club catalyst. Looking beyond lead and live worms

Controversies relating to ‘ready to cook’ or “ready to eat’ foods have been around for many decades. Recent episodes such as Lipton tea (live worms), Maggi (lead) and a host of other high-profile cases in the past, such as Cadbury (nickel, worms), McDonald’s (beef tallow for fries), KFC (artificial colour), Dabur Honey (antibiotics), Subway (live worm), Coke-Pepsi (pesticide), Nestle’s NAN Pro3 milk (live larvae), in addition to smaller controversies, have made headlines but with minimal long-term impact. Though the immediate cash flows made a huge dent both in terms of legal and penalty costs, as well as moratorium on sales, the brands rely on the short memory of the consumer to regain their position.

Despite negative reports in the media, protests by civil society organisations and bashings on social media, companies have still managed to bounce back quickly. The built-in negativity lasts no more than a few days to a few weeks beyond which these companies quickly carry out the damage control exercise to occupy almost the same slot in which they were operating. The interesting questions here are, why, at what cost and how.

The why of it

The “why” does not pertain to the rationale for rebuilding the brand image, rather it is, why does such a controversy erupt? If most companies adhere to prescribed guidelines, the probability of issues may not arise. The flip side is, if companies do not adhere to the guidelines, they must be well aware that they would be under the scanner some day or the other. Now, is adhering to the said guidelines difficult and expensive, which forces companies to operate by violating the guidelines as long as they can?

Second, is the cost of rebuilding the brand relatively lower than adhering to the standards? Let us take the case of Maggi, and lead and monosodium glutamate (MSG) content. Nestle has made a comeback within months with a product still tasting the same without an upward price movement, and having the same features like the earlier one but claiming reduced or no content of lead. Now, if the process to eliminate lead but retain the same goodness is so simple and inexpensive, why wasn’t the company doing it so long? Or is the R&D of Nestle superior that they were able to come up with the similar product in a matter of weeks? Again, the flipside is, if the R&D is sophisticated, then why did they not do it earlier? The question, ‘Why do companies adopt practices that lead to controversies?’ remains unanswered and there could only be two possible reasons — weak enforcement or complacency on the part of the manufacturers.

At what cost? The monetary cost of most of these controversies — starting from losing market share, damage control exercise, penalties, legal battles and rebuilding the brand — can range from a few hundred rupees to a few thousand crore. The bigger challenge, post crisis, is rebuilding the confidence of the user. Though it might appear a mammoth task, it is built with relative ease, given the fact that the consumer’s memory is, by and large, short.

Over the past decade, no company has wound up driven by the controversy over presence of a foreign body in the food it sells. Despite humungous numbers in terms of losses that are usually talked about following a controversy, it seems to be only the tip of the iceberg in the long-run valuations and cash flows for the company.

In fact, in most cases, the company resorts to excessive spending by accelerating the corporate social responsibility (CSR) activity for damage control. There have not been instances of any of these conglomerates withdrawing the complete brand due to such controversies, which makes it easier to justify the view that the cost is built into the product starting from day one — before the issue begins.

How is brand image restored? The question that all this brings to us is: Is it so easy to rebuild your tarnished brand image? Is the consumer’s memory so short? What do the companies actually do to win over the lost share of heart and mind of the consumer? Continuity and transparency are the key attributes for building brand image. But amidst the eruption of a series of controversies, these two fundamental principles are going into oblivion. It is only after a controversy erupts that companies make claims of transparency and voluntary inspection of the factories and outlets by the consumers or any other food governing bodies.

With the proliferation of social media vehicles, the controversies spread by leaps and bounds and even fall on the ears of those who might not be the target consumer for the controversial product. Two questions needs to be addressed here — first, how do brands handle such a media uproar? Second, what if these claims are untrue or may be one of its kind? The herculean task of resurrection of the brand image is difficult. The remedies for the companies like a double-edged sword. They not only need to act patiently but also have to react to all such allegations. Being silent is not an answer that will be accepted by the consumers. Companies must step out and take ownership but will taking the accountability solve the damage of public health caused by the contaminated food? It seems to be a vicious circle — Controversies -> allegations -> acceptance/denial -> lull period -> resurrection.

Companies also battle controversies by taking recourse to portraying themselves as a family and child-centric brand.

To reinforce this image, they rope in celebrity couples whose humanitarian work and support to social causes act as a bridging tool between the brand and consumer mind. But of late these strategies are also losing sheen and the consumers are becoming more and more immune to these “glamorously enamelled gimmicks.”

Nothing can go wrong when you rekindle old memories or strengthen old bonds. Companies hit by such controversies often resort to recreation of nostalgic moments. Maggi, in its comeback campaign, has loyal customers, particularly a mother, vouching for its authenticity. All these campaigns with emotional appeal hit the emotional chord with the lost consumer base. The retaliation by the competitors is witnessed in the form of focusing more on the left brain of consumers. They make rational advertisements — for instance, Yippee noodles talks of the quality and security checks of its noodles.

Amidst all these controversies, allegations, claims and revival campaigns, the loss is only for the consumer. The onus of making right decisions is left to the consumer. But is the decision so easy to make? When the most trusted brands play with consumer loyalty, how can this be the task of only consumers? Whatever happens, the ultimate penalty is borne by the innocent consumer.

Rather we all are waiting for the time when the tables will turn and these brands would be held responsible for not only their breach of trust but also for the physical and monetary loss incurred by the consumer.

Varisha Rehman and Arun Kumar Gopalaswamy are Professors with the Department of Management Studies, Indian Institute of Technology, Madras

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