Ground Floor: Cadbury Schweppes, in its financial performance report to June 2006, has put the cost of its recent product recall at about £20 million (€29.6 million), which seems a reasonable result, under the circumstances. Todd Stitzer, the chief executive, said the company is "still monitoring" the trading impact of the debacle, writes Sheila O'Flanagan
He said the markets had been positive about the company's ability to bounce back. The shares, which had slipped to below £5 when the story first broke, are now trading at around £5.45. Despite a downturn in sales as a result of the debacle (as well as a seasonal downturn due to the summer heatwave), all may end well for the company.
The Cadbury brand is a strong one, chocoholics are forgiving people and the likelihood is that the salmonella scare will be relegated to a minor blip on the company's balance sheet.
Big brands, however, still feature in the news. This time it's Pepsi and Coca-Cola.
Usually the companies hit the headlines because of the eternal battle for the hearts and minds of cola drinkers worldwide.
Coca-Cola has been the more dominant and profitable company in their rivalry, but recently Pepsi has surpassed its long-time rival. Not because it's selling more fizzy drinks, but because the market is changing and consumers are looking for different products, especially in the profitable "sports drinks" area. Pepsi's Gatorade leaves Coca-Cola's Powerade in the starting blocks, while Pepsi has also moved aggressively into juice and foods, where it has some big-name products like Quaker Oats and Tropicana.
In May, Pepsi was offered the recipe for Coca-Cola, which had allegedly been stolen from the company. Instead of gleefully accepting it, Pepsi informed Coca-Cola and as a result three people were arrested and charged with stealing confidential information and trying to sell it on. All of which makes you feel that a warm and fuzzy feeling now envelopes both companies. Pepsi is doing better by not slugging it out in the cola wars, Coca-Cola has faltered but is trying to reposition itself too, and their respective secret recipes are remaining a secret.
Unfortunately, however, that is not entirely the case. Last week, India's supreme court ordered Coca-Cola and Pepsi to disclose their ingredients and chemical composition following a study which claims that both drinks contain unacceptable levels of insecticides. If the companies do not submit, the court may suspend sales of the drinks.
Both companies ran into problems in India before. In 2003 the same body, the Centre of Science and Environment (CSE), alleged that the drinks posed a health risk due to the levels of "harmful residues" they contained. This time the CSE says the levels are even higher.
The two companies have denied the allegations, insisting that their Indian-manufactured products comply with international norms and national regulations. Pre-empting a court move, some local authorities have banned sales in schools and government offices.
While the privately funded CSE study showed that the companies had approximately 28 times higher than average pesticide residues, this has been challenged by the companies through the Soft Drinks Manufacturers' Association, which tests their drinks on a regular basis.
Dick Detwiler, PepsiCo's international spokesman, said the manufacturers have provided extensive data to the government to support their position.
More than 500 million cases of cola are sold every year in India. While problems with their products in India may not have an effect on sales elsewhere in the world, it is a difficult situation for the cola companies.
In 2003, when the first report came out, schools banned fizzy drinks and people switched to juice instead, leading to an 11 per cent drop in sales of cola products. With Pepsi's foray into juice markets, it might be in a stronger position to weather this particular storm, but once again allegations of less than 100 per cent commitment to consumer safety have the potential to damage the brands.
So far, though, the bubble hasn't burst for either Pepsi or Coca-Cola, with both companies' share prices trading close to 52-week highs. Nevertheless, this is not an issue which they will want to escalate.
*******************
A big thank you to everyone who got in touch with me following my plea last week to find a way to make my mobile phone ring for longer before diverting to voicemail. As a result of your suggestions I am now able to rummage in my handbag while the phone continues ringing (which is great for me but probably annoys the hell out of anyone nearby).
Last week I mentioned that my nephew doesn't have a watch because he uses his phone instead. In pursuit of innovation I actually wouldn't mind a phone which you could wear on your wrist in the same way. That would counter the tricky finding the phone in the bottom of the handbag scenario, although I'm not sure how easy it would be to see the screen. There's always something for us mobile phone dinosaurs to complain about!
www.sheilaoflanagan.net
