COMPANY PROFILE

PepsiCo is an American company founded in 1898. It was founded by a pharmacist Caleb D. Bradham. It was named PepsiCo in 1903. PepsiCo is one of the top consumer product companies in the world and it is also one of the most famous soft drink companies. Currently PepsiCo owns more than 21% share of soft drink market world wide and has over 30% share in United states alone. Pepsi has many brands in soft drinks alone namely mountain dew, diet pepsi, mirinda etc. Also pepsi has expanded its reach to other products like quaker oats, Tropicana fruit juice, lays potato chips, cheetos, Gatorade etc. One of the Pepsis popular product was its Diet Pepsi. It was introduced in 1964. Its main highlight was that it was a sugar free drink making it available to all larger section people. It had zero calories and also very less sugar content it and was an instant hit among the youth. PepsiCo is a leading company in soft drinks, snacks and foods and beverages. It has a revenue of more than 39 billion dollars and has employee strength of more than 1,85,000 people. PepsiCo company consist of mainly 3 companies. PepsiCo Americas Foods (PAF), PepsiCo Americas Beverages (PAB), and PepsiCo International (PI). PepsiCos products are one of the most recognized products in todays world. PepsiCos increase in success is mainly due to high standard of performance, commitment, determination and hard work of each and every member of the PepsiCo family. Pepsi also follows one of the best marketing strategies and business practices. PepsiCo has faced many challenges in its history. It has had its toughest competition from its rival Coca-Cola. It also faced other challenges like bankruptcy in its early stages and sugar rationing during World War 2. It has also faced a similar kind of crisis in 1982 and their methods to resolve the crisis is all the rage and part of many management case studies. It all happened in june1993, when a man in washignton has claimed to have found a syringe in a diet can pepsi. The rumor spreak like a wildfire among the people and several other incidents started appearing where people have claimed to have found many objects like bullets, cocaine vials etc. Within a week many similar incidents like this followed and the company was able to clear off all the charges through the crisis management techniques. PepsiCo was able to save its brand image as well the company image through these techniques. Today PepsiCo still stands strong in spite of many challenges it has faced. Pepsi co overcame all those challenges and problems and thus became of the most dominant soft drink companies not only in America but also all over the world and it becomes really imperative to know the management techniques they adopted in crisis situations in present day.

THE PROBLEM The case all started in June 9,1993 when a 80 year old man from Washington Earl Trippet who was a retired meat salesman and his wife Mary Trippet said that they have found a hypodermic needle in the 12 ounce can of the beverage. They were looking in the diet Pepsi can to find a prize-winning word to complete the phrase be young, have fun and drink Pepsi but instead they found a syringe. The syringe was very similar to the one used in diabetes in a can of diet Pepsi. They contacted their lawyer and handed over the can to him. This is where the simmers started to spread like a wildfire. The lawyer then handed this case to the country health officials. The Seattle television news reported the issue along with the discovery of second syringe which forced the FDA to issue a regional advisory. It was that time diet Pepsi was celebrating their 95th anniversary.FDA (Food Drug and Administration US) issued regional advisory urging the customers to empty the contents of the Pepsi bottle before drinking them. There was also a hoax spreading among the people that these syringes contained AIDS. PepsiCo believed that hoax to be false statements at first glance but what happened later was a series of tampering reports. Other objects such as bulle rs, needles,screws where allegedly found inside these diet pepsi cans around the country. 52 of these cases came out from 23 different states within few days. It was at this point that PepsiCo realised that they have a serious issue at hand and problem was looming around. At the PepsiCo headquarters in Somers, the Pepsi public affairs crisis team arranged a meeting hoping that the news would not create much of impact among the public because no one was affected and there was no question of shutting down the plant arised and as there was no cases of needles in the unopened Pepsi cans. The warning of FDA also prompted national attention of media and public within 24 hours. Pepsi has sensed that if they do not do something fast and effective the matter may be out of their hands Pepsi Companys image, reputation and integrity was on the line. The company had to resort to quick and effective crisis management techniques in this very short period of time to overturn the syringe crisis.

HOW PEPSICO REACTED TO THE SYRINGE HOAX: When faced with a product tampering crisis PepsiCo took the responsibility for the safety of the product and well being of their consumers and trade. They took the situation seriously and made it as a top priority of everyone in the company . Pepsi mainly used defensive strategies to claim its innocence in the matter. Proving the innocence of the company was absolutely essential as it would protect the company from further damage of its brand name. The message from the top management to the employees was to stay in constant communication with the employees as well as with the customers and press. Crisis of this magnitude demanded quick response and the important asset of the PepsiCo was clearly defined policy on crisis management and team set up to handle it. With the passing of each day more frightening images of syringes began to appear in the news. Pepsi knew that the syringe could not have gotten into the can during the canning process as it was done in a high speed. Pepsi relied on the well defined crisis guidelines to tackle the situation. PepsiCo decided to strengthen the communication between the people dealing with the customers and people at the nerve centre of the company and they allowed the bottlers to contact them at any time through the telephone and fax system that they have set up as well as the 800- consumer number helpline. Every morning during the week of crisis, to each one of the 1200 employees at head quarters in new York received an update from the president of the company and there was a separate consumer relations group whom were updated at least once in a day since they take calls from the consumers which figured up to 9600 calls in that week. About 100 people at head quarters dropped their regular jobs and the government affairs managers used to staff the phones to talk to the bottlers. The sales people face the biggest challenge talking to the customers in the store and was trying to restore their faith in the brand. The top management helped them by staying in close touch during the crisis. The PepsiCo had a multi disciplinary team working round the clock to separate truth from fiction and facts from hoax. Each day they had new facts to present to the sales people to present to their customers. The primary concern of the PepsiCo was for the integrity of the product and the safety of the customers. Their secondary concern was supporting the diet pepsi brand and making sure that it stayed healthy throughout the crisis. Taking responsibility and sharing all the facts helped PepsiCo took keep the consumers loyalty. It was found through consumer research that 94% of the consumers question who were aware of the stories felt that Pepsi has responded in a responsible way.

SEVEN DEADLY SINS OF DEADLY CRISIS MANAGEMENT In the midst of crisis,pepsi co had two paths of communication. One path to resolve the cause of crisis through analytical fact finding and site investigation and other path involve release of timely related information to media. A crisis management team was set up by 12 people in Pepsi co.Following the below mentioned rules will not only survive through crisis but also thrive in their dealings with future emergencies. SIN Chaos SOLUTON Lines of authority must be clearly defined.

Poor communication

An appropriate order and mechanism for contacting and employees should be planned. One person at each location should be a primary person.

Multiple point persons

Lack of trained back-ups Assumptions

Back-ups should have the training and authority to step in when a primary contact is not available and they should be kept informed of all pertinent events. Decisions should be based on the facts at hand

Accusations

If disciplinary action should be necessary, it should be done through appropriate channels and with dignity. Otherwise, the team work necessary to manage the crisis will significantly suffer.

Neglecting day to day business

While the CMT manages the crisis, the rest of organization should keep day to day business running as smoothly as possible.

Source: Pepsi-cola Company

STRATEGIES USED BY PEPSI CO Pepsi co decided to use a defensive strategy, claiming its innocence when they first heard the news outbreak. Proving the companys innocence would be important in protecting further damage to Pepsi-colas brand name. Pepsi co employed many strategies to deal the problem. 1)Pepsi attacked the accuser claiming that the objects had been inserted after having been opened and that many people do this in order to earn money from a settlement. 2) Pepsi used denial strategy citing that there was no crisis. Pepsi placed video cameras in their factories to show the bottling process and the imposiblity of inseitng a forgeing object into a can of pepsi before it is seen. 3) Pepsi president made appearance in the television and gave interviews to radio stations and news papers. He said that Pepsis bottle line was secure. 4) Pepsis high crisis managers decieded to fight media with media when the news regarding the needles was shown all over the country. 5) Pepsis CEO spoke with the FDA commissioner and agreed that product recall was not necessary. 6) Pepsi handles the situation very exquisitely. The company communicated with the public across all media. Investigations took place to verify the integrity of Pepsi plant and it was clear that no foreign objects could be inserted into the can before getting sealed. The situation was handeled by the Pepsi carefully and efficiently. They posted advertisements regarding this in 12 national papers and hundreds of ads were posted regularly in local news papers. There was 6 media relation managers that was assigned to deal with the calls of media, radio and newspapers. The calls ranged from 1500 to 3000 calls per day. The managers were assisted by a group of 30 consumer specialist and along with the support and help of 40 volunteers to manage the bulk of the calls received to the Pepsi. Pepsi also shown video of the news releases that was distributed to the local tv stations all across the county. The footage was almost shown in more than 400 stations and was viewed by almost 800 180 million people.

FOLLOW UP AND CONCLUSION After the settlement of the crisis it was found that the entire crisis was just a hoax. Pepsi itself issued a notice to the press on this. It explained that the FDA was ready to prosecute the people who accused the company and its product with false claims and deleberatley wanted to tamper and even destroy the image of the Pepsi. The syringe scare ended within 10days since it started. While the pepsi did incur some like loosing almost more than 20 million $ sales but it strongly came back after that. This shows the level of confidence the customers have in the Pepsi. There was an online survey conducted that revealed that more than 90% believed that the Pepsi handled the crisis very well and almost 70% of the believed in the company and its products. There were almost 40 people in 20 states that had made these false charges against the company. The press release made by the company also said that tampering with the consumer product is a serious crime and is punishable for upto 5 years of imprisonment and $ 425,000 fine. This was done to make barrier to prevent the people from making similar accusations like this in the future. Since this crisis there has not been any other case faced by the Pepsi company regarding the product tampering incident. Pepsi used effective and efficient public strategies to overcome the near disaster that they faced with this crisis. Even in the past also when the company faced crisis like this the people have stood with the company and supported it. It was the belief and faith that the company had in the minds of the consumers that helped Pepsi in overcoming a crisis like this. By not ordering a recall, providing video evidence as proof, setting up video cameras in the filling factories, and conveying the proper and reliable information to the media as well as the press the Pepsi has effectively tackled this situation.s

COMPANY PROFILE

Johnson and Johnson, head quartered in New jersey is an American pharmaceutical and consumer packaged goods manufacturer founded in 1886. Johnson and Johnson is parent to 165 companies in 53 countries. One of the Johnson and Johnson successful products were Tylenol .It had more than one hundred million users. It held a market share of 37% of 1.3 billion analgesic market and was dominant over four leading analgesics including Anacin ,aspirin,bufferin,Excedrin .Tylenol accounted for 7.4 % of J&Js corporate revenues and 17-18 % of corporate income. It was in September 1982 when crisis gets acquainted with Johnson and Johnson .Seven people died in Chicago after ingesting extra strength Tylenol capsules laced with cyanide. Immediately FBI declared poisoning act of terrorism which affected Johnson and Johnson .The share market shrinked to 8 % from 37%.Johnson and Johnson stock ,the most actively traded issue on NYSE ,opened at $ 49 a share but climbed to $50.625 by end of day .When the news of first death came out ,the stock closed at $51.75,down $1.75 from the previous trading session .In the days followed the stock fell 7 points.

Facts about Tylenol crisis : Tylenol crisis management has become the gold standard by which all crises are now measured now. It is worth analysing the multiple factors behind the crisis that happened in September 1982 Chicago. 1) An unknown murderer poisons extra strength capsules with cyanide. 2) Seven people die. 3) Approximately 250 illnesses are initially thought to be Tylenol related. 4) FBI declares act of terrorism . 5) Johnson and Johnson held blameless for deaths. 6) Johnson and Johnson recalls extra strength Tylenol capsules from the all shelves across the country. 7) Thousands of calls made to Johnson and Johnson from worried customers and the media. 8) Many thought that Tylenol sales would never recover.

Johnson and Johnson response: 1)James burke, chairman of Johnson and Johnson ,forms a strategy team to deal with the crisis. 2)Company posts a $100,000 reward for the killer. 3)Johnson and Johnson runs full page advertisements discussing the tragic event ,offering consumers an exchange of capsules for tablets ,and explaining tablets are not affected. 4) Company sets up a toll free hotline to answer questions and now offers free coupons for new product. 5)Burke appears in television ads and on TV interviews to inform each and everyone what Johnson and Johnson is doing to control the situation. 6)Johnson and Johnson develops public relations program for consumers, employees ,media and stock holders. 7)company makes intensive effort to communicate with physicians through all media so they can reassure their patients ,including 4,50,000 electronic messages to the medical community informing them of safety measures. 8)Over 2000 sales representative made presentations to physicians and health care professionals.

OUTCOME: 1)Media coverage is supportive of company. 2)More than 80,000 news stories appear. 3)Johnson and Johnson restores public confidence in extra strength Tylenol by introducing the triple safety tamper resistant package. 4) Tablet sales returned to 80 % of the pre crisis level after 3 months of crisis. 5) New capsule exceeded sales forecast by 50 percent.

EFFECTIVE COMMUNICATION THAT PREVAILED IN J & J DURING CRISIS: There was a clear and precise chain of communication that took place in Johnson & Johnson company during the period of this crisis. This communication played an important role in handling the crisis that was at the present. This communication can be divided into two parts. They are listed below: 1. External Communication: Some of the main and important factors in the crisis management is being open and honest to the media. If any delay occurs in communicating the media and public it ultimately would be a problem for the company. It would be tagged as an irresponsible handling of the situation. Through the daily media briefing and conducting press conferences with the chairman, CEO etc allowed the media to report the crisis correctly and accurately to the public. 2. Internal Communication: The company also focused on the employees as well and not the just the media, press and public since the employee and their families were also the ambassadors of the company in a way. The senior management did daily briefings with the employees to equip them with the answers and to make them know what exactly the company is doing to tackle the situation so that they are capable of answering questions from the public, friends, family etc.

LESSONS LEARNT FROM TYLENOL INCIDENT The actions Johnson & Johnson for tackling the problem is an excellent example of efficient and effective crisis management. The crisis communication and techniques employed by the company helped Johnson & Johnson to overcome this crisis. Some to the important things are listed below: 1) Johnson & Johnson provided financial help to the victims of the crisis and their families. Even though it was clear that it was not the fault of the company for tampering of the product. 2) Johnson & Johnson developed a new and improved tripe seal and resisitant to tamper package and a new inspection procedure was made to be done before shipping the Tylenol to the customers. 3) Johnson & Johnson won the support and confidence of the public by portraying that it too was a victim of an unfortunate attack from an outside entity. 4) Johnson & Johnson immediately did a total recall of the products from the market which came as to almost 31 million bottles and incurred a loss of almost $100 million dollars thus earning a sympathy from the public.

PHASES OF THE CRISIS The whole Tylenol crisis was handled by the company in mainly 3 phases. They are listed below: Phase 1) The company gathered as much information as it can about the problem from every available source. It was mainly done to understand the complexities and the in depth detail of the problem so that suitable actions can be taken immediately Phase 2) The company assessed the total risk that they were facing during this crisis and also did a brief search as to how much this will effect the company and the potential damage this crisis can cause to the company as a whole.s Phase 3) Once the problem and its potential dangers were identified by the company Johnson & Johnson took necessary steps for a recovery plan and the mitigation of the risk. The managers were able to make quick decision about being open with the press and putting the consumers interest first. The employees volunteered to assist in every way possible to help the company come out crisis. Johnson & Johnson is a symbol of open and honest communicating that existed in their company. Some of the benefits that were recognizable are: 1) Even though during the crisis Johnson & Johnson did not actively participate with the press meetings they conducted several major press meetings and conferences at their head quaters. 2) Co operating and answering to the media was one of the main steps Johnson & Johnson took. They answered to all the media questions as a staying away from the media or even disapproving the coverage could easy damage the reputation and the image of Tylenol permanently 3) Johnson & Johnson immediately and indefinetly cancelled all the advertisement and commercials related to the Tylenol from the market. The company used the media as a tool to issue a national alert to the people all over the nation not to use the Tylenol product to the public 4) A hot line consumer toll free number was issued in the first week of the crisis to answer all the consumers doubts, queries and problems relating to the present crisis. These were the phases and benefits that Johnson & Johnson did during the crisis.

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