Strauss announced today (Monday) to investors that the significant recall on its products "may have a significant impact on profitability."
Indeed, Strauss may suffer significant economic damage as a result of returning the products.
The financial damage is estimated at millions of shekels, and includes the collection of inventory from stores and distributors, the collection of products from customers, compensation, cleaning of production lines and damage to sales of the suspicious products - which the company will absorb.
It is also to be assumed that agile lawyers are already working at this time on a large-scale class action lawsuit against it.
The damage will even worsen if it is discovered that the company did not act properly, when it announced the return of the products a few days after finding out about the presence of the dangerous bacterium.
The pecuniary damages, which should not be underestimated, will most likely be covered by an insurance company.
But the damage to the image that may occur if the company's customers, among the largest in the economy, doubt the trust placed in it - will be very difficult to compensate.
If it turns out that the company did not have to recall, but acted with increased caution - the company can even come out strengthened from the incident, as consumer trust is a very important thing for food companies, very easy to destroy and very difficult to recover.
The recall carried out by the company proved the level of concentration in the food market.
Not many people know, but Strauss has a huge market share in the chocolate category - more than 50%.
The company is also a leader in sweet snacks, with more than 40%.
The data, taken from the company's reports to the stock exchange, confirm the widespread assumption that the shortage that is expected to occur in the chocolate market will be reflected in a rise in prices.
But in the meantime the concerns are premature.
It is very possible that the company will emerge stronger from the event.
The company's share did not crash, as might be expected, given the size of the event, but fell by 2.15% - not even the sharpest drop in the Tel Aviv 35 index. This means that investors decided it was a "slight blow to the wing", Also indicates the public's response to what is happening.
"The extent of the damage to Strauss depends on its conduct from here"
Ilanit Hayut, a crisis management consultant with extensive experience in the retail field, is convinced that "the company enjoys high reliability among consumers. Therefore, the extent of the damage to Strauss depends on its conduct here and there, and no less, Israel today".
She said, "Strauss has two risks in the current case: one, if it turns out that there are casualties due to salmonella due to consumption of the company's products - which would be very difficult to prove. Second, if it turns out the company preferred to release products to market. "It could damage the company's credibility and reliability is one of the most important values for a food company. The more Strauss is educated to be transparent with the consumer, the less damage it will do."
Hayut concludes: "These are only short-term damages and assuming that another similar affair does not happen soon, this event will end up as a slight blow to the wing. Strauss' credibility as a company it has built for years will stand to its credit. "He has no real competition for him, oblivion comes faster."
Damages amounting to millions of shekels
Like Hayut, Advocate Erez Kedem, a senior insurance adviser to corporations, is convinced that "Strauss may find itself facing a problem with the decision not to immediately publish the notice of the 'recall' since the Insurance Contract Law and policy clauses require it to act without Delay if it has information about a defective product, and make a recall immediately and at its expense. "
"If it turns out that the company did not act in accordance with the terms of the policy, the insurer can in principle reduce the amount of compensation it will pay, until it is fully canceled," Kedem adds.
According to him, "in previous incidents, in which Israeli companies had to carry out recalls on such a scale, they had to suffer millions of shekels in damages, among other things, also due to the need to hire various consultants, lawyers, etc. to deal with the legal and image crisis."
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