After months, even years of putting your heart and soul into launching your business, how do you cope if disaster strikes at the last moment? Ugly Drinks founder Hugh Thomas shares his story.
20 Oct 2016
The bigger they are, the harder they fall. Large corporates are certainly no stranger to facing up to disaster – with past incidents ranging from the 2013 supermarket horse meat scandal to 2008’s banking collapse serving as a playbook for crisis management. Although reputations may not always emerge intact, these large players often have the capital needed to get themselves out of a sticky situation. But what happens when catastrophe hits before a company is even off the ground?
Ugly Drinks entered the soft drinks market in early 2016 with its pitch of a completely sugarless flavoured water. While not as headline-hitting as Samsung’s spontaneously-combusting Note 7 smartphones, Ugly was hit by a crisis that rocked the embryonic company before it had even fully launched.
In July 2015, just six weeks after producing its first batch of 40,000 bottles, and not long after bagging deals with Virgin Active and Selfridges, Ugly Drinks’ warehouse informed founders Hugh Thomas and Joe Benn that the drinks were starting to change colour.
The entire batch was pulled off the shelves and sent for testing. Bacteria had infected the product, and the company was forced to destroy everything. ‘It was like a light switch went on and off,’ Thomas recalls.
Prepare to be unprepared
A crisis can’t always be prevented; Thomas and his team had performed a shelf life test on the initial batch, which passed with no problems. Their manufacturer had been in the bottling business for more than 30 years, and seemed like a safe pair of hands. But when it came to bottling the product, a lower-than-ideal temperature created a safe haven for bacteria.
After receiving the call from their manufacturer, the two founders sat in a Pret with their heads in their hands as the project they’d been planning for years appeared to be in tatters. But they decided to confront it in as honest and transparent a way as they could, defiant they would emerge on the other side.
Crucially, they quickly tried to come up with a plan. ‘We held our hands up, were embarrassed but totally honest, and had a solution-focused response,’ says Thomas. ‘Joe especially did a great job of being upfront about it with our retail partners. The way we dealt with it gave us a lot of goodwill – retailers and investors were impressed, and we stayed on board with our sugarless mission.’
As a result, the company switched manufacturers and started working with a food scientist to perform quality control checks. The reboot also gave the team a chance to incorporate feedback from the small amount – around 4% of the initial batch – sold: ‘We learnt that people wanted a sparkling drink, and we switched over to cans,’ says Thomas.
Being at an early stage had some advantages. ‘For us, there was less impact from a reputation point of view, but we were more vulnerable from a cash perspective,’ Thomas explains. ‘Twelve months down the line, and brand impact would’ve been more severe.’ Despite insurance being in place, pursuing an R&D claim would have been costly and distracting when they needed to get their product back out to market. The company lost between £30,000 to £40,000, and the window to prove their concept was rapidly closing.
Ugly is now back on the path to growth. Its drinks can be found in Whole Foods, Planet Organic, and various independent businesses across the UK, but the incident still feels fresh. ‘We still have a framed picture of the old bottles on the wall to give us a sense of perspective with today’s problems,’ says Thomas.
Six major corporate blunders – and what happened next
1. Nestle, 1970s
What happened? The company was accused of exploiting mothers in developing countries by getting them to use Nestle milk formula instead of breastfeeding, sparking a boycott of its products.
The reaction Guidelines were drawn up for mothers about how and when to give baby formula, while marketing materials were revamped to avoid seeming too pushy.
Long-term impact The company now tries to project a more socially conscious image, increasing its number of fair trade products and banning unsustainable ingredients.
2. Coca-Cola, 2004
What happened? The launch of Dasani bottled water in the UK suffered multiple blows. Shortly after being unmasked as simply bottled tap water from the mains supply in Sidcup, Kent, it emerged that the company’s purification process had contaminated the water with bromate, a carcinogen.
The reaction Coca-Cola immediately pulled its entire UK stock in response to the discovery.
Long-term impact The soft drinks giant returned to the UK bottled water market with Glaceau Smartwater in 2015. In January 2016, the company announced that Smartwater had grown to £18.4m in value.
3. BP, 2010
What happened? An explosion caused BP oil to spill out into the Gulf of Mexico, devastating wildlife. The company made several unsuccessful attempts to plug the leak before finally doing so after 87 days.
The reaction Although initially pointing the finger at the owner of the rig, the company agreed to pay for all claims and the cost of the cleanup.
Long-term impact The financial cost was huge (more than $40bn was paid out), but while the disaster has tarnished BP’s public image, oil consumption isn’t about to slow down. BP remains a major player in the market.
4. Ogilvy, 2014
What happened? A leaked advertisement created for Kurl-On spring mattresses showed Malala Yousafzai being shot, before falling down onto the mattress and ‘bouncing back’ to life.
The reaction Ogilvy’s head office apologised to Yousafzai and her family for the baffling creation, and launched a new internal approval system to prevent future mishaps.
Long-term impact The ads were never put into official circulation, and the company was able to maintain its reputation as a creative powerhouse with a swift apology.
5. Volkswagen, 2015
What happened? The German car manufacturer was discovered to have installed software on around 10.5 million cars worldwide that allowed them to cheat in emissions test.
The reaction The company took full responsibility, replacing its chief executive and launching a powerful advertising campaign apologising to customers.
Long-term impact Its reputation is still recovering, with more fines and lawsuits expected to be announced in the future.
6. BBC, 2015
What happened? Reporter Ahmen Khawaja mistakenly announced that the Queen had died – not realising the corporation was conducting a rehearsal.
The reaction Staff were asked to attend a social media refresher course, while the BBC released a statement saying they were sorry for the confusion and the damage to its reputation.
Long-term impact Fortunately, the nation saw the funny side. After a few weeks of publications explaining the process of compiling high-profile obituaries in advance, the incident was largely forgotten.