A Case Study in Crisis Management: The Perrier Recall
| Date | 01 July 1991 |
| DOI | https://doi.org/10.1108/02635579110007077 |
| Published date | 01 July 1991 |
| Pages | 6-8 |
| Author | Laurence Barton |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
A Case Study
in Crisis
Management:
The Perrier
Recall
Laurence Barton
6 INDUSTRIAL MANAGEMENT & DATA SYSTEMS 91,7
Industrial Management & Data Systems. Vol. 91 No. 7. 1991. pp. 6-8.
© MCB University Press Limited. 0263-5577
T
he effects and cost of recall of faulty goods
are examined, and remedial measures
suggested.
By January 1990, sales of Perrier bottled water had
reached an all-time high. The French-based company
commanded a tremendous market lead over its
competitiors, as Table I attests.
Then a crisis took its toll. In February
1990,
The Perrier
Group of Greenwich, Connecticut voluntarily recalled 70
million bottles of Perrier water products after it was
determined that abnormal traces of benzene were found
in samples produced over
a
previous seven-month period.
First introduced to American consumers in 1977 but
established in Europe prior
to
this, Perrier
was
to become
the world's best-known sparkling mineral water. As the
premier product within its category, Perrier
had
flourished
during the 1980s as a fashionable drink for the wealthy
and health conscious.
For almost 40 years, Perrier has been produced by
extracting its natural carbon dioxide (CO2) and spring
water separately from the same ground formation; the
water and gas are then combined in a bottling plant. The
Table I. US
Market Shares of Major Bottled Water
Companies
Major US bottled water
companies
Perrier Group of America
McKesson (Sparkletts)
Anjou (Hinckley & Schmitt)
Suntory (Kentwood)
Clorox (Deep Park)
Evian
Source: The Perrier Group
Estimated 1989
wholesale revenue
($)
640 million
225 million
125 million
100 million
50 million
50 million
process has been reviewed by regulators in both France
and the US and found to be safe.
With news that abnormally high traces of benzene (which
occurs naturally in this process) was evident in Perrier,
company managers acted quickly. They arranged to have
an 800 number (free phone) promoted so that consumer
concerns could be addressed even though there was no
apparent health risk. Company executives, who had wisely
hired a crisis management firm a year earlier to advise
it on precisely such a calamity, went to work. Their first
pledge was to work to maintain the trust of
the
consuming
public and to co-operate with FDA investigators.
Despite conflicting statements and press reports on the
cause of
the
high benzene level (a Paris press conference
by the company on
14
February was called "raucous" by
The
Wall
Street
Journal),
the company later determined
that
a
faulty
filtering
process was
to
blame.
With alterations
to that process completed, shipments of
the
product from
France resumed within three months.
Concern over
public
reaction to the reintroduced product was
extensive, however: Perrier contracted with the public rela-
tions
firm
of Burson-Marsteller to measure public attitudes
towards the company
in
its primary
markets,
namely France,
the US, United Kingdom and Canada. The reintroduced
Perrier now carried a new label marked New Production.
The
Journal
estimates
(12
February
1990)
that,
in
the end,
the recall cost Perrier some $40 million in lost sales. A
recent study suggested how stock prices of companies
in the midst of
a
crisis can drop significantly due to investor
anxiety[l],
and Perrier
was
no exception. In one day alone,
12 February 1990, the recall caused Perrier's stock to
tumble
202
French francs ($35.65) to close at 1,490 francs
($263.00). At one point that day, there were so many
"sell" orders that the Paris market suspended further
trading in Perrier stock.
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