Wednesday, July 6, 2022

Fonterra crisis: Co-op hasn’t learnt from experience, expert says

Fonterra needs to work with the Government in a co-ordinated way to rectify the damage to New Zealand’s brand, Massey University crisis communications expert Dr Christopher Galloway says.

The botulism scare is an issue that will have an impact far wider than just Fonterra, Galloway, from Massey’s School of Communication, Journalism and Marketing, said.

“Fonterra is our biggest exporter. It represents NZ in many markets around the world and trust in the safety of this country’s products has been compromised.

“The potential damage to NZ’s brand is such that the Government and Fonterra need to think about a co-ordinated approach to restore trust.

“This crisis is a further blow to our 100% Pure positioning and the repercussions will take a long time to play out.”

Galloway said Fonterra chief executive Theo Spierings did the right thing by jumping on a plane and heading to China but the three-day delay in going public with the potential contamination of its milk products was a big mistake.

“One of the key things when dealing with a crisis like this is to understand the emotional dimensions of the situation.

“Where you are dealing with food safety issues and human health and especially with babies, there is an emotional and a values-based side to it that needs to be taken into account.

“With crisis communication the best principle is to tell it all and tell it early.

“In a vacuum rumours and speculation abound so I welcome the urgency that Fonterra has now focused on this crisis.

“But the company does have some more explaining to do.”

Galloway says it is telling that Fonterra seems not to have learned some of the lessons from the 2008 Sanlu scandal when the company, partially owned by Fonterra, produced infant formula containing melamine.

“Fonterra was criticised after the Sanlu crisis in 2008 for being slow as well – at the time Helen Clark had to intervene.

“It would have been nice to see the lesson about prompt communication being reflected in the way this current crisis was handled.

“If Fonterra had any concerns at all, not just low level concerns, they should have taken action much sooner, including informing the government and their customers.”

Galloway said it was impossible, at this stage, to know the reasons for Fonterra’s delay in publicly announcing its problem.

“We can’t know what was going on inside Fonterra because they haven’t told us but they may have felt this was something they could contain.

“Were they over-confident in their ability to fix the problem and settle stakeholders down? Was there an unwillingness to admit there was a problem? Or was this just slow internal process?

“The problem, however, is that companies that sit on news of this nature tend to get punished by stakeholders who say, ‘We have a right to know’.”

Despite the challenges Galloway believes both Fonterra’s and NZ’s brands have not been damaged irretrievably.

“If it is confirmed there is botulism contamination, I’d be considering an appropriate apology. In a situation where people are stressed, angry or upset, they will not take in nuanced messages so Fonterra should be looking to send very simple and clear messages to its customers.”

Galloway says there is evidence that after the Sanlu scandal, Chinese consumers recovered confidence in milk producers – and over time Fonterra will be able to do the same.

“Consumers have long memories but it is possible over time to demonstrate change and regain trust.

“You cannot just turn up and say ‘We’re fine now, it’s all good, it’s safe’. You need to show that you have taken the appropriate steps, so it’s both a communication and an operational response.

“Trust is built on being trustworthy over time. From a reputation point of view, Fonterra needs to consider that for some of its stakeholders, this may be one crisis too many.”

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