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Fonterra's Botulism Scare & Product Recalls

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This case was prepared by Jacob Lindberg & Aloysius Lai as an assignment for CS 4033 Corporate Communications Management at Nanyang Technological University. …

This case was prepared by Jacob Lindberg & Aloysius Lai as an assignment for CS 4033 Corporate Communications Management at Nanyang Technological University.

Published in: Business, Health & Medicine
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  • 1. Fonterra’s Whey Blues An Analysis of Fonterra’s Botulism Scare and Product Recalls Photo from: http://www.fonterra.com/global/en/Hub+Sites/News+and+Media Jacob Lindberg Aloysius Lai CS4033 Corporate Communications
  • 2. Disclaimer This case was developed based on archival research with the sole purpose for class discussion. It does not aim to serve as endorsements or to be used as a source of primary data to illustrate managerial practices of the organization(s) or individual(s) mentioned in the case.
  • 3. Objectives This case aims to: • Illustrate the importance of transparency and prompt communication
  • 4. Objectives At the end of the discussion, you should be able to: • Identify communication strategies used in times of crisis • Analyze an organization's crisis situation • Suggest improvements to ineffective communication strategies
  • 5. Background • Fonterra Co-operative Group Limited is a multinational cooperation owned by more than 10,000 New Zealand farmers. • It is the world’s largest milk processor and dairy exporter. • The company has, including their milk producers, over 16,000 people working to produce and refine their products • Fonterra’s brand portfolio includes large and global brands such as Anchor, a milk brand available in over 70 countries.
  • 6. Start of the crisis • Fonterra did a wide-scale recall of products in 2013. Fonterra announced the recall after botulism-causing bacteria were found during a safety tests. • It only takes a small amount of bacteria to cause severe poisoning, possibly leading to respiratory and muscular problems in adults. • Almost 1,000 tons of consumer products were affected by the recall across seven countries.
  • 7. Fonterra’s initial communication • Fonterra announced the situation in a press release on 3 August 2013. • Fonterra admitted that the batch of whey protein found to be contaminated was made in May 2012. • They also stated that the issue was found in March 2013, five months before they made it public. • Fonterra do not clarify what brands or products that can be affected.
  • 8. Media and public reactions • The media criticized Fonterra for taking over a year to find out about the deadly bacteria and warn the public. • Fonterra faced great pressure announce the affected brands or products. • Angry parents react on social media: “If people know what it is then they can get rid of it before they use it, how dumb putting out warnings and people have to guess what product is affected. Putting lives at risk keeping this a secret”
  • 9. Fonterra’s response to media • Head of New Zealand Milk Products, Gary Romano, agreed to be interviewed on New Zealand’s biggest news show on television, Campbell Live. • Gary Romano lied about which products were affected • Mr Romano lied about having talked to the government about the situation • He explained that his mistakes were “normal human ones”. • Mr Romano resigned a couple of weeks later and the company’s CEO apologized to the public for the ‘misunderstanding’.
  • 10. Economical impact • Fonterra reported revenue of US$18.6 billion and earnings of US$1 billion before interest and tax, a decrease in 6% and 3% respectively from the previous year. • Countries such as China, Vietnam and Russia banned the import of milk powder and whey protein from Fonterra after the scare. • Danone, a French food giant that derives more than half of its sales from dairy products, reported that the health scare has delayed its sales growth strategy in Asia by half a year.
  • 11. Government criticism and investigation • Prime Minister John Key voiced his disappointment with Fonterra’s handling of the milk scare in a televised interview • Mr Key also accused Fonterra of delaying the announcement of the discovery • The Ministry of Primary Industries (MPI) dispatched employees to assist Fonterra with the containment of the situation. • The New Zealand government is conducting an ongoing ministerial-level inquiry into Fonterra’s botulism scare.
  • 12. Fonterra’s future plans • A new Group Director of Food Safety and Quality will be commissioned to provide better safeguards against future contaminations. • A full review of product quality standards and crisis communication protocols will also be conducted. • Confidential discussions have been ongoing between Fonterra and Danone over compensation for the loss in revenue.
  • 13. Discussion questions 1. Identify and critique the response strategies used by Fonterra. 2. How did the use of these response strategies affect the outcome of the crisis? 3. Suggest response strategies that could have alleviated the crisis. 4. How should Fonterra be prepared for similar situations in future? 5. Suggest ways to rebuild Fonterra’s brand image after this crisis.

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