scandals

How IKEA can get back on the horse after a meat scandal

February 26, 2013: 1:42 PM ET

IKEA and other companies can regain consumer trust after dealing with products contaminated with horsemeat. The trick is to be the vindicator, not the victim.

Would this make you not want to shop for bookshelves at IKEA?

Would this make you not want to shop for bookshelves at IKEA?

FORTUNE -- Many balk at the idea of biting into Seabiscuit. The cultural taboo around eating horse is one reason why the public has had such a negative reaction to the news that certain European suppliers have been shipping beef contaminated with horsemeat.

On Monday, news broke that said beef made it into IKEA's Kottbullar Swedish meatballs served in some European facilities. Meat in the U.S., the company insists, comes from U.S. suppliers. So far, no contaminated meat in the ongoing European scandal has reached the U.S.

To put the scandal in context, this will probably not significantly dent IKEA's business. Financially, its meatball sales are just gravy -- the company can more than float the business on the profits from its build-it-yourself furniture.

But it could turn into a consumer trust problem. Mostly, says Gene Grabowski, senior vice president and chair of crisis litigation of the strategic communications firm Levick, IKEA has handled this well. It is addressing the issue and promising solutions. That is not true for some of the manufacturers.

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"The European manufacturers are making the classic mistake of trying to appear as victims," Grabowski says, which is bad crisis management. There are three players in crises like these, he says: the victim, the villain, and the vindicator. "People don't identify companies as victims because of their size and resources."

Companies can, however, be the vindicator. In this respect, IKEA has done a fairly good job. It stopped sales of horsemeat-contaminated beef, and it issued press releases informing customers of the locations where the meat is known to be fine.

This crisis, like every crisis, has its own set of circumstances and demands a tailored response. "It's less serious than most food scandals because safety is not really an issue," Grabowski says. "But it is more alarming because it's so shocking to people, not just that the food is mislabeled but that they may be eating horsemeat, and that's abhorrent in a lot of cultures."

Other examples of food fraud have resulted in safety issues. In 2008, for example, distributors in China adulterated milk powder with a substance called melamine. The melamine made the milk appear to have the appropriate amount of protein, but in reality it only had about one-sixth of the protein infants need. It was also toxic.

Poisoning babies is horrific, but feeding people horsemeat is still an example of food fraud. Food fraud, as defined by a 2011 Journal of Food Science paper called "Defining the Public Health threat of Food Fraud," is the intentional adulteration of food products for economic gain. It is not a new phenomenon. The paper says: "Food fraud has been conducted since antiquity; evidence has been found of counterfeit Roman seals on amphaorae containing fraudulent olive oil and wine."

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In ancient Rome or now, food fraud creates a major problem for companies, even when safety is not threatened, because it is a form of cheating. "To many people, labeling is just as important in safety, because labeling equates to safety," Grabowski says. "In this case, technically it doesn't. But if you allow mislabeling, it looks like you don't take it seriously."

Customers are angry, and that's important beyond their feelings about eating certain meats. At some point in the supply chain, somebody butchered a horse and said it was a cow, and that's an unacceptable precedent.

Unfortunately, the incentives to commit food fraud are high, and they must be lowered. IKEA is a major multi-national company that sells furniture and food all over the world. It will probably come through this particular instance relatively unscathed. But going forward, IKEA and others can sidestep similar problems by operating, wherever they exist, by the most stringent standards they have to follow in any country.

Indeed, problems like this aren't local anymore. If IKEA is selling horsemeat-balls in the Czech Republic, it has a problem in Pittsburgh. And when companies do have crises, they must own up fast and solve them soon. No one will sympathize with big corporations as victims of their own supply chains.

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