From INSEAD Knowledge (http://knowledge.insead.edu)
When "Le Monde" exclaimed in a front-page headline: "Danone prepares to shed 3,000 jobs in Europe, including 1,700 in France," on January 10, 2001, Danone -- France's national champion and one of Europe's biggest food and beverage firms -- faced a major crisis. The announcement led to public and political protests, and a massive boycott of Danone's products.
Mark Hunter, INSEAD Adjunct Professor and a former investigative journalist, says: "Suddenly Danone, the most respected company in France, found themselves facing not only a social (or labor) crisis but also a societal crisis, unlike any other. ... We think they underestimated the extent of the forces that were facing them ... and the impact of certain stakeholder groups on the outcome of the crisis." As the media reported rumors that the boycott had led to a 10 percent to 20 percent drop in sales and a fall in stock value, Danone CEO Franck Riboud stated that global sales had risen 7 percent, and declared that "the storm is over." The media believed him. Journalists did not seek further information about the full effects of the protests. Thus, once Danone declared victory, the crisis was considered over. However, questions in the financial community about the credibility of Danone's management, which were posed more and more critically in analyst reports, continued to affect the firm.
"When a crisis ends officially, as was the case here, it doesn't always end in the real world," says Hunter. "There can be a really long tail to a crisis and that long tail can be affected by the people who get involved when the crisis is high." One of the major debates in France during that time, Hunter explains, was whether a consumer boycott would succeed for the first time ever. While the boycotters did not actually succeed in stopping Danone closing two biscuit plants as planned, the boycott did have an impact on the company's sales in France, and also encouraged union militants who disrupted Danone's supply chains. When financial analysts learned this, they began to question the credibility of Danone's management. Ultimately, Danone's stock was severely impacted.
In their case study exploring who won the Danone boycott, Hunter and his co-authors Marc Le Menestrel and Henri-Claude de Bettignies, the Aviva Emeritus Chaired Professor of Leadership and Responsibility at INSEAD, conclude that protest movements against firms succeed to the extent that they create conflict between management and stakeholders. Whether sales decline significantly or not, boycotters and other protestors can inflict major damage on a firm's valuation, if the company ends up in an adversarial position to other stakeholders. On those terms, the Danone boycott succeeded.
Another important finding is that media owned by stakeholders can have greater impact on a crisis than the news media. "In the news media, you can tell people what's important," Hunter says. "You can't tell them what to do about it. In stakeholder media (such as financial analyst reports), you tell people what to do about it. A financial analyst tells people 'buy, sell, or hold' ... and that has a completely different impact."
These outcomes suggest that crisis communication strategies must include a stakeholder-centric perspective, meaning crisis communication must aim not merely to diffuse messages, but also to deepen dialogue with key stakeholders. Managing a crisis does not -- and cannot -- only mean winning over the firm's adversaries in the domain of public opinion.
"What's happening now is there's a more dynamic process going on, in which managers are obliged to hear what's coming in from the environment," Hunter says. "We're seeing this more and more, not just in the corporate sector, but also in politics, that people just don't believe what they're being told."