PEPSI COLA CRISIS
Yeşim Ekici, M.Sc
Bahçeşehir University

CONTENTS
Brief History of Pepsi
Crisis
Crisis Management
Analysis and Comments
References

CONTENTS
Brief History of Pepsi
Crisis

Crisis Management
Analysis and Comments

Brief History of PEPSI
 1891- 1935: faced bankruptcy twice
 1898: becomes known as Pepsi Cola, formulated Pepsi-Cola

 1941: First signs of success
 Listed on New York Stock Exchange
 1964: formulated Diet Pepsi

 1965: PepsiCo, Inc. was established through the merger of Pepsi-Cola and
Frito-Lays
 Named one of the world’s top beverage companies CONTENTS
Brief History of Pepsi
Crisis
Crisis Management
Analysis and Comments

CONTENTS
Brief History of Pepsi
Crisis
Timeline of Crisis

Crisis Management
Analysis and Comments

CRISIS
 PepsiCo was entering peak sales season (Memorial Day to Labor Day)

 June 9, 1993: Syringe found in Diet Pepsi can (Tacoma, Washington)
 Hypodermic syringes in cans which cause HIV/AIDS
 When the crisis hit, days later on:
more than 50 new reports
in more than 20 states

with objects including: Syringes, a wood screw, a bullet, a crack cocaine vial and a broken sew needle

TIMELINE OF CRISIS
*2 more complaints reported
1 from Los Angeles; 1 from
Pennyslvania

*First complaint reported in Tacoma ,
Washington

JUNE 9

JUNE 10

*FDA (US Food and Drug
Administration) issues 5 states alert advising consumers to inspect their sodas by pouring

JUNE 13

JUNE 14

*Multiple complaints reported from multiple states
*PepsiCo crisis counselors address the public in regards to tampering complaints

TIMELINE OF CRISIS (cont.)
*2 more complaints reported
1 from Maryland; 1 from New
York

*Dozens of complaint reported in multiple states JUNE 15

JUNE 16

*Another dozen of complaints reported in multiple states

JUNE 17

JUNE 19

*PepsiCo annouced needle-incan scare over

CONTENTS
Brief History of Pepsi
Crisis
Crisis Management
Analysis and Comments

CONTENTS
 Brief History of Pepsi
 Crisis
 Crisis Management
 Getting Control of Situation
 Objective
 Crisis Plan
 Setting Up Their Crisis Management Center
 Gathering Information
 Understanding Media’s Mission
 Communicatıng Quıckly And Frequently
 Providing Closure
 Analysis and Comments

CRISIS MANAGEMENT- GETTING CONTROL OF THE
SITUATION
 When the first two complaints of syringes found in Diet Pepsi cans were reported in Washington state, PepsiCo considered it a regional issue.
 PepsiCo’s local management worked with their regional bottler to check the product line while the FDA tested the syringes for contamination.
 When a third syringe was reported (in New Orleans), PepsiCo realized that this was becoming a national issue and assembled their crisis team.
 PepsiCo determined that it was almost impossible that these tampering reports could be true. The real problem was how to stop the false reports and how to communicate to the public that there was no danger.

CRISIS MANAGEMENT- OBJECTIVE
Inform all publics tampering claims are false within the next two weeks

CRISIS MANAGEMENT- CRISIS PLAN
• PepsiCo had created a crisis plan with procedures for dealing with product tampering. • PepsiCo’s crisis team included employees from all the major divisions: scientific and regulatory affairs, manufacturing, public affairs, sales, marketing, and legal counsel.
• The goal of this team was to “ensure consumer safety and security while protecting 95-year old trademark and maintaining a positive image amidst a blitz of often negative media attention,” said
Craig Weatherup .

CRISIS MANAGEMENT- SETTING UP THEIR
CRISIS MANAGEMENT CENTER
 By Day 6 , June 14, PepsiCo’s crisis management team was gathered in a conference room at the company’s New York headquarters. This conference room became the crisis team’s headquarters for the duration of the crisis and also served as Mr.
Weatherup’s office during that period.
 Mr. Weatherup (CEO) was chosen as the spokesperson during the crisis because of his knowledge of the “complexity of the canning process”. He also communicated with PepsiCo Inc. Chairman D. Wayne Calloway several times each day throughout the crisis.
 Rebecca Madeira, Vice President of Public Affairs, became the crisis coordinator
 Other members of the crisis team included Public Relations Manager Ann Ward,
Product Safety Expert Dr. Jim Stanley (who had originally worked for the FDA), and
Manager of Public Affairs Andrew Giangola.

CRISIS MANAGEMENT- GATHERING INFORMATION
 Rebecca Madeira’s immediate concern was to determine whether or not the public was at risk: Once the FDA had tested the first two syringes and found that there was no risk of contamination. By day 5 -June 13, PepsiCo and the
FDA together decided that there was no need for a product recall.
 In the meantime, PepsiCo researched employee records, shipping and customer inventories, and consumer complaints to see if there were any indications that their production lines could have been subverted in any way.
 Based on their research and on the statistical improbability of such tampering occurring in numerous bottling plants over the span of several months, management and employees at PepsiCo were confident that the syringes reportedly found in their soda cans were not the result of product tampering but of fraudulent complaints.

CRISIS MANAGEMENT- UNDERSTANDING MEDIA’S
MISSION
 The media was creating a panic among consumers with its sensationalized display of a Diet Pepsi can with a syringe

 PepsiCo’s crisis team understood that they had to use this same media to deliver their own message to consumers: that they had determined with
“99.999 percent certainty” that the syringes could not have been inserted in a production line that fills thousands of cans per minute
 PepsiCo’s media messages were so effective that by Wednesday night, one day after Mr. Weatherup’s first television appearances, crisis team members noticed that news reports were beginning to use words such as “copycat” and “hoax” when reporting new tampering cases

CRISIS MANAGEMENT- COMMUNICATING QUICKLY
AND FREQUENTLY

 PepsiCo produced four VNRs during the crisis, including the first one showing the soda canning process.
 On Day 7 - June 15, PepsiCo asked one of their vendors, Robert Chang
Productions, to produce a video news release (VNR) showing the soda canning process. The video showed how each can was inverted, cleaned with pressurized water or air, and then flipped again and immediately filled with soda, all in less than one second. This first VNR was viewed that same day by 187 million viewers on 403 stations
 But the most powerful VNR was created using surveillance footage from a
Colorado retailer which showed a woman inserting a syringe into a can of Diet
Pepsi as the store clerk looked away.
 FDA arrests of individuals accused of filing false reports reinforced PepsiCo’s affirmations. CRISIS MANAGEMENT- COMMUNICATING
QUICKLY AND FREQUENTLY
 PepsiCo also made CEO Mr. Weatherup available for interviews with the news media. On Tuesday, he appeared on several evening news broadcasts including the MacNeil/Lehrer Newshour and Nightline with Ted Koppel, “quietly explaining how a syringe couldn’t possibly find its way into a can”. Mr. Weatherup was joined on Nightline by FDA Commissioner David Kessler, presenting a powerful message to consumers as both men assured the public that the tampering reports were unsubstantiated and that PepsiCo’s products were safe. The following morning, Mr. Weatherup appeared on several early morning network shows as well as CNN’s Larry King Live that evening.
 In addition to their efforts in the mass media, PepsiCo also kept other lines of communication open during the crisis: PepsiCo sent faxes to all of its regional bottlers twice daily to keep them apprised of any developments, and PepsiCo employees continued to respond to calls made to the company’s toll-free line from consumers, bottlers, and distributors.

CRISIS MANAGEMENT- PROVIDING
CLOSURE
 Within 11 days, the Diet Pepsi crisis was over.
 PepsiCo wanted to thank their constituencies for supporting them throughout the crisis and to officially declare the crisis over.

 From June 19 to June 21, PepsiCo ran ads in national newspapers declaring “Pepsi is pleased to announce … nothing!”
 On the weekend of the Fourth of July, PepsiCo printed coupons in newspaper ads that said, “Thanks America.”
 In all, sales of Pepsi and Diet Pepsi were reported to have dropped about 2% during the crisis but rebounded after the Fourth of July.

 The FDA had made several arrests for filing false tampering reports and there had been no substantiated cases of contaminated soft drinks. Between June and
September, 55 other people were arrested for making false claims and others started to retract their stories.

CRISIS MANAGEMENT- OVERALL ACTIONS DAY
BY DAY
DAY

ACTIONS TAKEN BY PEPSI

Thursday, June 10

Spokespersons chosen

Friday, June 11

A second reported syringe-in-a-can came to Alpac (bottler) directly

Sunday, June 13

The FDA issued its own advisory

Sunday, June 13

Pepsi urged companies not to remove the product off the shelves.

Monday, June 14

PepsiCo’s crisis management team was gathered at New York headquarters Tuesday, June 16

Revealed production process

Tuesday, June 16

Mr. Weatherup’s first television appearances

Thursday, June 19

«Impossible for syringe in the can», release news around the world.

CONTENTS
Brief History of Pepsi
Crisis
Crisis Management
Analysis and Comments

CONTENTS
Brief History of Pepsi
Crisis

Crisis Management
Analysis and Comments

ANALYSIS AND COMMENTS
 PepsiCo’s response to the Diet Pepsi tampering hoaxes illustrates how crucial it is for a corporation to have a crisis management plan in place.

 Unlike other similar cases: no product recall  The media, unaccustomed to this course of action for an alleged product tampering of this magnitude, persisted in reporting "victims" claims and in looking to the Company for answers.  PepsiCo responded quickly and effectively to sensationalized media reporting that could otherwise have proved catastrophic.

 The crisis management team determined that the most effective method for communicating with PepsiCo’s constituencies was through the very media that was reporting the hoaxes. Once that decision was made, teams were mobilized to provide VNRs and news updates, and a corporate spokesperson was selected to present a calm and reassuring face to PepsiCo’s constituencies.

ANALYSIS AND COMMENTS
 This is the first time a major regulatory authority has given such a public reaasurance (FDA).
 PepsiCo worked closely with the FDA to ensure that their products were safe.
 FDA’s involvement gave greatly enhanced credibility. Rebecca Madeira said that agency was the company’s crisis counsellor.
 HIV/AIDS hoax was very popular in USA.
 They reassured their bottlers and distributors by including them in their communication chain.
 PepsiCo took a situation that could have proved devastating to their corporate image and product line and instead emerged from the crisis “stronger and more united than ever,” said Craig Weatherup.
 In 1993 Pepsi-Cola profits surpass $1 billion
 Pepsi shows tendency for crisis due to use of celebrities.

THANK YOU

REFERENCES
 http://pepsibrattleboro.com/historyofPepsi
 Colin Doeg, 1995. Crisis Management in the Food and Drinks Industry: A
Practical Approach, Chapman&Hall, UK.
 Kathleen Fearn-Banks, 2011. Crisis Communications: A Casebook Approach,
Routlegde, NY.
 Norman R. Augustine,Anurag Sharma,Idalene F. Kesner,N. Craig Smith,Robert
J. Thomas,John Quelch,Greg Brenneman,Linda Hill
2000. Harvard
Business Review on Crisis Management, Harvard Business School Press, USA.
 Marcy Magiera, 2009. “The Pepsi Crisis: What Went Right.” Advertising Age 19
July 1993: 14-15.
 Regina Collins,2009. Corporate Communication Case Study, PepsiCo’s
Communication Strategy During Product Tampering Scare.