The Great Debate UK
What the horsemeat scandal tells us about risk
By Kathleen Brooks. The Opinions expressed are her own.
The developing horse meat furore is a keen reminder how companies need to always be on the lookout for the next big scandal that could rock their business. Take Findus, the frozen food company. It’s 100% beef lasagne, it turned out, was 100% beef free. The company who owns Findus –private equity firm Lion Capital – spent GBP 1.1 billion acquiring the firm in 2008.
The numbers may have added up when Lion did its analysis prior to the sale, but in hindsight it would have been more expedient to check the supply chain and ensure that Findus did what it said it did on the pack. The Findus brand has been in financial trouble for some time, including breaching debt covenant deals last year. However, through a complicated debt-to-equity deal with some of its lenders, Lion managed to hold onto the business. Maybe the effort wasn’t worth it. Lion will have to fight hard to dissociate its image form dodgy processed food companies flogging horse meat dressed up as beef to the unsuspecting consumer.
It’s not just a company’s products that can negatively impact a brand. Take sports companies and sponsorship deals. Nike only dumped Lance Armstrong once it had been proven beyond doubt that he used performance-enhancing drugs to win on the global cycling circuit. They had not only paid him millions of dollars over the years, but they lauded his image (and the charity that he founded) as an example of succeeding in the face of adversity.
Nike also had a problem with Tiger Woods. When news of rampant infidelity threatened to topple the world’s most iconic golfer, Nike must have held its breath. As his performance on the golf course tumbled and he took time out, the relationship between Nike and Tiger was stretched to its limit.
