Sanlu Could Be a Bionic Brand

The Chinese Dairy Can Be Saved, Says Beijing Consultant David Wolf

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BEIJING ( -- When I was nine, the hottest action show on television was called the "Six-Million Dollar Man." For those of you who don't remember it, the program followed the life of former U.S. astronaut Steve Austin, who had been horribly maimed when the advanced aircraft he had been testing crashed.

A grateful government healed him at great cost using electro-mechanical prosthetics - bionics - that gave him super-human abilities.

The tagline of the show was "we can rebuild him. We have the money, we have the technology. We can make him better than he was. Better. Stronger. Faster."
David Wolf
David Wolf

Andrew Ferrier reminded me of the show when the Fonterra Co-operative Group CEO told reporters last month that the brand of its Chinese dairy joint venture, Shijiazhuang Sanlu Group, was likely damaged beyond repair as a result of the baby formula poisoning scandal.

If I were the chief executive of a company that accounted for 35% of the world's dairy production, I would want to do everything possible to distance my company from the scandal, up to and including the outright abandonment of my China joint venture.

But I disagree with his stated premise. I believe the Sanlu brand could be saved. It could be a bionic brand. It could be rebuilt a better, stronger and smarter brand, in fact. Here's how.

At this moment there is nothing more important than the healing and long-term well-being of the children and families affected by the crisis. They come before anything.

Sanlu should form and fund a foundation for pediatric health, initially charged with ensuring the quality of medical care received by children affected by Sanlu products, ensuring that all costs of care and counseling were paid.

After the children have recovered, the Sanlu foundation should remain as an organization dedicated to funding the long-term health issues of the children and supporting improvements in the quality of food for children in China.

To save Sanlu's brand, it is necessary to purge all senior executives in the organization, from the CEO all the way down to the baby formula brand manager. Possibly, the entire board should be fired as well.

This would be somewhat unfair, as some of these people were in favor of going public with the issue sooner. But it cannot be helped. Extreme measures are required.

The board should be reconstituted by direct appointments from Fonterra and the Chinese government, selecting members executives with impeccable ethical records, even if they are from outside the dairy industry. Members of the new board should be recruited from around the world, not just China, with at least one member drawn from among the most respected pediatricians, and one nutritionist.

That board should then conduct a search for an executive team -- also drawn from around the world. When hired, the team should be expected to clean house internally -- changing policies, procedures, and personnel as necessary -- and make major investments in multiple redundant quality control systems.

This process would require Sanlu to cease production for at least six months. This time out of the marketplace would give the organization the breathing room to turn its internal systems upside-down, to rebuild its leadership, and to allow the issue to fade somewhat in the minds of consumers, laying the groundwork for the brand to return.

The actions above should be accompanied by a hyperactive but humble public relations campaign designed to tell Chinese consumers what is going on and give them a voice in how the dairy industry is rebuilt.

Sanlu should then take the extraordinary step of ending all arrangements with outside dairies, choosing instead to run its own herds and farms. While more expensive, this would lead to cost savings in the long run and provide another layer of quality control that could be managed by Sanlu itself.

Managing its own production would also give the organization the opportunity to build sustainable and organic dairies, setting standards not only for quality but for environmental leadership as well.

Once a new management and infrastructure are in place, Sanlu needs to develop a new brand identity. It should bring in a branding and market positioning strategy consultancy firm to work with the board and the executive team to redesign the company's look and feel to emphasize a focus on care and purity.

Sanlu should initially restrict distribution to a small area to ensure quality, perhaps focusing initially only on the organic market. The company should use testimonials from reliable, international third parties that can confirm the quality of the dairy and its systems. Sanlu should invite regular inspections -- not only by secular inspectors, but by organizations certifying purity that conformed to organic, halal, and kashrut standards.

An advertising campaign should be wide and large and include the company's new CEO, explaining not only how the company learned from the past, but how it took the opportunity to create the world's leading dairy.

Marketing should tell Chinese: We're back, we're better, and we're doing it right. The CEO should talk about the organic, sustainable nature of the dairy, and explain that Sanlu is a totally new company.

It would be tough going. Many would stay away, especially in the early years. But if the brand program is sustained over a long enough time -- a year, perhaps -- the brand would be back.

Is this plan possible?
I have no doubt Sanlu could be revived, since many Chinese are sincerely interested in turning Sanlu into the highest quality brand in China. The culpability of so many other brands in the dairy industry makes this possible. If Sanlu acts quickly and decisively, it could rebuild its competitive position and set a new standard for a damaged industry.

The greatest challenge to its recovery is the willingness of the company and its owners to undertake the effort and expense to return Sanlu to its former position.

If Sanlu is beyond saving, it is not because it is impossible to rebuild it. It will be because its shareholders did not even try.

David Wolf manages Wolf Group Asia, a Beijing-based management advisory firm that specializes in technology, media, telecommunications, and entertainment.

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