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CRISIS AT ALTOIDS

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5 August, 2015: Ain-ul-Abideen Mahdi, the brand manager of Altoids Ltd., was going over
customer reviews on Internet in his Lahore office. He was quite shocked by the negative
feedback posted by customers about the quality of Altoids juices. One particular review caught
his attention where a customer found his pack infested with fungus and advised people to boycott
the brand. Mahdi knew that the brand equity was now at stake and that he needed to address the
concerns of customers immediately before there was any significant drop in sales.

Company Background
Altoids, a multinational Swiss company, was founded by Haris Altoids in 1886 when he
developed a breakthrough infant food. Altoids grew to become the biggest food company in the
world within the span of a few years. The company expanded its initial product offering of infant
food to include beverages, confectionery, cooking aids, water, etc. In 2015, Altoids had 447
factories operating in 86 countries and possessed more than 8,500 international and local brands.

Altoids initiated its operations in the Pakistani food industry under a joint venture with Milk Pak
Limited in 1988. Since its inception, Altoids’ focus remained to be a leading ‘Nutrition, Health
and Wellness’ company of Pakistan. Production of Altoids juices commenced in 1996 with the
set-up of Polo Mint confectionary plant. Initially, only orange flavor juices were available but the
portfolio was later expanded to include additional flavors. This expansion was possible due to
the huge recognition received from the general public for Altoids’ continued commitment to
excellence in product quality. Because of its high standards and huge product range, the earnings
for Altoids Pakistan were reported to be PKR 6.2 billion and revenue to be PKR 52.2 billion in
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the first two quarters of FY2015. Altoids serves its juices under two brands namely Fruti and
Rasbhara. These two brands have provided stiff competition to the Altoids’ major competitors
i.e. Engro foods and Shezan (Exhibit 1). Over the past few years, Altoids lived up to its slogan
‘Good Food-Good Life’ and provided premium quality products to the customers.

Food and beverage industry of Pakistan has been growing rapidly in terms of revenue and market
share (Exhibit 2). The cumulative turnover of the top three players in the sector namely Altoids,
Unilever and Engro Foods was reported to be PKR 40 billion in the first quarter of 2015. This was a
remarkable increase of 11% in comparison to the same period in 2014. It was possible due to the
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4.2% growth rate of GDP in FY2015 and the rapid increase in per capita food consumption .
Moreover, the enormous increase in the number of superstores in the form of Metro, Imtiaz,
Hyperstar, Al Fateh, etc. provided Altoids and other companies of the food and beverage sector with
greater marketing channels. Consequently, it led to an increased exposure of their products to the
public. It is also very important to consider the fact that this sector contributed 13% to total exports
of Pakistan in FY2015 and a cut-throat competition existed among the exporters of

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!http://www.Altoids.pk/asset-library/documents/financial_reports/half_year_ended_2015.pdf
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!https://en.dailypakistan.com.pk/headline/country-records-gdp-growth-rate-of-4-2-in-2014-15-economic-survey-
980/

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beverages like juices . This increased pressure on manufacturer of juices like Altoids to meet
international standards of packaging in order to avoid any possible damage to their market
reputation. Therefore, these manufacturers were continuously innovating in packaging and
incurring huge expenditures in order to maintain their competitive edge.

Pertinent Departments
Supply Chain:

Altoids, unlike other FMCGs, in Pakistan didn’t setup any warehouse distribution system. It
established a total of 4 factories from which shipped the product directly to 35-40 handling
distributors and further to 250-300 independent sub-distributors all across the country. The
distribution was managed through agents who had different distributors for powder (milk and
nutrition products) and drinks (beverages and water) categories in one area.

Altoids maintained its own quality standard certification which defined much higher standards as
compared to the ISO called Quality Standards. These standards were maintained at each step of
the supply chain. Altoids thrived on its high quality raw material, preparation process, testing,
packaging and transportation. It constantly placed pressure on its distributors and retailers to
ensure proper storage of juices and milk products.

Marketing:

In the past few years, Altoids strongly focused upon marketing of its products through a digital
and social media strategy. Ain-ul-Abideen Mahdi, brand manager of Altoids juices, was an
integral member of the digital media marketing department at Altoids and had a dedicated DAT
(Digital Acceleration Team) responsible for managing social media accounts such as on
Facebook and Twitter. The team would sit in front of screens that showcased current, real-time
data trends and provided a window into the happening across Altoids’ digital world at any given
moment. The screens could measure metrics like trending posts, conversations and sentiment
level. This data allowed the team to figure out exactly when and how to engage with their social
and digital followers so that they could address their concerns efficiently.

Altoids also launched a 24/7 helpline called ‘Bol Do’ which provided information about the
packaging of every Altoids product. On this contact number, customers could lodge complaints
related to the product and were usually further forwarded to the concerned department. However,

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!http://www.tradingeconomics.com/pakistan/exports
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a mishap related to Altoids Ltd. which took place in 2015 casted doubts on the well-functioning
of this department in addressing the queries of customers.

Problem Faced By Customers

Altoids Ltd. had always been a customer favorite because of its quality, and the range of fruity
flavors offered by it. Customers consumed it themselves, served it to their children and guests.
The juice boxes seemed to be perfect for a family on the go because of good packaging.
However, in summer 2015, the quality of Altoids Ltd. was questioned as customers found mold
growth and fungus in their juice boxes. The problem was related to the packaging of 1-litre packs
and was mainly faced by customers located in Lahore and Karachi. One customer complained
that he had served the juice to several guests before realizing that it had a bizarre smell. When
the box was cut open, it was revealed that the box was lined with fungus growth. The incident
happened with a great rigor, and scores of customers experienced the same problem with their
juice boxes well before the expiry dates.

With the issue gaining quick popularity on social media websites such as Facebook and Twitter,
customers reduced their purchases of Altoids Ltd. to a bare minimum or boycotted the brand
entirely. Customers were less forgiving and weren’t willing to give Altoids a chance since.
Altoids had failed to deliver its promise of “Good Food, Good Quality”. Rabia Shujat, a Lahore
based customer, commented, “We used to consume a lot of Altoids juices, and often took them to
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our relatives as well but have completely stopped after such experience”. Things escalated
rather quickly as some customers fell victim to serious cases of nausea and food poisoning.

Customers were disgusted by the mold growth inside their juices, and they lashed out in a rather
vindictive manner by posting pictures all over social media. They also warned people to stay
away, and not fall victim to this contamination. There was a widespread criticism from the
customers who were not only probing the quality claims of Altoids but also creating a media
hype that earned a bad name for the company. Pictures posted on Internet quickly grabbed the
attention of public and received comments within a few hours. Some of the frustrated customers
posted videos on YouTube showing the zoomed pictures of mold. More than 200 complaints
were registered on the official website of Altoids.

No reason for the mishap was communicated to the customers and they were left in the lurch.
Altoids was sending the typical message to all of its customer complaints i.e., “We are sorry to
hear about the problem. Please contact us on the helpline”. This mere apology and vague
message was not good enough to satisfy the concerns of customers whose trust in Altoids had
been shattered by the mishap. Moreover, customers wanted a prompt response to their queries
and the current message didn’t have any immediate answers to the questions raised by the public.

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!https://hajrahswork.wordpress.com/2015/05/24/Altoids-fruita-vitals-reality-check/
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Need for Response
Mahdi was alarmed by the huge number of complaints received from customers on the official
website of Altoids and social media. He had several concerns that required him to devise an
immediate response strategy for tackling the issue. His major concern was that customer loyalty was
at stake if he failed to keep up with customers’ expectations when resolving their complaints. The
company had already received backlash from more than 200 customers and some of them had
decided to boycott the brand. Altoids couldn’t afford to lose the support of its strong customer base.

Another major concern of Mahdi was that customers would develop a negative perception about
the manufacturing facilities and production process of Altoids. This was evident from the fact
that customers were already questioning the hygiene and quality of the production of juices by
Altoids. One of the customers commented on Twitter, “If this is what we get from a MNC like
Altoids, then imagine the quality of local products in Pakistan”. Mahdi feared that customers
would label Altoids as a reckless company producing inferior quality products. Consequently,
this would demonstrate lack of ability of Altoids to live up to its commitment of enhancing lives
through good food and beverages.

Customers who consumed packs of juices contaminated with fungus were mostly likely to share their
bad experience with other people. Negative comments about Altoids could be catastrophic and
increase the possibility of tarnishing the image of the company. Moreover, such comments on
Internet would inform current customers of the issue who were completely unaware at present.
Consequently, this could dissuade a high chunk of current customers from purchasing Altoids Ltd.
again. Moreover, dissatisfied customers would warn the potential customers about the possible
defects and these customers would be turned away by bad publicity of the company.

Mahdi believed that Rasbhara was threatened by the possibility of losing its customers to the
competitors. Competitors like Engro Foods, Shezan, etc. would seize any such opportunity to
capture the customers of Altoids. Since the incident had taken place in summers when the
consumption of juices was already on the peak, losing any customer would bring a significant
drop in the sales of Altoids Ltd. This would have led to negative consequences for Altoids by
shaking its dominant position in the juice industry of Pakistan.

Possible Course of Action


Mahdi sat in his office scrolling through the customers’ reviews on the brand’s Facebook page.
The videos and pictures of the fungus were going viral. This was not a new phenomenon; just
months back the national airlines had served a business class passenger stale bread and the
pictures had made headlines on national television. Mahdi did not want Altoids to become
another case for bad media publicity and blame the victims for posting these videos.
Nonetheless, something had to be done to save the image of the Rasbhara brand.

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Mahdi brainstormed through the paths Altoids Ltd. could take. The company could pass the buck
to the brand’s distribution chain specifically the middlemen for their mismanagement of the
cartons. Simultaneously, he could bring the quality standards strictly followed by Rasbhara
strictly to the public’s attention. He could also blame the retailers for not storing the Tetra packs
in a cool, dry place away from sunlight. But he feared that doing so would not only damage the
company’s relationship with the current distributors but would also seriously threaten the
possibility of Altoids signing contracts with any new distributors in the future.

Mahdi also gave taking a less defensive action a thought. He considered the option of showing
customers empathy and apologizing for Rasbhara’ negligence in packing, handling and storage
of the juice through a formal press release. This would of course help Rasbhara retain its loyal
customers and regain some of the lost brand equity. But this option would come at a cost to; the
company risked bringing the quality assurance process of other products of Altoids Pakistan like
the popular Khalis Doodh into question. There was no way Altoids could afford carrying
portfolio of damaged brands in an attempt to improve the image of just Rasbhara. He, however,
was sure that the infected Rasbhara’ juices must be called back and replaced with the new ones if
the brand wanted to maintain good terms with its customers.

Looking Ahead
The struggle for Altoids Ltd. had only just begun and Mahdi was determined to not let the
company go down without a fight. The clocks were ticking and with every passing hour, the bad
press for the brand was going to increase. Mahdi knew the company couldn’t afford to lose the
trust of customers in the brand who had always perceived Altoids to be a promoter of product
safety and quality. The recent incident had raised serious questions about the commitment of
brand to improving the quality of life of Pakistanis. Mahdi, being the brand manager, found
himself in a state of quandary as to how should he respond to the complaints of the customers.
Both of the alternatives put on the table by him had certain limitations. He needed to implement
an effective strategy immediately since the public wanted answers from Altoids Ltd. The
question of who was to be held responsible for the huge mishap was still unanswered.

Assignment Questions
1.! What steps did Altoids Ltd. take initially to respond to customer complaints? Were they
effective?
2.! Mahdi proposed two alternatives to communicate the reason for the quality mishap: i)
blame the distributors or ii) accept responsibility. Evaluate both the alternatives and using
your own knowledge propose a plausible course of action.
3.! What should Altoids’ social media crisis plan be?

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Appendix

Exhibit 1:

Comparison of Market Share of Altoids Pakistan with Engro Foods Ltd. (Blue line represents
Altoids)

Source: https://markets.ft.com/data/equities/tearsheet/summary?s=ALTOIDS:KAR

Exhibit 2:

Online Resource: http://res.bmacapital.com/dailyreports/SOD/PDFS/12172013.PDF

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