Maple Leaf Foods: A Case Study in the Persistence of Memory
Maple Leaf Foods is Canada's largest food processor, and as the name implies, it traces its history a long way with our neighbor to the north. It has always prided itself on its food safety procedures.
Last year, as was widely reported, more than 20 people all across Canada died from listeriosis traced to one of Maple Leaf's processing plants in Toronto. A huge recall of Maple Leaf products was ordered. Recently, the company settled class action cases for a reported $27 million.
Perhaps Maple Leaf thought that put it all behind them. Hardly. A Thomson-Reuters article described how Maple Leaf considers itself well-placed in the current economic environment. The story is 11 paragraphs long. Five of the paragraphs tell the company's story. Six of the paragraphs, including the lead paragraph and the final five, are concerned in whole or in part with the listeriosis outbreak, plus a new recall of frankfurters and hot dogs.
People have long memories. The article in today's Wall Street Journal that peanut butter sales in the four weeks ending February 21 dropped 13.3% compared to the same period last year is just another indication of that.
More on Supply Chain Verification and Crisis Management
Food Safety Magazine’s latest issue focuses on “Industry in Crisis Mode.” The issue includes an article by Shaun Kennedy, director of the National Center for Food Protection and Defense (NCFPD). Mr. Kennedy provides a good overview of the elements of a supply chain verification program that any food seller should consider.
Mr. Kennedy acknowledges that costs for third-party audits, fixing supply chain problems, and establishing traceability can be high. To justify costs, he points to the recent experience of Maple Leaf Foods. According to Mr. Kennedy, Maple Leaf Foods incurred “direct costs to the company of over $20 million. The shareholder costs are even greater with its stock price having dropped by over 20% by the end of August since the announcement of the recall, a shift of over $200 million.” These costs do not include anything to compensate possible tort victims or to respond to inevitable products liability litigation (whether merited or not).
Forest Through the Trees: Lessons from a Crisis Management Case Study
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There was a nice article in the Canadian legal publication Law Times about the aftermath of the Maple Leaf Foods recall. The article praises Maple Leaf Foods for taking quick steps to salvage consumer confidence in the face of a Listeria outbreak across Canada. Specifically, the article discusses how Maple Leaf Foods CEO Michael McCain “immediately took responsibility for the plant outbreak.”
McCain is quoted as saying that “[g]oing through the crisis there are two advisors I’ve paid no attention to. The first are the lawyers, and the second are the accountants . . . . It’s not about money or legal liability, this is about being accountable for providing consumers with safe food.”
Yet the author of the Law Times article interviewed a Canadian corporate communications expert who noted that “McCain likely did listen to legal counsel.” The expert said that McCain’s “statement was an acknowledgment that if limiting legal liability was the main objective of the company’s response, it would be near impossible to restore its reputation.”
“‘The whole reason that Maple Leaf has been successful, and even though the recall has cost them $20 million in product [recalls], [is that] their reputation is intact,’” the expert is quoted as saying.
Finally, the best quote from the article: “[L]awyers need to understand that legal liability isn’t the only factor to consider in a crisis. But that’s not an easy pill for many lawyers to swallow. They believe future litigation is prejudiced if a CEO makes an apology, says [the expert].”
