Production glitches that oblige a company to call on consumers to return products, certainly food products, carry the potential of turning into a media crisis that can easily slide into a difficult business crisis if the event is not managed correctly. In the case of Strauss, one of the biggest companies in Israel, whose products are to be found in just about every home in the country, many of them consumed by children, the potential is explosive. It could become a mega-event.
As everywhere in the world, consumers in Israel are used to production glitches, and realize that the price of the convenience of an industrialized world is the need from time to time to deal with defective products. Israeli food companies have made recalls in the past - see under Eden Springs, Osem, Tnuva, and so on.
The public may be particularly sensitive to food product recalls, but experience shows that as long as the company behaves transparently and fairly, consumer memory is short, and the public is willing to forgive. On the other hand, when the company concerned does not behave transparently, as in Unilever's cornflakes crisis when the glitch was concealed for several days and the company made evasive excuses, the public punishes it and avoids buying the product. But even in Unilever's case, while it took time to restore public faith in the company, in the end consumers forgave and went back to buying.
Since the dimensions of the fault at the Strauss chocolate factory started to emerge, the company has played by the book as far as the media are concerned. Amid the ensuing chaos, its representatives have been answering questions patiently and transparently, trying to provide facts and reliable information to worried consumers and to journalists. The crisis is manifestly being managed, and the company is trying to leave as little as possible to chance.
But within a short time the chaos and confusion stage will end, and the operational stage will begin. The success of that depends on how deeply Strauss is prepared to put its hand in its pocket. The logistics of collecting the products, conduct vis-à-vis the supermarket chains, setting the level of compensation such that customers will feel that it's appropriate - all these things cost money, and any corner cutting is liable to blow up in the company's face, image-wise, and ultimately financially as well.
If Strauss makes the process of returning products cumbersome for consumers, demanding proof of purchase and receipts, gives people the run-around and tries to be penny pinching, there's a fair chance that the understanding that the company is currently enjoying will be replaced by complaints from consumers about how the company is evading responsibility. If Strauss makes life difficult for the retail chains, it will probably be faced within a short time with pictures of products being removed from shelves. But if most consumers feel that the company is trying to make things easy for them, that the returns process is simple and the compensation generous, the recall will remain within the bounds of a glitch and will not develop into a crisis.
A company consumers love to love
To judge from the way Strauss behaves in normal times, it can be presumed that it will make the necessary investment, of both cash and management attention, and will not reproduce past mistakes of food companies.
In its favor is the fact that Strauss is a company that consumers love to love. In the rankings of opinion of corporations, Strauss ranks highly. It is perceived as an Israeli company found in every home and is highly rated for contribution to the community. It is seen as a fair, honest and transparent company that promotes a social agenda, integrates different sections of society, and has a world view.
Strauss will also benefit from the fact that the crisis has no face. It's not a matter of a single brand that has been hit and that will from now on trail negative associations. It affects a broad range of products consumed in every home, and so in the end the size of the event is actually likely to play in the company's favor and help the consumer to forget the specifics.
A sudden twist?
Even if Strauss continues to go by the book, two things over which it has no control could cause a twist in the plot.
The first is the behavior of the Ministry of Health, which according to Strauss's reports received notification of the fault as required, several days ago, and did not make a public announcement. It remains to be seen whether the ministry will try to put the ball back into Strauss's court and look for flaws in its conduct in order to deflect possible claims.
The other relates to public health. Pictures here and there of children with stomach upsets will not affect the situation much, but if, God forbid, a child is brought to hospital in the next few days in a severe condition, that will be an entirely different situation.
It is therefore too early to determine whether we are seeing a passing glitch or a crisis in the making, but there is a high probability that, unless something unpredictable happens, and assuming that Strauss does the right thing, this episode will turn out to be a minor bump.
Published by Globes, Israel business news - en.globes.co.il - on April 26, 2022.
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