Two Damaged Brands Revisited
More than a year ago, I wrote a column about two damaged brands. One damaged brand was the “Made in China” brand and the other was the well respected financial brand of Wall Street. At that time China was dealing with the fact that pet food produced in China was killing pets all over the world and that toys produced in China had extremely unsafe levels of lead. Also at that time Wall Street was beginning to deal with the meltdown of the mortgage backed securities market.
This column immediately came to mind last week. In the same week that the $700 billion bail out was being discussed in Washington, China was basically shutting down its’ dairy business due to criminal negligence and bribery. More than 50,000 Chinese infants have been stricken with life threatening kidney ailments due to the addition of melamine to most baby formula and milk products. There are two things that are similar to both these crises. First, the dairy industry in China and the mortgage backed securities market in the U.S. were woefully under regulated. Second, those in power made firm assurances that changes would be made and that consumers and investors did not have to worry, that the worst was over. Lack of oversight combined with outright fraud in both cases now results in two brands that will need years to resurrect themselves. They both made me think of the man standing in the alley opening up his overcoat to reveal stolen merchandise said: “Want to buy a watch?”. All three have about the same level of trust and standing behind one’s product.
The similarities of these two situations are striking. It is now becoming clear that a number of Wall Street executives knew that the mortgage backed securities market was heading for trouble, yet they continued to gamble and get rich, assuming that others would pay, in this case the taxpayers. It is now also clear that milk companies in China willfully poisoned their products to pump up profits and that government authorities at various levels knew of the contamination of milk products months before anything was done.
We do not yet know whether the national leaders of China knew about the milk contamination well before the Olympics and made the decision to keep it quiet so that it would not take the focus off the incredible pageantry that was the 2008 Beijing Olympics. It is beginning to appear as though that might be the case. Given that it is the law in China that parents can only have one child, the outrage that is exploding across the country is understandable. Following on the revelation of shoddy construction of many of China’s new schools in the aftermath the earthquake the government of China faces the volatile and unrelenting anger of millions of parents. Chinese milk will soon become a punch line for jokes and will be a phrase used to describe greed, dangerous products and total lack of trust in a brand.
The image of Wall Street and the products they create will also suffer from incredibly low respect and trust. Millions of retirees and tens of millions of baby boomers are now looking at what is left of life savings with a mix of fear, anger, embarrassment and outright rage. For lack of a better target, the high flying executives on Wall Street, the institutions they run, and the culture of greed they inhabit will be the recipients of a world’s anger and resentment. I predict that it will be a decade before Wall Street will be looked at with respect.
In the global economy and the new global economic reorganization that is about to occur, a brand cannot survive without trust. Hundreds of millions of people around the world no longer have any trust in Chinese milk or in investment instruments created by Wall Street. Without trust, institutions cannot survive. Short term greed has produced long term damage to both of these brands. There is great opportunity for other milk producers to supplant the Chinese and for other types of financial institutions to replace the new fangled investment products of Wall Street. Dairy farmers around the world and local banks and financial planners rejoice, this is your time.