Experts: Despite ‘dark cloud,’ there’s a way forward for Blue Bell

For Blue Bell Creameries, the past four months have been a nightmare.

After federal officials linked Blue Bell’s products to a listeria outbreak that sickened at least 10 people and led to three deaths, the Brenham-based company has faced turmoil unlike anything else in its 108-year history. A complete recall of all its products and a total shutdown of all production. Thousands of workers laid off or furloughed. Losses estimated in the hundreds of millions of dollars. Devastating damage to the long-proud brand’s reputation.

As Blue Bell prepares to return its products to store shelves at the end of the month, the company faces what some experts say could be the toughest part of its road back — trying to win back consumers’ trust and proving its products are safe.

How well Blue Bell is able to do that, industry experts say, will determine if the company is able to reclaim its place as a leader in the ice cream industry – or if it will re-emerge as only a shadow of its former self.

“They have a long road yet to travel,” said Larry Keener, CEO and president of Seattle-based International Product Safety Consultants. “It will be a road of scrutiny like they have never seen before.”

‘Retracing our steps’

By now, the tale of Blue Bell’s fall from grace is well-known. On April 20, Blue Bell issued a complete recall of its ice cream goods — triggering the return of 8 million gallons of ice cream — after federal officials linked 10 cases of listeriosis, including three deaths, to its products. Listeriosis is a life-threatening infection caused by eating food contaminated with the bacteria Listeria monocytogenes, according to the U.S. Centers for Disease Control and Prevention.

In May, the Food and Drug Administration released documents showing that the company was aware that listeria bacteria had been found 17 times at the company’s Broken Arrow, Okla., production facility between 2013 and 2015 – but that Blue Bell didn’t tell the FDA about those tests until earlier this year.

Blue Bell shut down production at all three of its plants, and later in May said it was laying off 1,450 employees and furloughing 1,400 others.

For Blue Bell to have a successful future, food industry experts say, it must be able to convince consumers that it has fixed the problems that led to the listeria outbreak

Blue Bell says it has spent the past several months working to do just that.

At each of its production facilities – which are at its Brenham headquarters, in Sylacauga, Ala., and in Broken Arrow — Blue Bell has made repairs and conducted “thorough” cleaning and sanitizing, including disassembling and steam cleaning the equipment, Blue Bell spokeswoman Jenny Van Dorf said.

Blue Bell has also worked with a team of microbiologists to revise cleaning and sanitization procedures to eliminate possible contamination pathways, including redesigning work spaces and established protocols for environmental and product sample testing, she said. The company has also boosted employee training in microbiology along with detailed cleaning and sanitization methods, she said.

Blue Bell resumed production at its Alabama plant, and said last week that it will resume limited distribution in the Brenham, Houston and Austin areas, as well as the Alabama cities of Birmingham and Montgomery. Wider distribution will follow in tiered stages, Van Dorf said.

“We are retracing our steps, much like how we started in 1907. A slow and steady growth,” Van Dorf said. “Once we can properly service that first phase, we’ll look at entering the next.”’

Keener estimates Blue Bell has spent tens of millions of dollars to investigate the source of the outbreak and make subsequent fixes. As a result, the company “is able to put nice spin on their improvements that they have made,” Keener said.

“I think they get it now,” Keener said. “They are going to have to take every strident measure to make sure the products they put into the marketplace are safe for human consumption.”

The question is, can Blue Bell make that message resonate with consumers?

Most likely it can, Keener and other experts say.

‘Strong, strong following’

Despite its problems, Blue Bell has built up such strong fan base over the years that many consumers – particularly in Texas — are going to return to its products as soon as they are available, industry experts say.

That bodes well for the company’s future, Keener said.

“I think that they’re leveraging the equity that remains in the brand,” Keener said. “They are telling people the story that they are not focusing on the past, they are focusing on the future.”

Terry Hemeyer, who teaches crisis management at Rice University and the University of Texas, said Blue Bell also got some crucial help when Fort Worth billionaire businessman Sid Bass agreed to invest in the company. The company hasn’t said how much Bass invested, but The Wall Street Journal reported Bass loaned Blue Bell as much as $125 million for up to a one-third stake in the company. That gave the company a badly needed lifeline, experts say.

Hemeyer – who said Blue Bell should “go very careful, be very diligent” with its relaunch – said that “if they didn’t have Mr. Bass, they would have had a bigger problem and not be able to go forward. He solved their uncertainty. And it took the threat of a takeover away.”

Blue Bell’s hopes for success will initially be reliant on its biggest fans and on long-term vending partners such as the San Antonio-based H-E-B grocery chain, said Dwight Hill, a Dallas-based partner with retail consulting firm McMillan Doolittle.

“They certainly have a segment of loyalists that are going to follow them to the end and excited to see them back and lining up at the refrigerated section at their local H-E-B,” Hill said.

Round Rock resident Nancy Martin, 69, who said she has been snacking on Blue Bell products for 35 to 40 years, is one of those committed fans.

“There is no other ice cream but Blue Bell,” Martin said. “I am just a firm believer that they have cleaned up their act and taking it very seriously, and I think it’s going to be fine. I will be in line.”

However, Hill said Blue Bell faces a long road to win back other customers who have moved on

“I have to think they have lost a significant percentage of customers who have shifted to other brands,” he said.

Those customers could include hospitals and school districts, which might wait six months to a year to once again buy the product.

“My guess is that the hit will be in the niche players, the hospitals, schools,” Hill said. “They may well have found another supplier. And schools and other entities that buy it may not want to take the risk, at least immediately.”

There are examples of that around Central Texas, such as Dell Diamond in Round Rock, where officials dropped Blue Bell for the remainder of the baseball season. The park will decide in the off-season whether to sell it next year, a spokeswoman said.

The Eanes school district, which previously used Blue Bell products, will – at least in the short term — be offering students Ben & Jerry’s and other frozen options, district spokeswoman Claudia McWhorter said.

“We will not be offering Blue Bell at the elementary schools for the foreseeable future,” she said. “We may begin offering Blue Bell products at the secondary schools, depending on the products and sizes that become available.”

And losing customers like that – combined with the lost revenue and costs of repairs and cleanup – is why Blue Bell finds itself with a difficult hill to climb, experts say.

‘Still a dark cloud’

Along with the damage to the company’s reputation, there’s no getting around the financial toll the listeria scandal and production shutdown has taken on Blue Bell.

Privately held Blue Bell doesn’t release financial data, but industry experts estimate the company had revenue of $680 million in 2014. Analyst Chris Pisarski for New York-based PrivCo, which researches privately held companies, said Blue Bell’s revenue could dip as low as $500 million this year. Hill, meanwhile, projects that the numbers are even worse, with revenue dropping as low as $340 million.

“They lost almost half the year, and it was the worst time of year,” Hill said. And while “there will be a rebound, I fear it will be a slow one.”

So even as the company is struggling to win back customers, it will be faced with tighter margins as a result of larger food safety teams and processes, Hemeyer said.

Put it all together, Keener said, and he projects it will be at least two to five years before Blue Bell has really recovered.

There is, however, hope ahead for Blue Bell, Keener said. He compares Blue Bell today to the 1996 E. coli case that struck California juice company Odwalla Inc. The outbreak left one young girl dead and 66 others ill.

It took about three years for Odwalla to return to pre-outbreak levels, but “they were able to bounce back,” Keener said.

“And it seems like Blue Bell is taking a page out of their playbook,” Keener said. “There is still a dark cloud. But can they come back? I think so.”

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