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CAPSUGEL & TYLENOL: CRISIS - MANAGEMENT CHECK LIST & TRUE LEADERSHIP

Actualizado: 19 de mar de 2019






CAPSUGEL & TYLENOL: CRISIS - MANAGEMENT CHECK LIST & TRUE LEADERSHIP

No matter we’re talking about a business man, a football trainer or a teacher; the thing they have in common is that they are leaders.

But at what level of leadership are they, how do they treat their employees, what do they think about results, deadlines and so on?

Every leader operates at his own level and I had the fortune to meet three great leaders in the Pharmaceutical Industry they are:

Charles Hoover

Randy Dennin

Angel Mendoza Benavides



In 1983 I had the opportunity to collaborate with Capsugel, a manufacturer of hard empty gelatine capsules for the pharmaceutical industry.

Capsugel was a division of the very famous Warner Lambert pharmaceutical company with presence in the United States, Mexico and Brazil.



What are empty gelatine capsules for? Its function serves to mask the taste of medicines, to be easily passed through the larynx but above all, for the dosage of drugs in the stomach.

The main benefit that many users get from buying empty capsules is the ability to customize their supplement regimens. This means mixing particular herbal formulas, for example, that are not available in retail form.


Capsugel was founded in 1931 in Detroit, Michigan as Division of Parke - Davis after Arthur Colton designed a machine which simultaneously manufactured the body and caps of a hard gelatin capsule, and fit them together.

In 1970, Parke-Davis, including Capsugel, was acquired by Warner Lambert, which was acquired by Pfizer in 2000.

On 1 August 2011, Pfizer sold Capsugel to global investment firm Kohlberg Kravis Roberts for $2.38 billion.

In July 2017, the Lonza Group completed the acquisition of Capsugel for $5.5 billion from Kohlberg Kravis Roberts.



In the 80's I met great leaders who made Capsugel a successful and growing company; come to my mind Charles Hoover, Randy Dennin and Angel Mendoza Benavides.

I am sure that Capsugel was at that time a marketing company, since positioning the empty gelatin capsules between the large laboratories until to compete against substitute products such as pills and pellets, however, this trio of champions (Charles Hoover, Randy Dennin and Angel Mendoza Benavides) did it.


Undoubtedly, Capsugel was able to position its value proposition among the big manufacturers of medicines, proposals that were "BETTER CAPSULES FOR BETTER MEDICINES"


But not everything was easy in the life of Capsugel, since the shadow of the loss of prestige touched his door one day


CAPSUGEL CRISIS-MANAGEMENT CHECKLIST


The famous journalist and Mexican columnist Javier Collado wrote on May 24, 2017, a review in one important and reputable business newspapers in Mexico (El Economista), about the crises that Johnson & Johnson suffered in 1982, a crisis that affected to one of its most important suppliers: CAPSUGEL.


Below is a summary of the same article that can be read in the following link:

https://www.eleconomista.es/empresas-finanzas/noticias/8382435/05/17/La-crisis-del-Tylenol-las-pastillas-de-cianuro-que-no-lograron-matar-a-Johnson-Johnson.html



It was September 30, 1982, and Mary Kellerman, a 12-year-old girl, became a pill for a cold. Thus began a reputation crisis that caused losses to Johnson & Johnson (J & J) of tens of millions of dollars.

Mary Kellerman was the first of seven people who died in Chicago in just one week for consuming what was apparently just a pain pill, Tylenol Extra Strong, a product marketed by a subsidiary of J & J.


The tablets in question contained cyanide. Someone had managed to add the poison at some stage of the drug's development.


The effect on the markets was immediate.

The company was quoting at historic highs, exceeding $ 47 per share. The same September 30, after announcing the first deaths, fell to 43.13 dollars.

His minimum for the incident was marked on October 5, with $ 39 per title.

The company did not recover a closing above the 47 dollars until two months later, on December 7.


Tylenol was at that time the national leader of pain medication that did not need a prescription. It covered 37% of the US market to mitigate the pain - 10% of the total of medicines without prescription -, generating annual sales of about 500 million dollars. The Extrafuerte variety, which was contaminated with cyanide by an assassin that has not been discovered 35 years later, accounted for 20% of the total sales of the drug.



However, the company faced the crisis with promptness and intelligence.


1) On the one hand, it canceled the broadcast of the television commercials of the product as soon as the first reports of the deadly poisoning were published.


2) On the other, he offered $ 100,000 in reward to those who provided information to arrest and prosecute the "person or persons responsible for the murders."



3) But the main thing was the withdrawal of 31 million containers - 1.550 million life-threatening capsules - from the 34 states in which it had been distributed, which cost the company 100 million dollars. It reimbursed the money to stores that had purchased the product, while consumers who returned the drug to the company received coupons to receive the drug in the form of a tablet. In fact, J & J started an advertising campaign printing discount coupons in various newspapers for the acquisition of medicine. Finally, they kept the name of the brand but redesigned the package, adding security measures to hinder its handling.


Good work paid off. Shortly after the October tragedy, Tylenol's market share had gone from 37% to 24%. In mid-December it was estimated that it was already over 30% again.


The estimates for the net operating profit for the fourth quarter were a fall of 13% that finally materialized in 10.5%. A new advertising campaign in 1983 gave the impulse to the brand to recover its preponderant position in the market.


The Next Case was published in "The Vest - Pocket CEO" by Alexander Hiam


APPLICATIONS

• Responding to a crisis.

• Evaluating and improving current crisis-management plans.





PROCEDURES

1. Develop a list of possible crises that could affect your business and industry.