How Blue Bell Saved Itself

(Flickr / Barclay Nix)

(Flickr / Barclay Nix)

It was a CEO’s worst nightmare.

On February 2, 2015, the South Carolina Department of Health and Environmental Control discovered strains of listeria in a Blue Bell ice cream facility during a routine inspection. Listeria, a bacteria that can be deadly to humans, is usually found in contaminated raw foods or milk.

Blue Bell was sold directly in only 23 states, mostly in the South. But the firm had managed to become the third highest-selling ice cream brand in the country due to its fiercely loyal customers, distinct packaging (circular half-gallon containers), and high-quality flavor that some called “the best in the world.”

After a century of growth and strong brand loyalty, the company’s very existence was being threatened, and it was unclear whether Blue Bell could recover.

Yet today, Blue Bell is back in stores and social media abounds with pictures of customers enjoying their first purchase of their favorite ice cream flavors. How did it turn around?

First, it’s important to examine the nature of the problem. Public health scares can bring companies like Blue Bell to the brink of bankruptcy practically overnight. The primary problem is not that most people have a serious chance of getting infected; it’s that customers will stop purchasing the product until (and maybe even after) they feel safe.

Blue Bell had to assess the extent of the problem and ensure that the testing was legitimate before making any decisions. After several tests indicated that the listeria discoveries were indeed accurate, Blue Bell moved swiftly to recall the contaminated products.

But it didn’t stop there. As subsequent tests began to reveal listeria infections in other facilities and products around the country, the company was faced with an escalating crisis.

Blue Bell couldn’t simply expand its recalls — with every additional discovery, the news cycle restarted, giving the impression that the company was running from the problem. Instead, Blue Bell had to take drastic action.

On April 20, Blue Bell issued a recall for all products from all of its facilities — even those that showed no traces of listeria. Though the company incurred a massive loss, it was the only step that could have saved the company and restored consumer confidence. Without a total recall, the company would likely have sunk into bankruptcy.

Blue Bell CEO and President Paul Kruse readily apologized for the quality control problem that led to the listeria contamination. Executives that appear to understate the problem, blame customers, or talk about financial losses can irreversibly damage a company’s reputation.

The classic case study for a recall of similar magnitude is the Tylenol case in 1982,when seven people in Chicago died from cyanide-laced capsules made by Johnson & Johnson. Though many predicted the Tylenol brand would never recover, Johnson & Johnson’s drastic action saved the product.

The company spent $100 million to recall more than 30 million bottles of Tylenol from shelves, replacing them with tamper-proof packaging within two months. The result? “A year later, its share of the $1.2 billion analgesic market, which had plunged to 7 percent from 37 percent following the poisoning, had climbed back to 30 percent,” reported Judith Rehak of the New York Times.

The right decision isn’t always the easy one. Weeks after announcing the full recall, Kruse announced that Blue Bell would lay off more than a third of its workforce and cut salaries. “The agonizing decision to lay off hundreds of our great workers and reduce hours and pay for others was the most difficult one I have had to make in my time as Blue Bell’s CEO and President,” said Kruse in a press release at the time.

But without that decision, Blue Bell would have been hard pressed to convince customers that it was taking the crisis seriously. Thanks to a $125 million loan from Texas investor Sid Bass, Blue Bell remained afloat during a summer of no sales and (similar to Tylenol) rolled out new product back to stores within a few months.

Consumers have responded enthusiastically, with thousands of customers taking to social media to celebrate Blue Bell’s return to stores and document their first purchases. By taking responsibility and making the tough decisions, Blue Bell may weather this storm after all.

Click to see a timeline of the Blue Bell Crisis.

Published on Opportunity Lives