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With tainted products, companies walk fine line

Wal-Mart’s disclosure this week that it had quietly pulled dog treats from its store shelves about a month before publicly disclosing a potential hazard illustrates the fine line corporations walk in safeguarding their customers -- while also protecting their own reputation.

Wal-Mart’s disclosure this week that it had quietly pulled dog treats from store shelves about a month before publicly disclosing a potential hazard illustrates the fine line companies walk in safeguarding their customers while  protecting their own reputations.

“It is truly a balancing act,” said Bill Keegan, who heads the U.S. crisis and issues management practice for public relations firm Edelman, although he declined to discuss Wal-Mart specifically because his company does business with the giant retailer.

How a company manages that balancing act — and the potential impact on its bottom line — is facing increased scrutiny as more and more well-known manufacturers and retailers deal with safety issues stemming from Chinese-made products.

“We have never seen a 12-month period like we have seen this year, if you look at everything going back to dog food to tires to toys to shrimp and seafood,” Keegan said. "Made in China now has a stigma attached to it that’s going to be very difficult for them to overcome."

Wal-Mart acknowledged this week that it had pulled Chinese-made dog treats off its shelves in late July, following customer complaints, but had not made any public statement. The company later disclosed that subsequent tests showed the treats contained low levels of a toxic substance called melamine and that consumers should return the treats for a refund.

Wal-Mart’s disclosure raised concerns because some customers had continued feeding their dogs the potentially hazardous treats without knowing that the store was investigating a potential problem. Those fears were stoked by the fact it was only the latest of many incidents involving potential hazards to children and pets from products imported from China.

Wal-Mart spokeswoman Deisha Galberth said company officials believed they had to gather more information before making a public statement.

“We thought that we were very proactive in pulling it off the shelves as soon as we had complaints,” she said.

Don Mays, senior director of product safety planning for Consumer Reports, said he doesn’t fault Wal-Mart for testing the product before alarming customers — although he noted that it might not have hurt to give people an informal notice so they could choose whether to keep using the treats.

Still, Robert Passikoff, president of the consulting firm Brand Keys, doesn’t expect to see Wal-Mart’s reputation suffer too much from the debacle. While Wal-Mart certainly has plenty of other challenges to its reputation, he said the company is well-known for being tough on suppliers. He suspects that in this case that will help consumers feel confident that Wal-Mart will have little tolerance for any similar future problems.

Mattel Inc. might not fare as well. The toy maker last week announced its second major recall involving millions of popular toys that were manufactured in China and could contain either lead paint or small magnets that pose a safety hazard.

The fact that Mattel had to recall so many toys, and had to do it twice in short order, could make it harder for consumers to be forgiving, Passikoff said.

“It really is the perfect brand storm in terms of, ‘What are you doing right?’” he said.

Faced with such an unpleasant situation, public relations experts say Mattel did actually do many things right, including acknowledging the problems in a very high-profile, public way and making lots of information easily accessible to consumers.

Tim Tinker, senior vice president of Widmeyer Communications and an expert in crisis management, said Mattel did perhaps leave the initial perception that there was a lag time between when it knew about the problems and when it made that knowledge public.  Still, he thinks the company made up for that early misstep by responding quickly and frankly to consumers’ concerns after that.

Mattel spokeswoman Sara Rosales said the company needed time to set up toll-free numbers and other resources so consumers can respond to the recalls. She noted that the company reported its concerns about the latest recall to regulators on a Thursday and made the announcement on a Tuesday.

“I can understand a consumer saying, ‘Why didn’t it happen that same day, (but) you do have to do that investigation to make sure what you're reporting is accurate and factual before alerting customers,” she said.

Scott Wolfson, spokesman for the U.S. Consumer Product Safety Commission, which often works with companies on recalls such as these, said the agency does have a method for expediting serious recall notices but also defended the practice of taking time to set up appropriate resources for consumers.

Wolfson said the CPSC is investigating how Mattel handled its first toy recall, which involved its Fisher-Price division, although he wouldn’t say what the investigation is about. He said it could result in civil penalties.

Rosales said the company has not been notified about the investigation, and that it believes it acted quickly and responsibly.

While companies such as Mattel and Wal-Mart grapple with the fallout of specific safety concerns, more and more other companies are wondering how to avoid being caught up in the ensuing fray.  Public relations experts are already seeing manufacturers more strongly emphasize toys that are made in the United States, and Keegan said some companies also are looking at moving manufacturing to India, the United States or other Asian countries besides China.

He also expects some companies to start using higher-quality components in toys and food, even if it means raising prices.

“I think consumers will pay for quality when it comes to their kids,” he said.

But Passikoff, of Brand Keys, said companies will still have to walk a delicate line if they push marketing efforts based on things like safety or country of origin. While such a message may resonate with customers, he said it has to be subtle or it will come off as tasteless.

“There’s no nice way of putting a strip across the box or the package that says, ‘We never killed a child,’” he said.