The basis, applications and existence of quality management in FMCG sector. The close relation of quality management with brand image and customer behavior. Food safety issues and Unilever Turkey Lipton’s case study

This article is intended to understand the basis, applications and existence of quality management in FMCG sector, and to explore the close relation of quality management with brand image and customer behavior. Accordingly, the research includes literature reviews on TQM (total quality management) in FMCG companies, analysis of best practices and failures in quality management of FMCG, and as final part the case study of Unilever Turkey (giant FMCG company) Lipton’s (Tea brand) case study. Our study is a consolidation of existing studies on quality management tools, TQM activities in Fast Moving Consumer Goods market, the brand image literature and exploration the close relation between Product/Service quality and brand image while considering real life case studies. The framework of study can be seen in Figure 1. As defined also on figure concept of work started with understanding quality and quality management trends, which today become concept of total quality management and spread among all companies around world. As second phase the focus is shifted to meaning of brand, brand management in FMCG companies and drivers affecting brand image on consumer eye. The following part would be exploration of food safety in several industries, steps of safety management and possible risks in food industry. Before getting deep dive through real life case studies there is the need of understanding operational complexity in fast moving consumer goods market and quality related dynamics. In the final section we try to summarize case studies starting from giant Chinese Milk scandal to Unilever Lipton Turkey case study and quality of end product on shelf. In all cases not only situations are analyzed but also learning, effects on brand image and root causes of each problem are stated in detail. As our living conditions became more superior from day to day, human beings expect to have better products and services in terms of quality, functionality, image and cost. The term quality entered our lives in past century, concurrent with appearance of alternative providers for goods and services in market. Here the idea is concern of consumer while preferring a service/product among various alternatives. Although quality has several explanations from various authorities; Peter Drucker (Management Consultant & Social Ecologist) has a suitable explanation with approach of our study that, “Quality in a product or service is not what the supplier puts in. It is what the customer gets out and is willing to pay for.” This point of view supports the idea that quality is perceptual, conditional and subjective to understanding of people. [1] The tremendous increase in number of goods and services in market conduce a need of managerial control on processes, products and parts. In the following years quality management systems and quality departments are constituted in several global companies. As number of products increased rapidly the need for process management became more essential. In all sectors quality management standards defined and assumed to be one of the key drivers to motivate consumers for that specific product/service. FMCG (fast moving consumer goods) companies were the pioneers to adopt those standards in their way of doing business. The motivation under this reflex may be to focus on quality of brand as a differentiator factor among many almost same products competing in market. Considering today’s competitive and aggressive market conditions having standardized quality level and making improvements should be most important factors for achievement. However this could also be argued with the fact that for most companies having standardized quality means reliability to specifications. This assumption supports also the idea that these specifications would meet customer expectations. [2] Quality is kind of a word that everybody knows and feels the meaning of it; however when it comes to defining it is much more complicated than it appears. Dictionary says; it is degree of excellence or superiority in kind. When the literature is analyzed it is seen that there are various quality definitions made. A modern definition of quality derives from Juran's "fitness for intended use." This definition basically says that quality is "meeting or exceeding customer expectations." The journey of quality started when human beings started to consume. At first, quality was being error-free. Until the mid-1900s quality was the purpose. Nevertheless seasons changed and “quality” forfeits its place to “marketing” from then on “market share” and “brand image” was the purpose and “quality” became a tool to realize this purpose. [3] This replacement led a change in the meaning of quality and highlighted the concept of “perceived quality”. Perceived quality can be defined as the customer's perception of the overall quality or superiority of a product or service with respect to its intended purpose, relative to alternatives. Perceived quality is, first, a perception by customers. Perception is a powerful force in consumer buying behavior. Consumers often base beliefs about quality on the emotional connection they have made with a brand, regardless of the actual quality associated with its products. Alternatively, a brand that experiences an instance of bad publicity may take years to shake off the negative effects, even if the actual quality is good. FMCG brands are no different. A negative belief about a brand based on the opinion of friends or family, or a high profile incident, can sour a consumer on that brand’s complete model lineup. Alternatively, a positive belief about a brand can sometimes trump poor quality. Quality is a giant word which includes product, service feature, customer, satisfaction and deficiency. Even though it seems it is no more an independent purpose quality, it is one of the most important aspects of branding. During the previous decades this leading role led many improvements in quality. The milestone change was the evolution of TQM. TQM is a complete managerial process which is constituted by customer satisfaction, decrease in the number of reworks, whole procedure long strategic thinking, high level of team work by improved employee involvement, problem solving and supplier relationships. Even though brand image and marketing went far beyond quality, in the market TQM became a key player. The motive behind this development was the severe competition. Since TQM aims at cost reduction, customer satisfaction and increased revenue TQM became a must for companies. There is no standard or hard-line procedure for implementing TQM. Every company can practice TQM in a manner it sees best for its organization. However, a company’s TQM program must always be structured and internally standardized, i.e., everyone within an organization must practice TQM in the structured manner set forth by management. Most companies today have chosen to adopt a TQM program that’s patterned after an already established TQM model, e.g., the Deming Application Prize, the Malcolm Baldrige Criteria for Performance Excellence, the ISO Series of Standards, etc. TQM may be considered as a collection of principles and processes that have been proven to be effective in business quality management over time. It goes back to the teachings of Drucker, Juran, Deming, Ishikawa, etc, who each have studied and developed ideas for improving organizational management. [4] According to Chaudhuri and Holbrook, brand attitude can be measured via brand trust, brand affect, and brand quality. Brand attitude is the highest level of brand association and it frequently forms the basis of consumer behavior (e.g., brand choice). [5] Aaker and Keller proposed a relation between perceived quality of parent brand and consumers’ attitude toward the extensions. [6] Chen also suggested that the perceived brand quality provides the reasons to buy and it affects the user’s attitude toward brand extension. Here it is worth to state that this work is related to quality and brand image relation especially in FMCG industry. [7] Different than others, FMCG sector has intense customer pressure which comes from the structure of highly concentrated retail sector. As mentioned above brand image gained importance in the last century. Brand image is sum of all the issues that comes to a person’s mind when see, hear or encounter a brand. The simplest example is; Mercedes reminds elegance and safety to people, these characteristics constitutes the brand image of Mercedes. Since brand image is the perception of a product and it is touching every aspect of a brand it can easily be said that any little mistake can ruin all the success of a brand. The concept of brand quality can be analyzed under two main different perspectives: the objective quality and the perceived quality. [8] Objective quality refers to the technical, measurable, and verifiable nature of products/services, processes, and quality controls. Subjective or perceived quality refers the consumers' value judgments or perceptions of quality. The concept of quality, or more exactly the perception of quality, varies depending on a range of factors such as the moment at which the consumer makes the purchase or consumes a product, and the place where it is bought or enjoyed, to name but a few. Brand quality can, then, be defined in terms of the moment at which the consumer receives information or cues about the characteristics of the product while shopping for or consuming it. Thus, consumers evaluate the functionality or utility of the product on the basis of their needs. [9] To add, in FMCG industry we worked on the cases related to food. Hence it is necessary to emphasize on food quality. In food quality both internal and external attributes of the product is relevant. Food quality is an important food manufacturing requirement, because food consumers are susceptible to any form of contamination that may occur during the manufacturing process. Today many consumers also rely on manufacturing and processing standards, particularly to know what ingredients are present, due to dietary, nutritional requirements (kosher, halal, vegetarian), or medical conditions (e.g., diabetes, or allergies). [4] Consumers are taking unprecedented interest in the way food is produced, processed and marketed, and are increasingly calling for their Governments to accept greater responsibility for food safety and consumer protection. Effective national food control systems are essential to protect the health and safety of domestic consumers. They are also critical in enabling countries to assure the safety and quality of their foods entering international trade and to ensure that imported foods conform to national requirements. The new global environment for food trade places considerable obligations on both importing and exporting countries to strengthen their food control systems and to implement and enforce risk-based food control strategies. In the case part of our work three separate cases analyzed which are the evidences of our statement. The first case is related to the dairy product crisis in China. The scandal exploded in the mid-summer of 2008, after sixteen infants in Gansu Province, who had been fed on milk powder produced by Shijiazhuang-based Sanlu Group, were diagnosed with kidney stones. After the initial focus on Sanlu – market leader in the budget segment – government inspections revealed the problem existed to a lesser degree in products from 21 other companies, including Mengniu, Yili, and Yashili. This Food Crisis is still in the top ten scandals of The World Health Organization mentions so far. [10] The issue raised concerns about food safety and political corruption in mainland China, and damaged the reputation of China's food exports, with at least 11 countries stopping all imports of mainland Chinese dairy products. A number of criminal prosecutions occurred, with two people being executed, another given a suspended death penalty, three others received life imprisonment, two received 15-year jail terms and seven local government official. In summary the largest food producers of the country added melamine to all its dairy products. And this intended quality defect resulted in 72.000 victims. It was such a huge disaster that it even created a crisis between Taiwan and China. Since Taiwan was an importer of Chinese dairy products, the quality mistakes that Sanlu Group made ended the trade relations between these two countries. [11] The second case that we analyzed related to beverages. This case shows the direct relation between quality between and brand image. The summary of the story is; while The Schlitz Company was the 2nd rank company in the beer industry; with the cost reduction motivation they changed their ingredients and system of production. Following this change, sales diminished and the company lost a significant market share. In years, even they started to use the old recipe again they never gain their old reputation. An advisement manager in the company concludes the situation perfectly by saying; “Schlitz sacrificed its dignity for more profit. In beer business, if a company lost its sources and money while protecting its dignity there is always a way to see the sun. Unfortunately, if it lost its dignity nothing can bring it back”. [12] Our third and the final case study is Unilever Turkey Case Study. In 2011, Unilever brand Lipton had a problematic year. The teapot bags were not properly sealed so the tea was spilled to water during the boiling phase. This problem resulted in a fall in sales and when the problem is solved with the new production lines, the sales went back to its previous level. In conclusion brand management is a key factor for FMCG companies, however is not sufficient to have a perfect product performance. Product management and brand image is a joint task combining various departments like quality, production, R&D and logistics. In Lipton’s case after an uncontrolled launch as a part of short term strategy showed incremental values for brand, after a while failures and complaints has erased these additional values on brand. At the end a group of dedicated study helped Lipton to cover this short crisis situation and got things moving forward. To sum up, brand image is the star since mid-1950s and quality is the co-star of brand image. The relationship of these two is crucial because without the contribution of good quality it is impossible to build a successful brand image. In addition to that any small quality defect can ruin a glorious brand image. The whole literature review part of this study showed that there are only a limited number of studies that works on the relationship between brand image and quality. The hardest thing about this subject is presenting the results in numbers since it is really impossible to know the real reason of the change in the market shares. However the three cases that we have studied showed that the specific quality errors end with a significant change in sales.