First Written on July 16, 2008 Revised and Updated Sunday, July 20, 2008 Strategic error in crisis communications - The case of Groupe DANONE If you tell the truth, you do not have to remember anything - Mark Twain Groupe Danone is one of the most popular, respected and well known French companies, apart from tire manufacturer Michelin, glass manufacturer St. Gobain, auto manufacturer Renault and aircraft manufacturer Airbus Industrie. It is a giant TNC with operations in practically all countries. It is a very large food products company with biscuits being a major contributor. In India, it is a majority shareholder in Britannia Industries Limited, a big player in the food industry, especially biscuits. Danone had always shown excellent growth right from inception. This case study concerning it will highlight the strategic error in its crisis communications.  Danone decided to close two of its biscuit factories in France, as it found the operations at those units not viable. Nothing wrong with that and many companies do that. The problem was the French Labor Unions. The labor unions are a very powerful force in France, just like in the former socialistic countries, though France cannot be considered as a socialistic state in the literal sense.  When Danone announced its plans of closing the units, unions objected and went about obtaining public boycott of its products in France. Danone went by history as no boycott of any company products have ever been successful in France. The fact is that the boycott was totally successful and Danone had 0% growth in the concerned months the boycott was in force. Like many big companies do, it did not admit that. This is because admitting that would affect its share prices in the stock markets. The top managements of most giant companies have their salaries and bonuses linked to share prices through the stock options plan. It announced business as usual and said it had 7% growth worldwide. It was not untrue and it did have growth in other markets. The problem was it did not have the growth in the French market but growth in other markets made up for it.  Many large media companies have what is known as conflict of interests. They depend on such giant companies for ad revenues. Though many large companies do not use ad spends as a strategic weapon, it is never directly said but always implied. Media is also a highly competitive industry and it is not as independent as thought to be. Unless the matter is very grave, most media companies treat their large advertisers with silk gloves. Why lose good money and upset the applecart ? If you are the Chief Editor, you will receive a call from your owner boss to go easy because he would have received a telephone call from the owner boss of your large advertiser's company. That is how the large media works. The large media is subject to all kinds of pressure. Never be under some false illusions of editorial independence. It may work only when you are the absolute owner of the media.  When money talks, we all have to listen without protest. The big media companies kept quiet either due to fear of a backlash or ignorance, which is highly unlikely. The media knows everything but may not be able publish it due to some compulsions. Danone took the media for granted because of its financial clout and it was a strategic error in its communication strategy. Danone forgot that the local financial analysts and financial consultants have their own specialized media, albeit small ones. The internet is one big leveler. Anybody can publish their views and opinion on the web. Bad news travels fast. Good news may not. These guys spilled the beans that Danone was badly affected in France. Such focused media may not be large but have a very large clout with investors. Danone shares took a heavy beating in the stock markets and its management came out in poor light in this episode.  In this process, the large media companies also got hit and their credibility was at stake for not reporting it earlier. Things can get very shitty and hit the roof in a crisis.  Moral of the story All companies, whether big, medium or small should evaluate their strategic options when faced with such decisions which have other stakeholders interests. Danone could have admitted it lost some share in the French market instead of adopting an air of bravado. It should have told the truth. It does not mean admitting defeat. This small local crisis was badly handled because of lack of courage in admitting the truth for whatever reasons. I repeat what I have said a number of times in our pages. When you tell the truth, you do not have to remember or regret for anything at all. One need not be a genius to tell the truth but it needs courage.  Written  by Madhavan T Gopalachary The views, opinions and interpretations are personal. Sponsorship does not mean that the sponsors endorse them. Editorial Policy © Copyright, Jul-08 . www.madgopes.com . Without prejudice. All rights reserved www.mmgindia.com is the official website of Madras Management Group, Chennai, India. www.madgopes.com and www.mmg.name are personal websites and all editorials are published under their banner to retain editorial independence. We would highly appreciate feedback from readers and it may be sent to ipr@mmg.name.