Talk about a life-or-death situation.
When Odwalla Inc. CEO Stephen Williamson learned that his company's apple juice had been linked to a strain of deadly E. coli in Washington State, he feared that his company would never recover. When 16-month-old Anna Grace Gimmestad died 10 days later from drinking the contaminated juice, he almost wished that his company would just surrender and collapse.
In the span of one week in late 1996, Williamson found himself at the center of a human tragedy and a business crisis that could have destroyed Odwalla, a company built around its commitment to healthy products. Key employees quit, sales plunged, and the will to fight wavered as Odwalla -- and Williamson himself -- faced the ultimate setback. "Our vision statement is about nourishing the body whole, yet people were getting sick from our product," says Williamson, 42. "Then a little girl named Anna died from our apple juice, and Odwalla's world changed forever. Our company will never be the same."
That was five years ago. Today, the company is healthy, growing, and profitable. The nation's number-one fresh-juice distributor, Odwalla has entered the soy-milk and energy-bar markets, upgraded its production facilities significantly, and purchased Maine's Fresh Samantha Inc. -- none of which should suggest that Williamson, Odwalla, or its 750 employees have forgotten the 1996 tragedy or the lessons learned about resilience.
Odwalla (pronounced "odewalla") sprouted from the back of a 1968 Volkswagen van in Santa Cruz, California 21 years ago, when now chairman Greg Steltenpohl and friends Gerry Percy and Bonnie Bassett began squeezing fresh oranges on a $200 hand juicer. Within eight years, the motley crew had incorporated Odwalla, named for a musical piece performed by the Art Ensemble of Chicago, and expanded its juice distribution through Silicon Valley and into San Francisco. In 1992, Steltenpohl moved the company's production facility from the seaside hamlet of Davenport to California's fertile Central Valley, where Odwalla thrived by creating juice concoctions like "C" Monster, Mo' Beta, and Femme Vitale.
When Williamson joined the company in March 1991, Odwalla's annual sales totaled $6 million. Before the E. coli crisis, the company projected 1996 sales of $90 million. Odwalla was growing by about 30% a year and was expanding distribution into the Pacific Northwest, the Rocky Mountains, Texas, and southern California. While competitors like Snapple teetered on the brink of bankruptcy, Odwalla was reaping the profits of its strong brand and customer loyalty.
"Managing Odwalla's rapid growth was challenging but exhilarating," Williamson says. "We were sourcing, squeezing, mixing, blending, bottling, shipping, and delivering our products to more retailers and more consumers every day."
Odwalla's Cinderella story ended abruptly on October 30, 1996, when the State of Washington Environmental Health Services notified Williamson of a possible epidemiological link between several cases of E. coli O157:H7 and Odwalla's apple juice. Though the E. coli link remained uncertain, Williamson ordered a complete recall of all products containing apple or carrot juice from 4,600 retail outlets in seven states and British Columbia. Within 48 hours, the $6.5 million recall was completed.
By the time the link was confirmed by health authorities on November 5, news of the E. coli contamination and of consumers' illnesses had spread across the United States. Sales dropped 90%; Odwalla's stock price plummeted 34%; customers filed more than 20 personal-injury lawsuits; and a grand-jury investigation threatened to rupture the tight-knit community of some 500 Odwalla employees. Most small companies would have succumbed to such injuries within the year.
But in the midst of the crisis, Odwalla's leaders launched a survival strategy that hinged on four objectives: constant internal communication, personalized customer service, fast and effective response, and responsibility -- that is, admitting when you're dead wrong.
In the weeks following the E. coli outbreak, Odwalla faced a deluge of FDA investigations, product recalls, media criticism, and customer inquiries. As more juice was tested and more victims were uncovered, Odwalla employees struggled to keep up with the latest information. "At first, things were changing so quickly that the core management team met every 15 minutes," Williamson says. "As things calmed down, we began meeting once an hour, then twice a day, and finally once a day. As the pace of information changed, we changed how we communicated."
On the day that news of the E. coli contamination first broke, Odwalla was caught unprepared. Anxious consumers began calling the company's 800-number with questions about the outbreak before customer-service representatives even knew about the crisis.
By day two, Williamson began conducting regular company-wide conference calls. Employees across the organization could dial in to hear Williamson's overview of the day's findings and to ask him questions. "People wanted to feel connected to the change surrounding them, and they wanted to know how the company leaders were dealing with the situation," Williamson says. The conference-call concept proved so popular and useful that Williamson still holds a call each quarter to discuss the state of the union with his employees.
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