Milk
Scandal in SanLu and Fonterra
Introduction
SanLu
group of companies involved themselves in the boosting of protein levels in the
milk products with a chemical melamine, in their powdered milk products. The chemical
caused severe health complications in children who were fed on the product and
deaths of about 6 infants (Sommerville, 2009). The addition of the chemical
melamine was in contradiction to the food safety laws of the European Union
where the Fonterra Company was incorporated. The scandal was covered up for a
period of 8 months as the company started receiving customer complaints in
December of 2007. However, they kept on
producing using the same formula until mid May until their partner, Fonterra blew
the whistle. Only then did the milk production stop and the long court battles
began. Fonterra company maintained that no amount of melamine was safe in the
milk while those at the SanLu, especially the chairperson of the group,
maintained that they got a communication from the partner firm that some
amounts of the product, melamine, were safe in the milk. Tian Wenhua, the
chairperson of the SanLu group, intimated that a board member acting form the
instruction of the Fonterra gave her a document that which intimated that 20
milligrams of the chemical per kilogram of milk was allowed in the EU zone.
SanLu later cut the levels of melamine to 10 mg per Kg of milk. It later
emerged that the Fonterra did not instruct the firm to continue production at
the level that was indicated in the report. They maintained that they initiated
a public recall of the product when it came to their attention that the milk
was contaminated (Hembry, 2009).
Stakeholders
in the crisis
The milk scandal in the Chinese
company involved an array of external stakeholders who were affected diversely
with the contamination of the milk products of the firm. Proper communication
with all of the stakeholders will help to improve their understanding of the
situation. The first stakeholders’ in the scandal were the parents of the
children who were affected by the products (Hazleton, 2006). A parent whose
daughter became ill after consuming the product was the first person to alert
the company of the problem that existed in their production process. However,
the company respondent to the complaint of that parent by giving four boxes of
the milk product to the consumer. Later on, several complaints were received
from as many as 360,000 other parents (Chen, 2009). Secondly, the government
agencies, especially those who were concerned with the safety of the food were
also important stakeholders in the crisis. The firm informed the Health
department of the city of Shijiazhuang six months after the crisis was first
noticed even though this was an issue that was directly linked with the health
of the consumers of the products. Finally, the media who act as the informers
of the people were also key stakeholders in the case.
Communication
strategy of SanLu-Fonterra
SanLu group intended to cover up the
scandal by contracting a public relations firm which was to aid them towards
achieving that objective (Chen, 2009). A memo written by the PR firm Beijing
Lanataotonglue outlined three ways through which the firm would deal with the
crisis. The strategy that was given most weight was to acquire the help of the
Baidu, a search engine which uses the local Chinese language. Baidu was meant
not to return search results about the scandal thus would help in misinforming
the parties interested in the scandal (Ghuman and Aswathappa, 2010. However,
Baidu did not honor the arrangement thereby leaving the company as exposed as
it had begun to be. The company further denied any knowledge of the milk
scandal even after the partner company had been informed.
Moreover, the Fonterra dairy company
also denied ever having instructed the SanLu operation of the amounts of the
chemical that was to be present in the milk. Although they agreed that they did
give the partner the alleged document, they denied having intended it to be
followed by the SanLu group. However, independent observers have questioned the
truthfulness of the Fonterra’s group CEO. The question that many ask is “why
did the board member give the document to the Chairperson of SanLu? What was
the document to be used for? The answer to the above questions exposes Fonterra
Company as that which does not want to bear responsibility for their actions
(Seagull Reference, 2008). Further, Fonterra also just withheld the information
for two weeks from the public even after they had been informed of the problems
facing their partner.
Problems
with the strategy
The two firms employed strategies of
cover-ups and denials. SanLu, for instance, by offering to give Baidu a
whooping 300 million Yuan attempted to infringe on the public’s rights to know (Seagull
Reference, 2008). The people understanding of the crisis would have been
enhanced if the companies involved were open with the information that they
held. Fonterra also did not communicate the information at the right time doing
so after pressures had risen and the consumers had become so restless.
Recommendations
No
cover-ups were necessary as the firm would have prevented the extra damage in
terms of blacklisting and the more deaths that resulted even after the chemical
had been noticed in the products. Also,
the firm would have addressed the needs of those who were affected at the
outset without resorting to rewarding the customers with the same product which
caused them the problem (Barton 1993).
Plan
of action for the crisis management
The two companies needed to have
acted at the earliest opportunity. All the points which the company perceives
as important to the public should be communicated at the right time. All
products in the markets that were prepared using the formula should be recalled
and all the customers advised against ever using the products made from the
formula. Finally, the firm’s spokesperson should be somebody who has skills on
how to handle the media. This excludes not giving of gifts or money to the media
personnel (Henry, 2001).
Bibliography
Barton,
L. 1993. Crisis in organizations:
managing and communicating in the heat of chaos.
Cincinnati:
South-Western Pub. Co.
Chen,
S. 2009. "Sham or shame: Rethinking the China’s milk powder scandal from a
legal
Perspective",
Journal of Risk Research. 12(6):
725–747.
Ghuman, K. and
Aswathappa, K. 2010. Management: concept,
practice and Cases. New
Delhi:
Tata McGraw Hill.
Hazleton, V. 2006. Public relations theory II. New Jersey:
Lawrence Erlbaum Associates.
Hembry, O. 2009.
Convicted SanLu boss blames Fonterra. New Zealand Herald, para. 7, Jan. 28,
2009.
Retrieved on 26/09/2011 from
http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10553867)
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R. 2001. You'd better have a Hose if you want
to put out the Fire: the Complete Guide
To Crisis and Risk Communications.
Gollywobbler Productions.
Seagull
Reference 2001. A
timeline for the SanLu milk case, 15 September, 2008. Retrieved on
26/09/2011
from http://seagullreference.blogspot.com/2008/09/timeline-of-sanlu-milk-
case.html
Sommerville, Q. 2009. Little comfort in milk scandal verdicts.
BBC News, para. 4, 22 January,
2009.
Retrieved on 26/09/2011 from http://news.bbc.co.uk/2/hi/7845545.stm
Zhe, Z. 2009. Feeding a formula for disaster. China Daily, para. 2-4, 2009, January 6. Retrieved
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