What if… you have to face a product recall in the middle of the World Cup?
Ahead of next week's World Cup, what to do if the worst should happen?
In the latest of his series of quarterly columns assessing potential shocks which the drinks sector may face, Chris Hart, a partner at business performance consultancy McKinney Rogers, reminds readers of the vital contingency planning that should not be forgotten in the excitement of preparing for a big sports event.
With the World Cup almost upon us, many drinks companies around the world are devoting countless man-hours to prepare for a likely surge in demand. The battles have already been fought over advertising, sponsorship and distribution deals. Many have also been preparing for launches and special editions. Production capacity will have been running at full-stretch for quite some time now. With the pressure on, what are the chances of something, somewhere going wrong? What if the unthinkable happens and you have to organise a product recall during the World Cup?
Of course, no one wants to contemplate such a scenario. The impact on sales and reputation during such an important time for the drinks industry could be disastrous. However, recalls are not that rare. The 2004 UK-wide recall (and withdrawal) of Coca-Cola’s Dasani water brand – following reports suggesting it was potentially carcinogenic - does not seem that long ago. The much smaller recall of Grolsch in 2008, due to concerns of glass fragments in the bottles, also did the Dutch brewer no favours. And when recalls happen, their costs can be very damaging. Boston Beer’s 2008 recall costs equated to around 75% of its 2009 profits alone.
With such damaging consequences at stake, planning for the unthinkable should form part of the preparation for any important sales event. While many drinks companies will have already put some form of plan together to deal with a product recall, problems arising during the World Cup may be somewhat different.
What if you have signed a deal with a new supplier to increase your production capacity for the World Cup, for example? Have you investigated their quality control procedures? Are they adopting your usual system for labelling batches? If you have to recall the drinks brand they are contracted to produce, what flexibility is there in the contract you have with them? Can you stop payment? Does the contract give you automatic rights to compensation if they are at fault? Can you ask them to switch to production of another of your brands?
Many companies will have special distribution arrangements set up during the World Cup. If these include new relationships, how well will you be able to communicate with them during a product recall and how quickly can you supply them with an alternative brand in your stable if they are willing to take one?
At the outset, it may be unclear whether the issue with the drink is due to a change in manufacture, a contaminant that has affected certain batches or a particular production plant, a problem with a particular ingredient, or something as drastic – but not unheard of – as deliberate tampering. However, you will quickly be under pressure to provide answers. Has your senior management team rehearsed such scenarios? Testing out the robustness of your early warning systems, the labelling and tracking of drinks batches and communications with your quality control teams is just as important as establishing good communications lines with your supply and distribution chain. Early knowledge of the problem is vital, not only for containing damage, but also for shedding light on other potential issues. It may highlight the risk to other products that share a production line, for example, before a problem is apparent with them.
If you ask UK consumers what they associate most with Cadbury, you will probably get two answers: the recent takeover by Kraft and the ‘glass-and-a-half’ advertising campaign featuring a drumming gorilla. Few will think first of the 2006 salmonella-related recall of its Dairy Milk bars.
Swift and decisive action following a well-rehearsed - and up-to-date - product recall plan can help to minimise the long-term impact on the brand.
Chris Hart is UK partner of business performance consultancy McKinney Rogers.
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