Odwalla Case Brief
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Robyn Mitchell
3/19/2009
JOMC 431: Professor Byars
Case Brief II
Odwalla Fruit Juices and E. coli Outbreak [October 1996]
Synopsis
Driven by its simple vision of making great juice, doing good things for the community
and building a business with heart, Odwalla Inc. is a thriving health food company that sells a
wide selection of fruit juices, smoothies and energy bars. Founded in 1980, the company was
extremely effective in establishing itself as a distinctive brand with a loyal customer base in
markets across the United States and Canada. Odwalla, which is now owned by the Coca-Cola
Company, is headquartered in Half Moon Bay, California, and is continually developing new
products to remain competitive with similar brands such as Kashi and Luna Bar.
With its annual sales rising approximately 30 percent per year, this quirky juice company
was the drink of choice in the increasingly health-conscious market of the 1990s. However, this
quickly changed on October 30, 1996, when health officials in Washington State linked several
cases of E. coli 0157:H7 to the company’s fresh apple juice. The link was eventually confirmed
on November 5 and ultimately resulted in the death of one child and more than 60 customers in
the United States and Canada becoming violently ill after drinking the contaminated juice.
According to Public Relations Quarterly, “Sales plummeted by 90 percent, Odwalla’s stock
price fell 34 percent, customers filed more than 20 person-injury lawsuits and the company
looked as though it could well be destroyed,” (Evan, 1999).
Odwalla addressed the issue immediately, beginning with CEO, Stephen Williamson,
ordering a complete recall of all products containing apple or carrot juice. Covering
approximately 4,600 retailers in seven different states, the recall was completed in just two days
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and cost the company nearly $6.5 million dollars. Furthermore, Williamson ensured that Odwalla
took full responsibility for the crisis and was completely transparent with both the media and its
employees. According to the New York Times, “On all media interviews, Williamson expressed
sympathy and regret for all those affected and immediately promised that the company would
pay all medical costs. This, allied to the prompt and comprehensive recall, went a long way
toward satisfying customers that the company was doing all it could” (Drew, Belluck, 1998).
Odwalla simultaneously launched a Web site within 24 hours of the confirmed E. coli link,
which provided up-to-date information on the crisis and allowed the company to communicate
efficiently with both press and consumers.
The company also focused heavily on internal communications, including conducting a
company-wide daily conference call in which employees had the opportunity to ask questions
and receive the latest information. Lastly, in order to deal with the larger issue of contamination,
Odwalla completely overhauled their production process, introduced a new method for making
their juice products, which they called ‘flash pasteurization.’ According to Williamson, this new
approach guaranteed that E. coli and all bacteria would be destroyed, while not compromising
the great flavor that the company had become known for. Due to its rapid action and great
lengths to ensure customer safety and satisfaction, Odwalla recovered relatively quickly from the
ordeal, however not without consequences. The company eventually plead guilty to charges of
selling tainted apple juice and was the fined the huge sum of $1.5 million dollars, “the largest
penalty for a food poisoning case in the United States,” (Baker, 1998).
Analysis
Being a health-conscious company, Odwalla’s entire premise is based upon providing its
consumers with healthy and nourishing products. Therefore, a crisis such as this had the potential
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to taint the company’s image permanently. However, due to their rapid response, focus on
transparency and willingness to accept all responsibility, Odwalla effectively handled the E. coli
outbreak and established itself as a resilient brand with long-term marketability.
As a Mechanical organization in which much of its public relations consists of marketing
the product line, Odwalla relies on a number of key publics to ensure its prolonged success. The
company’s internal stakeholders include its present and potential future employees, Odwalla’s
fruit and produce suppliers, delivery workers, the CEO and upper management and Edelman PR,
which the company hired to handle the crisis. Odwalla’s extensive list of external stakeholders
consist of their present consumers and loyal customer base, potential future consumers, the
media, the FDA and the CDC, their investors, potential partners such as the Coca Cola
Company, their competition including other fruit juice manufacturers, the Federal Government
and state governments in the areas affected by the outbreak, the families affected by the E. coli
outbreak, the medical community, fruit farmers and vendors that sell Odwalla products.
Communicating effectively with these crucial stakeholders was the key to the juice giant’s
successful handling of the entire ordeal. Whether by speaking with media directly, or reaching
out to consumers through their crisis Web site, Odwalla made sure that they established open
lines of communication, so as to not sever ties with the individuals crucial to their recovery.
According to Public Relations Quarterly, this strategy ultimately helped Odwalla to garner
positive media coverage, “using the media itself to communicate key ideas and human empathy
to its consumers and the families affected by the E. coli virus” (Evan, 1999).
Furthermore, utilizing Williamson as the primary spokesman helped to establish a
genuine face to the company, while also conveying to the public that upper management was
dedicated to making the crisis their top priority. Williamson also successfully bridged the gap
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between internal and external stakeholder groups, thus ensuring that both areas were fully tended
to while dealing with the situation. The company made a smart strategic decision by jump
starting its crisis communications plan with a product recall, as it allowed Odwalla to make a
powerful statement to its stakeholders that their safety was infinitely more important than any
potential sales. By partnering this with their offering to pay for all medical costs, the company
successfully acted according to the ‘empathy factor,’ whereby Williamson and the Odwalla team
genuinely felt the consumer’s pain rather than simply offering monetary compensation. In
essence, by being open and transparent with its consumers, the larger public and the media,
“Odwalla was able to seize the initiative and take control of the crisis before it destroyed the
company,” (Evan, 1999). And so despite not having a crisis communications plan in place,
Odwalla’s commitment to its core values, in hand with a profound understanding of its consumer
base allowed the company to successfully handle the crisis within a relatively short period of
time.
Equally as important, Odwalla launched an extremely successful internal
communications plan, which helped to foster a sense of community and collective responsibility
amongst its employees. By conducting daily company-wide conference calls, employees
remained up-to-date on all crucial information, thus effectively creating a cohort of crisis experts
who could potentially communicate with outside publics if necessary. Furthermore, Odwalla
refused to lay off any of its delivery workers during the crisis, instead utilizing them to “maintain
customer relations that not only earned the loyalty of the employees, but helped to secure the
company’s reputation with its customers,” (Baker, 1998).
Lastly, Odwalla vowed to prevent similar crises from happening in the future by
installing new, state-of-the-art safety procedures in cooperation with FDA and CDC standards. In
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doing so, the company helped to secure continued loyalty from both internal and external publics
who may have been concerned about continuing their relationship with the product. Furthermore,
“by inviting authoritative bodies and using credible experts, the company crushed media
speculation,” (Evan, 1999). Odwalla thus emerged as an innovative industry leader in terms of its
facilities and safety measures, allowing the company to garner successful media coverage while
ultimately providing a happy ending to a potentially disastrous situation.
Overall, Odwalla’s dedication to ensuring the best product for its consumers as well as its
willingness to deal with the crisis openly and efficiently is what helped the juice giant to bounce
back relatively unscathed. Relying heavily upon the empathy factor, the company was able to
effectively develop a sense of authenticity, thus helping to foster an enduring bond with both
consumers and employees throughout the ordeal. And so despite having no formal crisis
communications plan in place, Odwalla’s reliance upon its strong company values and its
consumer-focused philosophy allowed the juice giant to navigate itself onto the road to recovery,
while ultimately helping to ensure a successful and prosperous future to come.
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Case References:
Mallenbaker.net. Mallen Baker. 1998. Corporate Social Responsibility News and Resources,
London. 15 Mar. 2009 <http://www.mallenbaker.net/csr/CSRfiles/crisis05.html>.
Purifying a Tainted Corporate Image: Odwalla's Response to an E. Coli Poisoning. Steven R.
Thomsen & Bret Rawson. 1998. BNET, New York. 15 Mar. 2009
<http://findarticles.com/p/articles/mi_qa5515/is_199810/ai_n21430060>.
Odwalla. Thomas J. Evan. 1999. BNET, New York. 15 Mar. 2009
<http://findarticles.com/p/articles/mi_qa5515/is_199907/ai_n21442792/pg_3?tag=conten
t;col1>.
Deadly Bacteria a New Threat to Fruit and Produce in U.S. Christopher Drew & Pam Belluck. 4
Jan. 1998. New York Times, New York. 15 Mar. 2009
<http://query.nytimes.com/gst/fullpage.html?res=9C03E3DB1730F937A35752C0A96E9
58260>.