This post is the first in our six-part Solution Stories series, where in each story, we profile a real-life crisis and how it evolved and was managed. We also offer a digital solution that could support effective crisis management in similar circumstances.
Stakeholders' influence is the single biggest variable in crises today. The reality is that stakeholder engagement is a vital leadership skill needed to handle a crisis effectively. One of the best demonstrations of this was during the syringe panic experienced by PepsiCo in the early 90s. In terms of financial impact, the crisis cost the company more than US$25 million in lost sales and increased marketing expenses during the 11 days it spent defending itself while it was ‘under siege.' The company’s share price dropped almost a dollar in the first few days. Sales of Pepsi and Diet Pepsi decreased by about two per cent during the crisis, which coincided with the peak sales season but rebounded soon after. Today, the incident remains a good case study in effective crisis management, demonstrating the pressing need for a rapid response and engaging with stakeholders effectively.
The crisis was triggered by a syringe allegedly found in a can of Diet Pepsi in the state of Washington, in the United States, on Thursday, June 10, 1993. An elderly couple claimed to have discovered the syringe inside a can of Diet Pepsi. They first called their lawyer, who promptly called the media and local health authorities, who notified the police. A second case of a syringe found in a Diet Pepsi can was reported by a woman who lived less than 20km away. The Food & Drug Administration (FDA) warned consumers in the area to pour their cola into a glass before drinking, noting that both cases involved a company bottler in the state of Washington. PepsiCo was baffled and ensured executives from its local bottler were available to the media. While the company considered a voluntary recall, it decided against it, following advice from the FDA that it was not required as there were no reports of injuries nor any sign that the syringes contained any harmful substance.
When reports that a third syringe was found in another state on June 13, PepsiCo recognised they were facing a national issue. It assembled a line-up of executives who would form the core crisis team for the duration of the crisis. By Tuesday, June 15, the president of the North American operations, Craig Weatherup, had been nominated as the primary spokesperson because of his familiarity with the bottling system. He provided regular updates and was available for media interviews.
Pepsi produced a video news release (VNR) explaining the mechanics of the production process, showing how each can is cleaned and filled with soda in less than one second. The VNR demonstrated the impossibility of inserting foreign objects during bottling and was seen by more than 187 million viewers on stations across the US. A lucky break led to the discovery of surveillance footage from a supermarket of a woman inserting a syringe into a Diet Pepsi can. The company issued another VNR with a copy of the footage and distributed it to news media nationwide. These VNRs provided visual proof, which helped convince the public that the tampering reports were hoaxes.
Pepsi worked closely with the FDA and its then-commissioner, David Kessler. He appeared on an evening news broadcast with Weatherup to assure the public that tampering reports were unsubstantiated and that PepsiCo’s products were safe. The FDA also helped reassure retailers, preventing most supermarkets from pulling Pepsi from their shelves. It also informed the public that the agency would check complaints received and warned about the consequences of making fraudulent tampering claims. False claims are considered a federal crime that could incur penalties, including up to five years in prison and a US$250,000 fine.
Meanwhile, PepsiCo kept its other stakeholders in the loop, faxing daily morning updates on the crisis to its offices, distribution centres and bottlers throughout the country, asking them to reassure retailers that the products were safe. The company also set up a toll-free line to respond to calls from consumers, bottlers and distributors. Reports showed that PepsiCo company representatives, including the president, gave 2,000 interviews to the media over five days during the height of the crisis. They communicated openly, cooperated with the public and effectively used visual evidence to reassure them. This proactive approach helped to counteract the rumours and demonstrated PepsiCo’s confidence in its manufacturing processes and the stakeholders involved.
More than 50 reports of Diet Pepsi tampering across the country appeared in the media in the days following the first reported claims. Among the most bizarre reports of items allegedly recovered from Pepsi cans were a wood screw, a bullet and a crack vial. The FDA made several arrests for filing false tampering reports, and there were no substantiated cases of contaminated soft drinks. PepsiCo declared the crisis over by running ads in USA Today, The New York Times and about a dozen other major newspapers from Saturday, June 19, to Monday, June 21. Pepsi’s ad agency, BBDO Worldwide, created a print ad that was the company’s only paid placement in response to the crisis. The headline read: “Pepsi is pleased to announce.... nothing.” The ad stated: “As America now knows, those stories about Diet Pepsi were a hoax. Plain and simple. Not true.” It thanked consumers for their support.
PepsiCo had a lot at stake. Its brand, reputation and business were under threat. At that time, the soft drink market was worth $47 billion a year, and Pepsi brands accounted for about 32 per cent of the total, behind Coca-Cola’s 41 per cent. Some experts have suggested that how the company handled the crisis may have benefited the company in the long term. PepsiCo had a clear and cohesive strategy that considered all its stakeholders and ensured a unified front. By mapping the influence of their diverse stakeholders, PepsiCo was prepared and able to steer the course as soon as the first signs of a problem emerged. As a result, they could reduce the impact of the crisis and strengthen their resilience.
Today’s instantaneous viral spread of information and disinformation on social networks allows multiple stakeholder groups to bear in on a crisis even if they are not directly impacted. The increasingly complex stakeholder web is a major crisis management challenge that calls for effective stakeholder mapping tools such as Untangle™. Stakeholder mapping lets you see all the stakeholders who can impact an unfolding adverse situation or a new initiative or project. Untangle™ helps prioritise stakeholders and provides a context in terms of their relative influence and power as well as the resources for effective engagement, strategic planning and risk management. This framework is essential because, without stakeholder mapping, it can be challenging to determine which stakeholders carry the most influence on the course, outcome, and consequences of the crisis. Learn how to support your stakeholder mapping efforts here.
Caroline Sapriel is Managing Partner of CS&A International, a consultancy specialising in risk, crisis, and business continuity management. With over 30 years of experience in risk and crisis management, she is recognised as a leader in her profession and acknowledged for her ability to provide customised, results-driven counsel and training at the highest level.
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