Can Johnson & Johnson recover from $72 million talc dust-up?
Three decades ago, Johnson & Johnson (JNJ) wrote the playbook on damage control with its handling of the Tylenol poisonings. How times have changed.
Johnson & Johnson has been ordered to pay $72 million to the family of an Alabama woman who died from ovarian cancer, which she said was linked to her use of the company's baby powder and other talc products. Unlike its handling of the Tylenol-linked deaths in 1982, though, J&J isn't winning over many fans for its response or helping put fears to rest.
"It's a different company now," said Michael Gordon, the chief executive of Group Gordon, a corporate and crisis public relations company based in New York. "It's not your father's J&J."
Some consumers might be wishing for a throwback to the J&J of old. Its quick response to the Tylenol poisonings, which led to the deaths of seven people after a still-unknown person laced some bottles with cyanide, was credited with changing not only how over-the-counter medicine is sold but saving the company from taking a damaging blow to its brand. But so far, J&J's response has fallen far short of that ideal, Gordon notes.
"It's clear that they are doubling down on talc as part of their response strategy," Gordon added. "They are putting up a wall without an opportunity for any other side to the story, and their tone to me sounded angry at the victim, which is not a good long-term strategy."
Johnson & Johnson is taking to social media to promote the safety of talc, writing on Facebook that it "has no higher responsibility than the health and safety of you and your family."
While some consumers are expressing their support for the business, others are airing serious concerns and fears about baby powder and other talc-based products. One consumer noted, "I'm confused, after reading your "about" section. Your product caused someone to die but you say you're caring for the world one person at a time?" Others vowed to stop using the product and raised questions about whether J&J is valuing profits over human health.
Johnson & Johnson didn't immediately return a request for comment. Shares traded Friday at nearly $106, up slightly from the previous Monday, when the verdict was announced.
Questions about talc's safety are likely to linger, given that about 1,200 talc-related cases are still pending, according to Reuters.
At trial, attorneys for the family of the Alabama woman introduced into evidence a September 1997 internal memo from a Johnson & Johnson medical consultant suggesting that "anybody who denies (the) risks" between "hygenic" talc use and ovarian cancer will be publicly perceived in the same light as those who denied a link between smoking cigarettes and cancer: "denying the obvious in the face of all evidence to the contrary."
"The key in all of this is what happens over time," Gordon said. "There are two issues with a crisis: how do you deal with IT in the moment, and what is the long-term brand impact. If talc is proven to be unsafe, and J&J doubles down on it, that will have enormous impact on the brand."
That, in turn, may spill over into the investment sector, given damage to J&J's brand could lead to lower sales and profits if consumers lose faith in the business.
Johnson & Johnson doesn't break out sales of its baby powder and talc products, although its baby care, skin care and women's care units brought in a combined $1.6 billion in revenue last year, of which talc-based products are likely a small percentage. The units' $1.6 billion in sales represent about 2.2 percent of the company's total $70.1 billion in 2015 sales.
It may seem strange that a company would stake so much on what amounts to a tiny drop in its ocean of revenue, but Johnson & Johnson's baby powder remains an iconic product for the company. Many women grew up using baby powder, and many parents continue to dust their babies with it.
"Right now it's their way or the highway," Gordon said. "That could prove to be fatal long term if they're wrong."