had regained its market share.
2. U.S.-based toy giant Mattel issued an extraordinary apology to China in September 2007 over the recall of millions of Chinese-made toys, taking the blame for design flaws and saying it had recalled more lead-tainted toys than justified. Mattel ordered three high-profile recalls in the summer of 2007 involving more than 21 million Chinese-made toys, including Barbie doll accessories and toy cars due to concerns about lead paint and tiny magnets that could be swallowed.
3. In March 2007, the president of Canadian pet food company Menu Foods apologized to pet owners amid a recall of products found to contain Chinese-supplied wheat gluten laced with poisonous melamine. Company shares dropped following dog and cat deaths. Executives were asked to take pay cuts and the company downsized its workforce after millions of packages of pet food were recalled and dozens of lawsuits were launched. The recall cost Menu Foods an estimated $55 million.