Is reputation worth anything? Canadian ag is getting the chance to find out

Warren Buffett said that it takes 20 years to build a reputation, and only five minutes to lose it.

We might have just gone one through one excruciating five minute period and be entering another one.

The one we just went through is the XL Foods disaster, which has had short term and might have profound long term consequences for prairie cattle farmers. The e. coli outbreak isn’t the damaging bit of the disaster. Various foodborne illnesses hit us every year or two and as long as they’re handled well, there doesn’t seem to be lasting damage to the image or the value of the product involved. Lots of people over the years have gotten sick from broccoli, and no-one’s boycotting that or considering that veggie to be generally unhealthy.

The most damaging part of the XL fiasco was the awful way it was handled by the company, which didn’t communicate much at all with the Canadian public throughout much of this ongoing situation. There was nothing much for a long time communicated by the company, then scant reassurances. Little attempt was made to convince the public from the start that the company took the situation extremely seriously, cared deeply about the consumer’s health, and was committed to fixing the problems and ensuring they never happened again. That’s the kind of thing the public wants to hear. (That may indeed have been how the company felt, but it didn’t do much to communicate it, if it was the case.) That’s the sort of stuff Maple Leaf Foods immediately did when it had its listeria crisis a few years ago, and it seemed to work. Having Michael McCain put himself in front of the cameras and the entire population of Canada to take responsibility for the problems does a lot to make ordinary people think you’re taking things seriously. Certainly, shoppers like me still buy Maple Leaf products for our kids. Here’s something that’s in my fridge right now:

The operators of XL, for whatever reason, chose to circle the wagons and not engage the public, and the impact of that will affect how people view beef and cattle producers for a long time to come. People remember situations like this one. That isn’t unimportant. People not only eat beef because it tastes good, but also because it is (usually) seen as safe, healthy, and produced by nice rustic farmerfolk. That positive reputation of Canadian beef adds value to it. So it’s worth money.

I thought the Canadian Cattlemen’s Association did a good job of speaking up for the industry, so that probably mitigates some of the damage. When a number of CCA reps appeared on CBC’s The Current, they were excellent and likeable, so kudos to them for being willing to put themselves up front to face the national scrutiny.

But lost reputation isn’t easily regained, and how much damage has been done to the Canadian beef brand remains to be seen. One thing’s for sure, for at least the medium term, the industry won’t be able to simply say “Canadian beef” and assume the consumer immediately thinks “safe, healthy and good for my family.” That reputation needs to be re-earned, which could take quite some time.

The next five minutes of reputation-loss we could possibly go through could be with our reputation for having the world’s best grain quality and consistency. We haven’t yet damaged that reputation and might not hurt it at all. But it’s unclear what the impact of the unravelling of the CWB system and the changes to the Canadian Grain Commission will mean to the quality and consistency of the grain coming out of the end of the pipeline that leads to our premium markets. (I know I’ve blogged about this before, but it’s an important issue.)

Last week I met with the managing director of the Japanese grain millers association, and he was worried about Canadian grain losing its excellent quality and consistency – something his nation’s high-paying millers value greatly. He told me that Australian grain quality and consistency had declined markedly since the ending of the Australian Wheat Board export monopoly, and that this was a problem for Japanese millers. What particularly bothered him was that there was no-one he could directly turn to to address problems now that control of Australian grains has been diffused to many grain companies, exporters and marketers. Who’s going to address a general problem?

I don’t have a clue whether the same thing will happen in Canada. Hopefully we’ll learn from the Aussie mistakes and do things differently. Certainly, corporate grain types here in Winnipeg I’ve spoken to understand the premium value of Canadian grain due to our sterling reputation for quality and consistency and they definitely don’t want to lose that. But they simply might not have the power to ensure quality and consistency are kept as high as previously. The CWB controlled all the export wheat and durum, so it could go wherever it needed to get the right stuff and blend it up so that it hit the specs perfectly. No one company today has that kind of pull. And how the CGC changes will affect the situation, that’s another wild card. Hopefully that’s been well thought out too.

But right now we have a wonderful reputation with our export grains, one built up over decades of diligence, and it’d be a tragedy to see that lost. Five minutes of ignominy could blow a lot of good will and the ability to demand premium prices. Reputation matters, and you get what you earn.

 

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