Rotten Fruit, Black Crud And The End Of Odwalla

The Odwalla E. coli outbreak of 1996 continues to spur talk of new regulatory reforms, tougher industry standards, and increased food-safety expenditures by government.

But as a recent New York Times investigation shows, the more immediate combination of intense public scrutiny, natural market forces and legal action can be a powerful tool for consumer protection. The newspaper reported that Odwalla ignored basic safety precautions and dismissed the concerns of inspectors during a go-go period of rapid expansion. The result was permanent health damage to 14 children (including some from the Seattle area) and one girl's life.

Now it is costing Odwalla.

The company's stock price has plunged more than 20 points in the last two years. Sales and profits have yet to recover. Recall-related costs totaled $6.5 million in fiscal 1997. Half a dozen lawsuits are pending; five others have been settled; nearly 600 other claims for damages were handled by Odwalla's insurance carrier. In early 1997, a federal grand jury investigation was begun. The reputation of the once-hip juice-maker is in tatters.

Company documents obtained by the New York Times show a pattern of disregard for safety standards. As far back as 1993, the fledgling company was grappling with high readings of bacteria, yeast and mold at a key California plant. One contractor's memo warned of citrus-processing equipment that was breeding bacteria in "black rotten crud." When a quality-assurance manager hired from the Florida juice industry argued that the company should use a chlorine rinse to protect against bad fruit, he was overruled because another manager feared it would leave an "aftertaste."

The federal grand jury investigation uncovered a new account of events that may have led directly to the fall 1996 poisoning of some 70 Odwalla consumers throughout the West. According to documents and interviews by the newspaper, production officials ignored the objections of a quality-control inspector who spotted apple bins that had "high decay" in early October 1996. One apple she cut open had a worm in it. Her suggestions to take extra steps to weed out bad fruit were overridden. Health inspectors have determined that the batch of juice made that fateful day was responsible for the E. coli outbreak.

The lesson for food companies big and small, established and up-and-coming, is simple: Cutting corners is deadly business. Rotten practices inevitably bear rotten fruit.

No matter what new safety techniques or laws Odwalla now champions, it will forever be known as the careless producer of poisoned fruit juice.