Companies and Brands

P&G Recall of 8.2 Million Bags of Tide Is Reputation Risk

Tide Pods with Ultra Oxi
Courtesy of Mike Edmisten via 24/7 Wall St.

Procter & Gamble Co. (NYSE: PG), one of the largest consumer products companies in the world, recalled 8.2 million “defective bags” of Tide Pods, Gain Flings, Ace Pods, and Ariel Pods liquid laundry detergent. According to the U.S. Product Safety Administration, the bags can rip open and be ingested by children. They can also injure the eyes and skin.

P&G said that customers can return the products and get refunds. The cost of that is the least of P&G’s problems. The bags were sold at Big Lots, CVS, Family Dollar, Home Depot, Sam’s Club, Target, Walmart, and online at Amazon.com. The recall represents a reputation risk for P&G and one of its most important products. News of the recall ran in dozens of media, including the most prominent and widely read in America: ABC News, NBC, CBS, AP, and CNN.

Tide is among the leading detergents sold in the United States by revenue, with sales of $1.2 billion. For scale purposes, P&G’s net income has averaged $14 billion over the past three years. While a Tide recall will not dent that, brand valuation and consumer confidence are critical to large companies with tens of millions of customers. P&G’s CEO has been cutting his ownership in the company.

P&G is not the first company to be affected by a recall and will not be the last. Recalls are almost a regular part of the car industry. Ford, in particular, has had this problem. Among other things, it has hurt Ford’s financials because of recall repair costs.

Does P&G’s recall ripple across future Tide sales? There is no way to know, but huge recalls of famous brands are not trivial.

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