Crisis Management At Carrefour

(China Business via  Thirteen days of crisis at Carrefour.  April 26, 2008.

For the Pudong (Shanghai) Carrefour worker Zhang Xiaowei, the experience has been an unprecedented test.  The number of patrons at his counter dropped drastically this past weekend.  The pressure and trial were not just economic, but it was also psychologically demoralizing for him.

As an ordinary worker, Zhang is just as befogged as the outside world about what has happened or will be happening inside the company.  The company has asked the workers to act in a restrained manner and his immediate supervisor has warned him that he should pay attention to his personal safety (such as removing after work anything that indicates that he works for Carrefour).

This temporary confusion was not limited to Carrefour workers.  For the outside world, everything started on April 10, 2008 with a post by a netizen named "Shui Ying."  The post was titled "Boycott French goods, let us start with Carrefour" and was initially posted to the MOP forum.  On April 16, 2008, Carrefour made its first public statement, one whole week later.  This sort of indifference and nonchalance looked like arrogance and may have made some netizens even more determined to carry out the boycott.  Thus, they used different methods to call for others to join, "If we all don't go to Carrefour, then Carrefour will seriously recognize the strenght of the Chinese consumers."

For the next week, Carrefour began to employ various remedial measures.  On April 22, the Ministry of Commerce person stated during a media interview: "Recently, the French government and companies have done a number of things that are useful to improving and maintaining bilateral relations.  Carrefour and other companies have stated publicly that they oppose Tibet independence and support the Beijing Olympics.  We welcome these actions."

An industry insider pointed out incisively that this slow style of management had caused Carrefour to miss the moments that were best to impede the momentum in the affair.

As a public relations worker at Carrefour headquarters, Li Kuan (note: the name has been changed for publication) learned about the boycott against the company somewhat belatedly.  On April 11, he went to work as usual and sensed an abnormal atmosphere.  A colleague gave him a short briefing.  With his professional acumen, Li Kun sensed that this was no ordinary event.

After quickly looking up the earliest Internet posts, Li Kuan got worried.  "Although Carrefour was not the initial target, this affair occurred under very special circumstances ..."  But Carrefour headquarters did not give a clear explanation of the situation and its potential actions.  This point was confirmed from another public relations worker at a Carrefour branch office.  The branch office found out about this affair only on April 13, and they thought that April 13 was the first day when the Internet posts and mobile phone SMS went out for the Carrefour boycott.  Thus, they were two days behind the headquarters in terms of awareness about the situation.

It is not known what emergency meetings were held at Carrefour headquarters over those two days.  But the slowness of communication was surprising.  From April 14 on, the media began to descend on Carrefour.  According to inside information, Carrefour did not have a consistent message when the media showed up.  "The headquarters did not tell the various local public relations people what to say or respond.  Everything was based upon their own careful handling by virtue of professional experience and guesswork!"

To the outside world, the slowness of the response was against the first rule in crisis management.  Carrefour did not make a quick evaluation of the situation in the first instance and it did not attempt to control the situation.  According to people who understand how Carrefour works, this speed is consistent with the normal way by which Carrefour handles crises.  The senior managers at Carrefour have a unwritten rule: Silence is golden.  In many of the previous public crises, it was very rare to see senior managers coming out to clarify or explain.

Carrefour has been expanding in the China market, and crises have been occurring continuously.  "The Chongqing Carrefour stampede," "Bacterial counts in mineral water violated standards" ... In each crisis, the response by Carrefour was half a beat too slow.  At the Carrefour boycott by the Shanghai Seed and Nut Roasters Association, the reporters recalled that it took more than a week for Carrefour to issue a simple written opinion to the media.

While Carrefour was still mulling over the affair, things were happening on the outside.  On April 13, the boycott became reality.  In the plaza outside the Baishiqiao (Beijing) Carrefour store, netizen KittyShelley showed up with a national flag and a placard to describe what happened to the Olympic torch in Paris.

While nobody was sure how many more KittyShelley's will show up, it was enough to draw public attention.  On April 15, Southern Metropolis Daily published the article <Netizens call for boycott, Carrefour claims innocence> (see the translation at Kitty Shelley versus France).  That was when Carrefour made its first public statement.  The article pointed out that the Southern China Carrefour public relations person said that the netizens provided inaccurate information because Carrefour has never donated any money to the Dalai Lama and it cannot possibly support Tibet independence.  With respect to the story of the Carrefour shareholder making the donation to Dalai Lamal, Carrefour offered its first version of explanation: "LVMH had previously purchased some Carrefour shares.  But Carrefour is not a subsidiary of LVMH.  An owner of LVMH had provided financial support to the Dalai Lama, but this does not mean that Carrefour participated."

At the same time, Carrefour's Greater China spokesperson Dai Wei said during an interview with The Wall Street Journal that she does not understand why a boycott should be targeting Carrefour.  She said that Carrefour is a foreign company doing business in China.  "We don't want to be involved in politics or sports.  We run a legitimate business in China and we pay attention to what Chinese consumers need.  We will try our best to act responsibly towards them."

Based upon the situation at the time, Carrefour lacked coordination and organization in their response.  Dai Wei's statement represents the consistent style of crisis management at Carrefour -- "passive response and letting the facts speak for themselves."  To the netizens, this appeared as haughty arrogance and they swore to "fight to their deaths."

Carrefour began to feel really nervous on April 15.  On this day, faced with questions from all sides, Carrefour finally realized the seriousness of the situation.  They had to come out and make a statement.  On that evening, Carrefour posted a statement on the official China website of Carrefour.  In this statement, Carrefour wanted to communicate two core messages.  The first message was that the rumor that Carrefour supported certain illegal political organizations was completely fabricated and without any basis.  The second message was that the Carrefour group has supported and will support the 2008 Beijing Olympics.

The content of the statement is very active.  But the statement contradicted what Dai Wei said earlier in the day.  For example, Dai Wei said that the company "did not want to be involved in politics or sports" but the company statement emphasized that Carrefour supports the Beijing Olympics.  In the eyes of the boycotters, such contradictions showed that Carrefour was insincere.

During the crisis management, Carrefour clearly lacked a strong and unified voice.  This reporter was able to verify that the April 15 statement on the official Carrefour website was not even made known to the branch office PR workers until the next day.  "From noon on April 16, we began to distribute the statement to the media," said a PR person at a branch office.  "This statement was authorized by the Carrefour Group to Carrefour China.  The decision-making and handling of this affair were in the hands of the China headquarters from the beginning to the end.  Apart from translating some internal documents, the branch office PR persons for Carrefour played no part.  The principal duty of the local PR person is to deal with certain boycott incidents within their local areas."

Even so, the internal voices within Carrefour did not become unified.  On April 16 Carrefour Eastern China district Public Affairs General Manager Yu Jian was interviewed by print media.  The published report showed Yu to be impatient, emotional and helpless.  Yu also said that senior Carrefour managers have contacted the Ministry of Commerce and other government departments.  This emotional display was said to have created very negative results as it was inappropriate to put the Ministry of Commerce on front stage.  This episode was classified as an "accident" afterwards within Carrefour.  According to inside information, Yu had been responsible for public relations with government departments and he was inexperienced in dealing with the media.

This phenomenon of "multiple conflicting voices" did not arise just because of inter-departmental friction.  Carrefour headquarters says that it has now established a crisis management team.  People familiar with Carrefour said that part of the reason was due to organizational problems.  "Compared to the headquarters, the regional offices have nearly perfect systems.  They have clear division of labor but there is not much communication.  The regional headquarters wield a lot of power, with the authority to hire/fire 70% of their workers."

Apart from problems with the system, Carrefour insiders said that the lack of control by Carrefour headquarters was astonishing.  According to the analysis, this may be the result of senior personnel changes.  The information is that the person in charge of external affairs had submitted a resignation letter, and therefore the job of crisis management this time fell on someone else's shoulders.  When this exceptional crisis emerged, it was almost impossible to establish powerful communication channels inside the company between the headquarters and the regional offices in such a short time.

The statement that appeared on the official Carrefour website on the night of April 15 did not seem to have a strong healing effect.  Instead, it drew "a fatal attack."  At 2pm on April 17, someone found out that the Carrefour China home page carried a "Boycott Carrefour" slogan.  As of the morning of April 22, the website is no longer accessible with only a message "The Carrefour website is undergoing maintenance and updating in order to provide even better service."

The other regional stores were in limbo just like the website.  Over the past weekend, some stores were tested to different degrees.  In some places, more and more people gathered outside the store to "call for a boycott."  Carrefour asked its employees to act in a restrained manner.

Although Carrefour has emphasized that sales promotions were normal during store anniversaries, there are multiple versions about the sales promotion activities on May Day.  On April 19, an old man named Liu Yi came out of another supermarket on Nanping Street in Kunming city.  As he walked past Carrefour, some boycotting young men used him as a model example.  They raised his shopping bag high and said, "This elder is not buying at Carrefour!"  Quickly, the media wanted to interview him.  But Liu Yi felt angry at the distortion: "I did not go into Carrefour only because they did not have what I wanted to buy!"  But he could feel a strong rushing force that was carrying forth many citizens who did not understand what is going on.

According to a Carrefour senior manager, the degree of boycott differed by region: "The protests in Guangzhou, Shanghai, Suzhou and other places were relatively reasonable."  In Shanghai, the visitor traffic was noticeably less but the business operation was normal.  Xiao Zhang is marketing red wine.  Apart from offering gifts, she said that she would exercise her authority to give free wine away to customs.  On Yenan Road in Hangzhou, 23-year-old Xiao Mei and her companion  produly said: "We won a second-order prize at Carrefour on the day before yesterday!"

According to information, various kinds of sales and marketing activities are continuing in various regions.  In certain regions where the boycott was especially emotional, those sales posters have been removed.  The Carrefour crisis management team seems to be moving in a new direction silently.  A regional PR person told the reporter: "The Carrefour Group chairman and the biggest shareholder have come out to clarify and express support for the Beijing Olympics.  As a company, we have done what we could.  This is no longer anything that a Carrefour department can do.  Therefore, we will not come back to clarify or respond anymore."

According to the a veteran PR person, Carrefour had done far more than what meets the eye with respect to crisis management here.  Carrefour PR policies tend to emphasize government relations.  Instead of worrying about lower sales at certain regional stores, Carrefour would rather spend more energy on government PR.  As long as the capital flow continues, they are more concerned about the government attitude and support, because this is the basic reason why Carrefour can stay in China over the long term.

On April 22, Xinhua interviewed the relevant person at the Ministry of Commerce with respect to the Carrefour affair.

The person in charge said: "Carrefour entered the China market in 1995.  95% of its products are manufactured in China.  We have noticed that the French government and companies have recently taken certain actions to improve and maintain bilateral relations.  Carrefour and some companies have stated that they oppose Tibet independence and they support the Beijing Olympics.  We welcome these statements."

Just before deadline for this article, Carrefour inside information has it that there is a big breakthrough with respect to government public relations.  The insider claimed that there will be significant actions shortly.  Carrefour has even reported internally that the government has barred the Carrefour boycott issue from the media.  No matter what happens, the worst thirteen days are over.  A Carrefour headquarters PR person said that Carrefour has a crisis management system in place to deal with any crisis.  But a crisis may be unexpected, such as this one.

Related Link:  Inside Carrefour's crisis management in China  Imagethief