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Assignment

On
Management Crisis of
Cadburys Worm Controversy
Cadburys Management Crisis

Introduction

Cadbury, a British confectionery company, was launched by John Cadbury in 1831, when John
Cadbury opened a grocers shop at 93 Bull Street, Birmingham, England. Among other things,
he sold cocoa and drinking chocolate, which he prepared himself using a pestle and mortar.
John Cadbury became a partner with his brother Benjamin and the company they formed was
called Cadbury Brothers of Birmingham. Now, the brand offers a host of delicious chocolates
and drinks. Cadbury started its India operations in 1948 by importing chocolates. It is a
significant player in the Indian chocolate market taking up more than 70 per cent of the
market share. The Brand Trust Report, India Study, 2011 published by Trust Research
Advisory ranked Cadbury in the top 100 most trusted brands list. It is one of the best-
managed companies and best workplaces in India, and a highly trusted and respected brand.

Description of Cadburys Worm Controversy Crisis

Despite the public trust enjoyed by Cadbury, on the eve of 3rd October 2003, it found itself in
the eye of a storm. Two bars of Cadbury Dairy Milk Chocolate were found infested at a shop in
Mumbai just before the peak festive season of Diwali. The consumer complained to the
Maharashtra Food and Drug Administration (FDA), who seized the chocolate stocks
manufactured at Cadburys Pune plant. An inquiry was setup by the FDA to investigate into
the infestation complaints, to determine whether this was a stray incident or is it one to add
to the numbers. CNBC was the first to report the story.
The news spread rapidly and the infestation incident became a major subject of discussion for
the next ten days. A common perception that each and every Cadbury bar could have worms
in it spread like wild fire. Consumers ire against the brand was palpable across India. Within
days, the brand became a symbol of disrepute and blame.

The key crisis:

Reputation and credibility was under intense scrutiny.


Sales volumes came down drastically in the first 10 weeks.
Employee morale especially that of the sales team was shaken.
Due to which media coverage touched close to 1000 clips in print and 120 on TV news
channels.
People even assumed that every chocolate could be contaminated.

As a result of the widespread media coverage the reputation of Cadbury was blemished
beyond doubt. The heat of negative publicity melted Cadburys sales by 30 per cent, at a time
when it sees a festive spike of 15 per cent. For the first time, Cadburys advertising went off
air for a month and a half after Diwali, following the controversy. Consumers seemed to
ignore their chocolate cravings. Even the retailers stopped stocking the brand, reluctant to be
associated with a company under such severe public censure. Cadburys net profit in 2003
dipped by 37 per cent to Rs 45.6 crore as compared to a 21 per cent increase in the previous
year.

Challenges

The incident came close on the heels of a cola controversy where a scientific laboratory
declared colas unsafe due to high levels of pesticide. The jury was still out on that issue and so
this incident acquired political overtones with parties decrying Cadbury as an irresponsible
MNC. Andrea Dawson- Shepherd, Global Corporate Communication Counsel, Cadbury
Schweppes called it the worst worm infestation-related crisis anywhere in the world.

The immediate objective was to get the following key messages across:

Infestation could never occur at the manufacturing stage


The problem was storage linked; this without alienating trade channels
Cadbury Dairy Milk continued to be safe for consumption
The challenge was to restore confidence in the key stakeholders (trade and employees,
particularly salespersons) and build back credibility for the corporate brand through the
same channels (the media) that questioned it.

Recommendations

Panic and impulsive reactions should never be adopted. Crisis management requires more
than an apologetic press release or a CEOs insincere appearance on television. News circulate
very fast, as lights speed. An organization should be ready to react and respond to disasters
swiftly and decisively, using all platforms to communicate with the public.

Most important is that high executives and senior managers should not go underground. They
should also not avoid media, but face it and convince that if a mistake has been made it would
be rectified and steps taken so that such things do not happen again in the future. The
company if has been caught on the wrong foot should not justify the mistake by using illogical
arguments which media can deflate with facts. Crises, like accidents in life, are part of
corporate functioning. Theres no panacea, cure-all method, to remedy company crises, but
there are lessons to be learned from past successes.

Initiative made by the company

The management of the company lost no time in addressing the crisis. Managing Director of
Cadbury India, Bharat Puri, personally designed and implemented the crisis management plan
to assure the consumers that it was safe to eat Cadburys chocolates.

Cadburys first damage control initiative was to launch project Vishwas - an education
initiative covering 190,000 retailers in key states. As a part of this, Cadbury released full-page
advertisements in fifty-five publications in eleven languages to inform trades and consumers
basic facts about the manufacturing and storage, highlighting corrective steps taken by the
company.
The second major action on part of Cadbury was to re-design the packaging. It introduced
purity-sealed packaging with heat-sealed polyfoil to complete protection in January 2004.
The company invested up to Rs 15 crore (Rs 150 million) on imported machinery to revamp
the packaging of the Dairy Milk without hiking its price. A toll free number and an email id
was created for consumers to contact the company directly in case of any complaints.
Expert highlight

Cadbury also chose legendary actor, Amitabh Bachchan to endorse it as a brand. In the
advertisement announcing the launch of the new packaging, Amitabh Bachchan, spoke about
how he first convinced himself about the quality of the Cadbury chocolates by visiting the
factory before deciding to endorse the brand.

Cadbury also took steps to reinstate and win back the trust of its employees. Bharat Puri sent
out letters to each employee to erase all doubts regarding the brand. The company held town-
hall meetings with senior managers addressing employees to ensure they were updated on
the proactive actions being taken to handle the crisis and ensure non-occurrence of such
incidents in the future.

Initially the companys response may have been too passive. Once the matter escalated,
however, Cadbury acted decisively. It immediately suspended its advertising campaign and
focused its efforts on educating retailers on safety and hygiene.

Even while the company was under siege, Cadbury made itself accountable as it conveyed
empathy to the victims and launched a comprehensive education initiative covering nearly
200,000 of its retailers around the world.

After the companys infrastructure had been fixed, Cadbury resumed its aggressive
advertising. At that point, the companys relationship with the media had significantly
improved; its new media campaign was well received by key constituencies.

Conclusion

It was decided from the start to address the issue head-on and take whatever steps were
necessary to restore confidence. Having historically maintained a low profile with the media
and let its brands and its performance speak for it, the company began to cultivate
relationships with the media and turn it into an ally and a credible, independent endorser to
rebuild stakeholder confidence.

Cadbury's case could be an example of a sweet recovery from a crisis. It continues to lead the
Indian chocolate market with over 70 per cent market share. However, the experts feel that
today's constantly changing environment should keep the company on guard.
References

http://www.mondelezinternational.com/brand-family
https://www.cadbury.co.uk/our-story
https://www.slideshare.net/mustahidali90/mustahid-ali-imc-campaignassignment
https://www.slideshare.net/saurabhladdha1/cadbury-32130717
http://www.rediff.com/money/2006/dec/24cad.htm