Snow Brand’s Unethical Practices in Japan

Specific situation Description:-

Snow Brand Milk Products Co. Ltd. Was the largest dairy products manufacturer in Japan while its
subsidiary Snow Brand Food Co. was one of the largest meat processing and food products
manufacturers.
An outbreak of food poisoning can bring a food products company to the brink of disaster. The year
2000 spelt doom for Snow Brand, one of Japan’s premier dairy foods companies.
Since June 2000, Snow Brand had been facing many problems. The company’s problems started with
food poisoning caused by its contaminated milk products. Subsequently investigations conducted by the
government revealed many other alleged unethical practices inside the company. The company was also
accused of tampering with evidence and attempting to cover up its violation of Food Sanitation Laws in
Japan. Further, just when the food poisoning incident and issues surrounding it appeared to have died
down, in January 2002, it was revealed that the company had cheated the government to take advantage
of the subsidies given to receive the domestic beef industry. In 2002, Snow Brand Food Co. Ltd. ,
liquidated its subsidiary , due to irreparable damage caused by the unethical practices at Snow Brand
Food Co. Ltd.
The disaster: On June 27, 2000, a large number of people, especially in Western Japan, fell ill after
consuming milk or related products made by Snow Brand. It was later revealed that around 10,000
people had been affected by Snow Brand’s products. The problem was caused due to the presence of a
bacterium, Staphylococcus aureus, on the production line at the Osaka factory of the Snow Brand
Company. The bacterium was found in a valve which should have been cleaned regularly. Inspections
revealed that production facilities at the plant did not meet the established standards of hygiene.

The company’s response: The Snow Brand Milk Products Company did not address the concerns of the
public immediately. It gave the impression of being more worried about its reputation than about the
victims. Instead of voluntarily recalling its products, the company made an attempt to limit the extent of
product recall. The Osaka City Health Center issued a recall order for two products, and requested the
company to voluntarily recall other products. The company recalled the two products as ordered by the
city officials. The company agreed to recall the other products only after being pestered by city officials.
It also asked city officials not to announce the recall order publicly so as to give an impression that the
company was voluntarily recalling its products. The city officials did not accede to the request and
publicized both the recall order and the company’s request to the city officials not to announce the recall
order.
The company also tried to cover up the incident and did not provide full details regarding the nature of
the incident. Initially, Snow claimed that the valve which was found to be contaminated was used very
rarely. On further inquiry, it was learnt that the valve was used almost every day. Company officials
also claimed that the area of contamination was small, that is, about the size of a small coin; but
investigations revealed that the contaminated area was larger than what the company claimed it to be.
The situation deteriorated further because the company’s top management also was not completely
informed about the incident.
The overall impression caused by this incident was that Snow Brand Company was bothered only about
its reputation, not about its affected customers.

Consequences: As a consequence of this incident, the company was forced to close five of its factories
– including the one where the contamination was detected. This incident also resulted in erosion of the
consumer’s confidence. Snow Brand reported a consolidated loss of 52.9 billion yens (about $ 430
million) for the year ending March 2001.
Prior to this incident, Snow Brand had a market share of about 45%. This unfortunate incident and the
poor way in which the company handled it led to a steep fall in the company’s market share.