Two days after the company was hit with a lawsuit by the state of Oregon, Johnson & Johnson had a recall this last Friday. I didn’t think it could get any worse for this company. On my last post “Johnson &Johnson’s Recalls Bring Lawsuit”, I refrained from criticizing the company too much or stating they should get rid of the McNeil Consumer Healthcare division. After so many recalls and the lawsuit, reading “Can Johnson & Johnson Get Its Act Together?” by Natasha Singer and Reed Abelson has convinced me Johnson & Johnson needs to eradicate and rebuild their McNeil Division.
The article is vast, filled with information to link all of the recall events and F.D.A. investigations performed on the company. If you are not aware of McNeil recalls, please read the article. I have also written about the company three times before. So, I’m not going to give a full summary but I will point out important aspects of the article.
According to the article, there have been other recalls.
Last year, O.B. Tampons disappeared from store shelves. The company did not publicly address the reasons for the shortage or officially state there was a recall. Bonnie Jacobs, the spokeswoman for McNeil Division, “declined to explain the nature of the supply disruptions that caused the shortage”. Sounds like another “phantom recall”.
Outside of the McNeil division, contact lenses and two different hip implants have also been recalled.
The impact on Johnson & Johnson has been severe.
While these recalls have not been life threatening, they have altered consumer confidence in their brand. According to some figures in the article, company consumer sales went from 1.7 billion to 1.3 billion in 2009, dropping 25%; over-the-counter medication and nutritional products, the main area of recalls, have dropped 40%; the 2010 total cost of the recall is $600 million; and Goldman Sachs has lowered 2011 earning expectations.
Obviously, recalls cost money. But these continuous recalls, coupled with phantom recalls, are costing money from products pulled from shelves and from consumers choosing other brands over J.&J. And which brands are replacing J.&J.? Generic drug store brands. The article reminds us that when you go to a drug store, the missing areas of J.&J. products are usually replaced with that store’s generic brand. Considering J.&J. is more expensive, the only reason to purchase them was brand assurance, which is all lost because of the recalls.
“This is really unusual to have this gross systemic failure”
-Donald Riker the editor of OTC Product News
Possible theories for the failures.
Being that McNeil and its spokeswoman, Bonnie Jacobs refuses to provide an explanation for these recalls, some people, including former employees, have their own theories: “[Decentralization] of its oversight of manufacturing and quality control in error” and lack of investment in manufacturing. The article mentions despite many problems, the company hesitates to invest money to solve these manufacturing issues. They are not eager to buy equipment or fix problematic ones.
The article did end on a somewhat positive note, speaking of the steps the company has taken to fix their problems. They have changed operations and set “monthly goals…in its overhaul plan submitted to the F.D.A." Overall, some in the industry do believe J.&J. is trying to fix its problems.
I don’t have the inside scoop on J.&J.’s game plan. But I hope it includes some makeover of the McNeil division. Everything, from it manufacturing to its public statements, needs work. I do not like that despite being caught with a phantom recall and another possible one with O.B. tampons, McNeil continues to hide information as if it has much integrity to save. At this point, McNeil needs to admit guilt and work on their public image with the millions of consumers they have lost.
I have said it before and I’ll say it again, although its brand has been badly hurt, J.&J. will not fall because of its McNeil nightmare. To save itself, J.&J. needs to fix the McNeil division.
In the mean time, I have read that to be cautious, McNeil might have more recalls. I hope to one day, within this year, read a positive story about Johnson & Johnson’s operations. I also hope Ms. Bonnie Jacobs can say more to us than generic statements. consumers don't want to hear the company is “working on it” unless the statement reveals a plan.
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