On 3 October 2003, the country’s biggest festival, Diwali, was just around the corner. Traditionally seen as the time when the sale of chocolate peaks, that year the excitement at Cadbury, the half-a-century-old British chocolate maker with over 70 per cent market share in India, was palpable. That year, sales during the festival of Rakhi had been much better than usual and Diwali was a much bigger festival. Then, at 2.30 p.m., the phone rang at the Cadbury India headquarters and changed everything.

Cadbury has been synonymous with chocolate in India, having begun operations in the country in 1947, the year the country gained independence. It has become a major player in what is known as the ‘impulse foods’ category, garnering up to Rs 700 crore in turnover. The brand also had a remarkably positive brand image – Cadbury had been billed as one of India’s best-managed companies and among the best places in which to work in India by the pink papers in 2003. Despite a global slowdown in the FMCG sector at the time, there was great potential for fast growth in a developing economy like India, and Cadbury had seen a 15.1 per cent cumulative growth in the third quarter alone in 2003.

While it was confident about its place in the market, according to the company, its risks were tied to the environment or nature. The raw materials it used depended on how the monsoon fared in the country, and with a sizeable amount of the major ingredient, cocoa beans, being imported, it was also exposed to fluctuating exchange rates of foreign currency. In early 2003, as public shareholding of the company dropped below 10 per cent, the company moved to delist its stock from the stock exchange, which meant it no longer had to open up its books to financial institutions or to the media, nor did it have to speak to them openly about matters that impacted its stock price. At this time, the company was receiving up to 50 product-related complaints every month and some of them were related to infestation. However, this is something all companies dealing with edible products and storage issues have to contend with, and Cadbury had a consumer grievance cell to address such complaints.

It was in this context that a CNBC-TV18 correspondent contacted the company on 3 October 2003. The journalist had heard about some infestation complaints that had been lodged with the FDA and sought to clarify the story. It turned out that two bars of Cadbury Dairy Milk chocolate had been infested at a shop in north-west Mumbai and a consumer had complained to the FDA at the behest of a prominent retailer, who happened to be a part of a retailers’ association pushing for higher discount margins during the festive season. In response, the then FDA commissioner Uttam Khobragade called for an enquiry.

The media enquiry caught the company completely off-guard and the internal reaction in the company was that this was probably a stray incident that would die down. But they couldn’t have been more wrong. The next day, the news that there were worms in the company’s chocolates was splashed across national dailies. What made it worse was that TV cameras had captured footage of worms crawling out of chocolates from across the country – from Thiruvananthapuram to Chandigarh to Nagpur – much to the consumers’ horror.

In response, the company issued a press release saying that it affirmed that its products were of the highest quality when they left the factory. The release also added that while chocolates are susceptible to infestation if stored near grains or in unhygienic conditions, retailers are provided with proper storage equipment to combat this, and that every pack carries storage instructions. The live images had, however, done major damage and this was compounded by the fact that the FDA had ordered the seizure of Dairy Milk chocolates across the state of Maharashtra once the case was brought to its notice.

In the following weeks, the coverage snowballed into a thousand adverse press clippings and 120 news clips in 10 languages. The worms-in-chocolate topic soon became a part of SMS jokes, cartoons and TV tickers. Cadbury was taken by surprise, with the FDA reporting its findings directly to the media before alerting the company. The FDA authorities visited the Cadbury factory in Talegaon, a storage depot and a few re-distributors and impounded the stocks. For two days after this, FDA Commissioner Khobragade refused to meet the Cadbury team though the FDA continued to brief the media. When the team finally met him, they were informed that the lab reports would be made available in two days, but yet again the media was given access to the report before Cadbury got it, leading to the belief among Cadbury management that they were perhaps being subjected to some kind of a witch-hunt.

Thereafter, the Cadbury officials met the FDA for damage control. The minister in charge of the FDA reported that he had visited the Cadbury factory in Thane and found that the hygiene conditions were more than satisfactory, making it impossible for infestation to have occurred there. That would have been the end of the issue, but at this time fresh reports of worm infestation surfaced in Nagpur. Khobragade alleged that Cadbury was applying political pressure on him to go easy on them and, by the very next day, the minister changed his position, saying that it was not enough to maintain hygienic conditions during manufacturing alone and manufacturers should also accept responsibility for the storage of products at the retail level as well.

It is important to remember that, at this point, Cadbury Dairy Milk was the company’s flagship brand, contributing about 30 per cent to its Rs 687.30 crore turnover. Within a week, the sales volume of Cadbury products crashed by 30 per cent and given that this was a boom time for the festive gifting of sweets and chocolates, it was an unmitigated disaster. A survey conducted among 200 consumers in seven cities showed that consumers did not want to take a risk by buying Cadbury chocolates – 69 per cent did not want their kids to buy it, and 58 per cent would not buy it for their kids.

Soon, the issue turned political. On 16 October 2003, the local members of the Bharatiya Janata Party (BJP) threw ink at the office walls of Cadbury’s Mumbai headquarters screaming anti-MNC, anti-Cadbury and – somewhat incongruously, given that the brand was British – anti-American slogans. Given all this heat, retailers began to dissociate themselves from the brand and stopped stocking it or displaying any point of purchase material.

In the first 10 days after the crisis hit, Cadbury was reduced to being a sitting duck, simply reacting to reports from the FDA or the media. First, the company’s incident management team met to assess the next steps. Ogilvy PR, their public relations firm, was called in and a media cell was set up to handle the barrage of questions. As mentioned earlier, the first statement issued at 7 p.m. on the day the crisis hit had clarified that ‘in spite of every care being taken at the manufacturing stage, chocolate is a food product that requires specific care and attention in storage. Additionally, every Cadbury product label mentions the care instruction “Store in a cool, hygienic and dry place”. However, chocolates are susceptible to infestation if they are stored near grain and cereals or in unhygienic conditions.’ It was a defensive move, and designed to absolve the company of blame before the actual firefighting commenced.

Then the top brass rolled up their sleeves and got to work at real damage repair. The then managing director of Cadbury, Bharat Puri, met media houses individually to address queries and explain the company’s position. Consumer outreach also began with this measure, the aim being to reassure consumers across the country that the infestation was a storage problem, that Cadbury chocolates were safe to eat and consumers must be as careful when buying chocolates as they would with any other food item. But by then the media, regulators and political parties had managed to create the impression that each and every bar of Cadbury chocolate was infested.

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