No excuse for crisis blunders

The surprising thing about the recent Coca-Cola contamination crisis is not so much that it happened, but that the company handled the aftermath so badly. After all, it is by common consent the world’s leading brand.

Instead what we witnessed was a catalogue of errors. Coke was complacent. Early reports, dating to May 12, of Belgium consumers suffering from nausea after drinking Coke were effectively ignored. It was hamfisted. Only two days after the evidence of crisis became overwhelming did it withdraw 2.5 million bottles from sale. It was unhelpful. It failed to communicate the nature of the crisis to consumers and reasssure them early enough. And finally, it lost control: the authorities in Belgium and France stepped in and probably prolonged the crisis longer than necessary; with incalculable consequences for Coke.

It would be easy to heap criticism on Coke chief executive Doug Ivester for all of this; he is certainly not blameless. But the causes go deeper and are part of a syndrome which afflicts international brands faced by unexpected crisis. The syndrome explains why top brands such as Coke, Perrier, Shell and Mercedes commit the same mistakes – apparently impervious to the lessons of experience.

In a sense, all these brands became victims of their own success. Accustomed to a long track-record of success, they were ill-prepared for criticism and still less how to deal with it. In all cases, there seems little evidence of a crisis contingency plan springing rapidly into place. Although it is difficult to generalise, part of the problem lies in corporate reporting structures. Local managers are often fearful of rocking the boat, while those at corporate HQ may be insulated from the true severity of the crisis and adopt an unsympathetic attitude to warnings. Paradoxically, the more successful a brand becomes in achieving global reach, the more a crisis will test the fabric of its owner’s management. Crisis ignores national borders and acts like wildfire. If only the same could be said of international management.

But while a poor response seems to be the rule, there are certainly exceptions. The Tylenol affair, in which painkillers were laced with cyanide, cost Johnson & Johnson dear. But J&J is considered to have emerged credibly from a difficult situation and crisis management consultant Michael Regester thinks he knows why: ‘J&J didn’t have a crisis plan, just a belief that the customer always comes first.’ More recently, KFC coped well with the dioxin crisis emanating from Belgium.

A brand crisis remains a unique opportunity for testing a company’s mettle and its standing with consumers. Unfortunately, if handling of it is botched, it will provide an equally unique opportunity for the investment community to rerate the company’s value downwards. So there really is no excuse for getting it wrong, however hard it may be to get it right.

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