Tag Archives: Paul Kruse

The Thorny Issues in a Product Recall

In 1982, people in Chicago began dropping dead from cyanide poisoning, which was linked to Johnson & Johnson’s Tylenol in select drug stores. Johnson & Johnson immediately pulled all Tylenol from the shelves of all stores, not just those in Chicago. It was ultimately determined that the product had been tampered with by someone outside of Johnson & Johnson. But the company’s aggressive actions produced a legend: The Tylenol scare was chalked up as the case to review for an effective brand-preserving (even brand-enhancing) product recall strategy.

In 2011, though, the FDA took the extraordinary step of taking over three Johnson & Johnson plants that produced Tylenol because of significant problems with contamination. This time, Johnson & Johnson could not blame a crazed killer, only itself. A company that should have learned from its own celebrated case study had not retained that knowledge 30 years later.

The problems associated with recalls often aren’t the recall itself. In a recall, stores pull the products, and the media helps get the message to those who have already purchased the product to return them for refunds, replacement, repair or destruction.

One problem crops up when companies are too slow to move. It was revealed in the press in June 2014, that GM allegedly knew of its ignition switch problems seven years before it recalled the product. The recall that began in February 2014 itself became tortuous as new models were added almost daily to the list of cars that were in danger of electrical shutdown while in motion. The press, the regulators and, of course, the lawyers pounced on GM for its alleged withholding of information for so long and for the seemingly endless additional recall of cars affected by the problem. In 2015, regulators have called meetings with GM and other auto manufacturers mired in what has become an epidemic of recalls to discuss why repairs are dragging on so long.

Denial, lack of information, hunkering down (bunker mentality), secrecy, silo mentality and fears for the impact on the bottom line all contribute to disastrous recalls. With all recalls, there is the cost of the recall, the cost of complete or partial loss or loss of use of certain products, repair costs in some cases (GM), regulatory scrutiny and fines, class action and other lawsuits and the loss of potential income during any shutdown. These can all be big-ticket items, and some companies will not survive these expenses and loss of revenue.

Probably the biggest cost of any recall is the cost to reputation, which can mean loss of existing and future customers. In recent years, lettuce growers and a peanut warehouse did not survive recalls over contaminated products. In the case of primary agricultural producers like growers and peanut warehouses, the processors simply change suppliers, leaving the primary producers without any customers. In the retail market, the competition for shelf space is high. Brands that are recalled that are new or that do not have high customer value are simply barred from shelf space, effectively destroying the ability to market their products.

However, there are others that have strong brand following and even cult-like status in local markets. Blue Bell Creameries (famous for its ice cream) is one such company that has secured an almost cult-like following in the Southern and Midwestern states. Blue Bell, founded in 1907, maintains its headquarters in the small town of Brenham, TX (pop. 16,000).

Problems began when hospitals in Arizona, Kansas, Oklahoma and Texas reported patients suffering from an outbreak of listeria-related diseases, some as early as 2010. Some reports included the deaths of patients. On May 7, the FDA (Food and Drug Administration) and CDC (Centers for Disease Control and Prevention) reported, “It wasn’t until April 2015 that the South Carolina Department of Health and Environmental Control during routine product sampling at a South Carolina distribution center, on Feb. 12, 2015, discovered that a new listeria outbreak had a common source, Blue Bell Chocolate Chip Country Cookie Sandwich and the Great Divide Bar manufactured in Brenham Texas.”

Listeria is a bacteria that can cause fever and bowel-related discomfort and even more significant symptoms, especially in the young and elderly. Listeria can kill. Listeria is found naturally in both soil and water. Listeria can grow in raw and processed foods, including dairy, meat, poultry, fish and some vegetables. It can remain on processing equipment and on restaurant kitchen equipment, and when food comes in contact with contaminated equipment the bacteria finds a ready-made food source in that food and multiples. The FDA has issued guidance reports to food processors, preparers and restaurants on how to prevent listeria contamination. This includes proper preparation techniques, cleaning techniques, hygiene, testing and manufacturing and processing methodologies.

Once Blue Bell understood that its cookie sandwiches and ice cream bars were implicated, the company immediately recalled the products. But soon it became evident to Blue Bell and others that this outbreak might not be limited to the ice cream bars or cookie sandwiches, and Blue Bell recalled all of its product and, to its credit, shut down all manufacturing operations.

The FDA conducted inspections of Blue Bell plants, and in late April and early May produced reports on three plants, noting issues of cleanliness and process that were conducive to listeria growth. The FDA has also reported that Blue Bell allegedly had found listeria in its plants as far back as 2010 but never reported this to the FDA.

As of this writing, Blue Bell plants are still shut down. The FDA investigation has come to a close, but many questions remain. The company has cut 1,450 jobs, or more than a third of its work force, and has said it will reenter the market only gradually, after it has proved it can product the ice cream safely.

The question is whether these things Blue Bell has done: the quick recall, first of the problem products and then all products, and the closure of plants to mitigate contamination issues are enough to save Blue Bell from further damage in the eyes of consumers and the stores that sell the product. There are many tough questions to be answered going forward.

In the intervening months, will competitors replace Blue Bell with their own products that consumers feel will compare favorably? If so, when Blue Bell products are returned to stores will consumers return, or has the stigma of listeria and the acceptance of the taste of comparable products weakened the brand? Will stores give Blue Bell adequate shelf space? And, does Blue Bell have enough of a cult following and viral fan base that once product is back in stores customers will return as if nothing had happened? These are the scary questions that affect all food and drug companies when recalls are from contamination in their own plants or those in their supply chain.

The American consumer seems to have become numb to the endless succession of automobile recalls from just about all manufacturers. We dutifully return our vehicles to the dealer to fix a broken or faulty this or that. Even though many recalls involve parts or processes that could cause car accidents, injuries and deaths, it is as if we have come to accept faulty auto products as the norm.

This is not the case with food-borne illnesses. The fact that a faulty car can kill as easily as a contaminated food product seems not to be an issue as people return again and again to buy new cars from the same car manufacturer that issued five recalls on their last purchased model. However, consumers will shun the food brand that made some people ill. This bifurcated approach to risk makes no sense even in the context of protecting children from harm. The faulty car that mom drives the kids around in every day may have the same probability of injuring or killing her child as the recalled food brand. She doesn’t abandon her car, but she bans the recalled food brand from her table.

In 1990, Perrier discovered benzene in its sparkling water product. It quickly recalled all its product but then hunkered down into a bunker mentality. The lack of communication by Perrier about the problem and what it was doing exacerbated the fears of consumers, and the press speculation and outcry ran high. Perrier had always touted the purity of its water, so toxic benzene shattered this claim. Hunkering down reduced consumer confidence, and many left Perrier for suitable alternative products. Perrier has never regained the market share it had previously.

Blue Bell has taken the time to do things right, to find the causes of the problem and take steps necessary to prevent contamination in the future. But time also means that existing or even new competitors with comparative products will try to fill the shelf space vacated by Blue Bell’s absence. You can be sure that other-region favorites with cult followings that could never before gain a foothold in Blue Bell’s territory have been pressuring retailers to try them out as a replacement for Blue Bell.

Is the Perrier loss of market share inevitable for Blue Bell even if Blue Bell communicates adequately and with transparency? Time will tell. For now, Blue Bell not only has to fix the problems of plant cleanliness, it also needs to address emerging questions about its past operations, such as allegedly not reporting to the appropriate

While we note the good press that surrounded the 1982 Tylenol (external-tampering) recall and have seen so far a good effort by Blue Bell to resolve its own plant contamination issue, ultimately it is contamination that is the problem. Companies can become complacent, let cleanliness slide, use outmoded procedures, not replace older equipment or even ignore warning signs and isolated contamination events. Regional and limited product line companies need to be especially cognizant that even though they have carved out a powerful niche in the marketplace, maintaining this niche is tenuous at best in the highly competitive world of food products. Cleanliness and contamination-free are assumed by consumers. Food processors and manufacturers must do everything possible to keep that assumption from becoming contradicted.