Monday, January 28, 2013

Milk Scandal in SanLu and Fonterra


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)
Henry, 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
On 26/09/2011 from http://www.chinadaily.com.cn/cndy/2009-
01/06/content_7368333.htm