Lessons from a Dairy Giant's Crisis Management Playbook in China

Fonterra Was in Trouble in China, But Turned It Around With New Brand

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The Anchor brand's launch in Shanghai.
The Anchor brand's launch in Shanghai.

Just four months ago, New Zealand dairy giant Fonterra was doing damage control in China during a massive recall sparked by a false alarm over botulism contamination.

Fast forward to now. Fonterra, the world's biggest dairy exporter, launched its Anchor brand in China at a flashy media event where a celebrity touted the brand as a safe, 100% imported alternative to local milk. The recall was never mentioned.

It's a quick comeback attempt, but Fonterra is betting that despite the scare, Chinese consumers still trust New Zealand milk over local dairy products. That's because dairy safety anxiety runs high in China after a deadly 2008 scandal over tainted baby formula killed at least six children and sickened tens of thousands.

"From a consumer angle (the August crisis) probably does not change the perception that much, especially when it was actually a false alarm," said Sandy Chen, senior analyst with Rabobank food and agribusiness research and advisory department. "The perception is still very much of a better quality in the imports."

In August, however, Chinese consumers panicked. Media ran headlines about "poisoned milk" amid the crisis, which involved recalls in many countries including China. China banned some imports. The New Zealand government later said the bacteria involved were not botulism-causing after all.

Then came the Anchor launch and a chance for positive spin.

"That's how you do crisis communications: At a certain respectful point after the crisis, you rebrand," said Simon Cousins, CEO of Illuminant, a China-focused PR and strategic communications agency.

Fonterra has until now been a B-to-B brand in China, selling milk powder to companies including Coca-Cola and Danone.

Selling its own brand in China gives Fonterra a better margin, and Anchor is also rolling out its own baby formula line in China.

Meanwhile, it is seizing an opportunity amid a milk shortage in China as the dairy industry evolves from small-scale to massive farms. Rabobank says liquid milk imports in the first 10 months of 2013 increased 112%.

Anchor long-life milk is new to China, though the brand is sold in 70 countries and has a 127-year history – facts featured prominently in the campaign targeted to parents. The Chinese brand name translates as "safe and good."

A TV ad by DDB's Tribal Worldwide Shanghai shows a Chinese mother and daughter visiting a farm and showcases the pristine New Zealand countryside – appealing imagery for Chinese consumers living in polluted cities.

Reporters and key opinion leaders were invited last week to a product launch at a Shanghai shopping mall, giving a glimpse into a typical China press event.

Strobe lights flashed overhead, and actress Hu Ke strode onstage wearing glittering stilettos. She talked about her confidence in Anchor, and Fonterra executives toasted with milk drink boxes.

Afterward journalists rushed Ms. Hu and asked personal questions, such as whether she wanted a second child.

Fonterra executives didn't take questions from reporters while onstage, but one spoke to Ad Age afterward.

"There's a lot of work we can still do in terms of reassuring and communicating to consumers," said Manoj Namboodiri, Fonterra China business development director. "In the meantime, we have full confidence in our brand and the products we are launching."

The next day, several Chinese reports and microblog accounts of the event didn't mention the August scare – and didn't even connect the new Anchor brand to Fonterra.

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