Odwalla Apple Juice Crisis Erin Floyd-- PR Case Studies

The Company in Question Odwalla Juice Company was started in 1986 by a group of health- conscious friends (Greg Steltenpohl, Gerry Percy and Bonnie Bassett) who lived together in the San Francisco Bay area. The main element of their business model was the claim that Odwalla's fruit juice was squeezed fresh and with minimal tampering. The founders believed that pasteurization (the process of heating the juice to a certain temperature to kill bacteria that can develop during growing/picking/processing) affected the taste of the juice and was unnecessary. Odwalla was also a pioneer in the United States' movement towards organic food (TOJCC).

Pre-Crisis Odwalla used an acid-based rinsing process to kill bacteria as an alternative to pasteurization. The company gained a loyal following of customers that wanted the freshest organic juice possible, and sales quickly started growing. By the mid- 1990s, Odwalla was selling almost $90 million worth of juice per year (TOJCC). Odwalla developed a reputation for being socially responsible, and they received awards from Business Ethics magazine in 1995 for Outstanding Corporate Environmentalism and Inc. magazine in 1996 as Employer of the Year (TOJCC).

The Crisis On the evening of October 30, 1996, Washington health officials contacted Odwalla, informing them that a link had been discovered between E. coli 0157:H7 and the consumption of Odwalla fresh apple juice (Mogel).

A Quick Response Twenty minutes after receiving the news, Odwalla held a press conference to announce “a recall of all products containing unpasteurized apple juice. It also shut down its production facility and carefully analyzed every point in the process” (Lerbinger). The recall amounted to 70 percent of its product line and affected more than 4,600 retail establishments in seven states and British Columbia (Mogel). On October 31, Odwalla hired Edelman Public Relations/San Francisco to manage their crisis communications (Mogel).

A Quick Response Odwalla expanded its voluntary recall on November 1 to include carrot and vegetable juice products, which brought the total to 13 juices. They also offered refunds to anyone who bought the juice, as well as offering to pay medical costs for anyone who fell ill from drinking Odwalla juice. On November 3, the company executives defended their sanitation process in Seattle newspapers. Odwalla launched a second website and used two 800-numbers (previously created for customers and suppliers, respectively), to offer alternative sources for recall information (Sellnow).

Internal Communication CEO Stephen Williamson conducted “regular company-wide conference calls on a daily basis, giving employees the chance to ask questions and get the latest information.” This practice ended up being so well-liked by employees that it survived the crisis (Baker).

Founder's Response Odwalla explained that “samples of apple juice from Odwalla's Tukwila, Washington distribution center were tested and confirmed to be infected with E. coli.” In a November 5 press conference, founder Greg Steltenpohl said that Odwalla would research heat pasteurization as a company procedure. He also claimed to have visited with some of the victims' families personally (Sellnow).

A Tragic Death Reportedly, 61 people became sick from the Odwalla contamination, which was the same E. coli strain that contaminated Jack-in-the-Box hamburgers in 1993 (Lerbinger). Then, Anna Grace Gimmestad, a 16-month-old from Evans, Colorado became so sick after drinking Odwalla apple juice that within two weeks, “her kidneys gave out, part of her brain became clogged with dead blood cells, and her heart faltered,” resulting in her death on November 8 (Drew and Belluck).

What now? On the day of her death, Odwalla issued a press release offering condolences to Anna's family. Another same-day press release indicated that “no E. coli bacteria were found at Odwalla's Dinuba plant.” The focus shifted to suppliers and sub-par sanitation processes, not just at Odwalla, but with the fresh fruit industry as a whole. By November 19, media reports claimed that Odwalla was “calling on its competitors to stop selling unpasteurized apple juice” (Sellnow).

A Technological Advance Even though it was only 1996 and the internet was in its “beginning stages” as a powerhouse of info, Odwalla took full advantage of the web to give both the media and consumers instantaneous access to recall information. The company's crisis-related site went live within 48 hours of the crisis (Mogel), and within the first 48 hours of its existence, the site generated 19,000 hits (Lerbinger).

A Good Response Odwalla's rapid action and constant communication are the likely reasons that an America Online independent survey found “96 percent of the respondents said they approved of the way the crisis was handled and 86% said they would continue to buy its products” (Lerbinger). The company did survive, but its stock price, which was $28.70 a share before the crisis, was slowly recovering from a 52-week low of $9.25 a share (Lerbinger).

What They Did Right The Odwalla site was well received and appreciated by the media because of the links to other sites of interest that it prominently displayed, such as the Food and Drug Administration and the Centers for Disease Control and Prevention. Crisis sites are not only of interest to reporters, but are also beneficial to stakeholders such as vendors, customers, employees, and the entire investment community (Mogel).

Crisis Timeline Sellnow, T. L., Ulmer, R., Seeger, M. W., & Littlefield, R. (2008). Ch. 8- The Long-Term Implications of Risk Communication. Effective Risk Communication : A Message-centered Approach (pp. 105-113). Dordrecht: Springer.

A Silver Lining Odwalla started developing one of the most “comprehensive quality control and safety systems in the fresh juice industry” (Spurrier) and began using flash pasteurization (quickly heating and then rapidly re-cooling juice). The flash method affects taste less than traditional pasteurization, which would entail heating the juice for a much longer period. Williamson said the company has added “several measures designed to enhance safety at its state-of-the-art plant.” Among other steps, Odwalla will spray apples with a neutral detergent and a chlorine rinse. Fruit will be “carted into the facility from outside delivery areas in special plastic bins. No other bins from growers, packing houses or otherwise will be allowed inside the plant” (Groves).

“Core” Values (No pun intended...) CEO Stephen Williamson: "We had no crisis-management procedure in place, so I followed our vision statement and our core values of honesty, integrity, and sustainability. Our number-one concern was for the safety and well-being of people who drink our juices” (Baker).

Could this have been prevented? Customers began filing negligence lawsuits, claiming that Odwalla had already known the acid-rinse method was ineffective. These customers said that there were scientific studies proving that “this method was effective in killing bacteria that caused E. coli only 8 percent of the time” (TOJCC). Although pasteurization is not required by federal or state laws, it is prevalent and widely-practiced in the industry for this reason (TOJCC).

Did Odwalla ignore the warning signs? During the discovery process in one of the lawsuits filed by an affected consumer, a report surfaced “indicating that the U.S. Army had rejected Odwalla’s proposal to sell their juice in U.S. Army commissaries after an Army inspector found uncommonly high levels of bacteria in a sample.” The inspector concluded that the contamination risk was “extraordinarily high.” This rejection happened four months prior to the E. coli outbreak (TOJCC).

A Scathing Report As a response to the Army's rejection, Odwalla’s head of quality assurance had recommended that the company employ “a chlorine-based washing system” for the fruit. His recommendations were not implemented due to management’s concern that the chlorine would affect the juice's taste (TOJCC). After these disclosures were made public, Odwalla settled numerous lawsuits, and The Seattle Times wrote an editorial about what Odwalla had done thusfar. The report was very critical and predicted that Odwalla would be known forever as “the careless provider of poisoned fruit juice.” Odwalla’s stock hit an all-time low, and the company went into debt because of litigation costs and technology upgrades. Then, the Food and Drug Administration issued a $1.5 million fine, which was the largest in FDA history (TOJCC).

More Controversy Though Odwalla has publicly acknowledged around 70 health-related incidents, it “submitted an affidavit in one suit admitting to more than 300 cases.” Some documents even indicated that there had been various outbreaks of Listeria, which is potentially more fatal than E. coli (Entine). According to interviews with former Odwalla managers, in the weeks before the outbreak, Odwalla began relaxing its standards of blemished fruit acceptance. In these accounts, production managers “brushed aside warnings from a young company inspector that a batch of apples was too rotten to use -- some were highly decayed and one had a worm in it -- without taking special precautions against contaminants” (Drew and Belluck). Odwalla did try to identify and eliminate the Listeria contamination source, but had ultimately focused on extending shelf life “without ever conclusively solving the contamination problem” (Henkel).

Odwalla's Response Odwalla officials admit that their safety systems did fail to eliminate E. coli, but they deny that the company took any “undue risks” and insist that they did not break the law. Odwalla executives made a statement that they simply did not know that E. coli O157:H7 could survive in something as acidic as apple juice (Drew and Belluck).

Where did the bacteria come from? Though officials could not pinpoint the exact source, several theories emerged. Among them: “1) The apples used to make the juice were contaminated with animal fecal material. 2) The wooden crates used to ship the apples were contaminated. 3) Odwalla employees failed to wash their hands properly after using the bathroom and before returning to production areas (Henkel).”

What has been done? As part of the consent decree, Odwalla implemented an HACCP (Hazard Analysis & Critical Control Points) plan, which includes the following provisions: “1) Maintaining sanitary conditions to avoid food contamination 2) A written sanitation control program run by a qualified manager 3) A comprehensive employee training program in areas such as proper food handling and personal hygiene.” In June 1997, Odwalla underwent a follow-up inspection. After juice samples and swabs from Odwalla equipment had been analyzed, everything came back negative for E. coli (Henkel).

Post Crisis Only two years after the crisis happened, readers of San Francisco Magazine voted Odwalla “Best Brand.” Even though the company seemed to have potential for a comeback, it was in too much debt to continue on its own. After exploring merger opportunities, the company merged with Fresh Samantha (an East Coast juice maker) in 2000. Then, Odwalla ended up being acquired by the the Coca-Cola Company's Minute Maid division in October 2001. Today, Odwalla is still owned by Coca-Cola and has more than 650 employees. The company features “25 organic products within eight product lines including smoothies, soy shakes, and food bars” (TOJCC).

Post Crisis Quotes "Right now we believe pasteurization is an important line of defense," said CEO Stephen Williamson. "What [customers] are looking for is a degree of comfort.” “I don't blame the company," said Anna Gimmestad's father, Chad. "They did everything they could” (Baker).

Looking to the Future Assistant U.S. Attorney Joseph Johns said that he hopes the Odwalla case will encourage all companies to keep up with high standards for food prep. "We're not just interested in Odwalla's conduct,” said Johns. “We're interested in preventing this from ever happening again” (Knapp). This case is an example of how a company can embrace a crisis and use it as an opportunity to start an industry-wide change (Sellnow), which is a similar result to the Tylenol case.

Obligatory YouTube Time! :) Interview with Odwalla founder, Greg Steltenpohl

Works Cited The Odwalla Juice Company Crisis . (n.d.). CAPSTONE CASE STUDY. Retrieved November 28, 2011, from highered.mcgraw- hill.com/sites/dl/free/0073377694/868035/mel77694_case1_656_658.pdf Baker, M. (n.d.). CSR case studies in crisis management - Odwalla. Corporate Social Responsibility. Retrieved November 28, 2011, from http://www.mallenbaker.net/csr/crisis05.html Drew, C., & Belluck, P. (1998, January 4). Deadly Bacteria a New Threat To Fruit and Produce in U.S. - New York Times. The New York Times - Breaking News, World News & Multimedia. Retrieved November 28, 2011, from http://www.nytimes.com/1998/01/04/us/deadly-bacteria-a-new-threat-to- fruit- and-produce-in-us.html?pagewanted=all&src=pm Entine, J. (n.d.). The Odwalla Affair - Reassessing Corporate Social Responsibility, by Jon Entine. At Work- Stories of Tomorrow's Workplace. Retrieved November 28, 2011, from http://www.jonentine.com/articles/odwalla.htm Groves, M. (1996, December 5). Odwalla Will Pasteurize Its Apple Juice - Los Angeles Times. Featured Articles From The Los Angeles Times. Retrieved November 28, 2011, from http://articles.latimes.com/1996-12-05/business/fi-5784_1_apple-juice Henkel, J. (n.d.). FDA Investigators' Reports--January-February 1999 FDA Consumer. Internet Archive: Wayback Machine. Retrieved November 28, 2011, from http://web.archive.org/web/20080126220542/http://www.fda.gov/fdac/departs/ 1999/199_irs.html

Works Cited Knapp, D. (n.d.). CNN - $1.5 M fine in tainted juice case - July 24, 1998. CNN Interactive from Internet Archive: Wayback Machine. Retrieved November 28, 2011, from http://web.archive.org/web/20060830020905/http:// www.cnn.com/HEALTH/9807/24/odwalla.plea/index.html Lerbinger, O. (2006). Ch. 8- Bypassing the News Media: Direct Communication. Corporate public affairs: interacting with interest groups, media, and government (p. 218). Mahwah, N.J.: Lawrence Erlbaum. Mogel, L. (2002). Ch. 17- Crisis Communications. Making it in public relations an insider's guide to career opportunities (2nd ed., pp. 222-227). Mahwah, N.J.: Lawrence Erlbaum Associates. Sellnow, T. L., Ulmer, R., Seeger, M. W., & Littlefield, R. (2008). Ch. 8- The Long- Term Implications of Risk Communication. Effective Risk Communication : A Message-centered Approach (pp. 105-113). Dordrecht: Springer. Spurrier, A. (2011, February 7). Introduction to Public Relations: Example of Good Crisis Management- Odwalla Juice Company. For the students of CST 362 (Introduction to Public Relations) at the University of Portland. Retrieved November 28, 2011, from http://introductiontopublicrelations.blogspot.com/ 2011/02/example-of-good-crisis-management.html