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When Reputation's on a Road to Ruin

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December 10, 2010 – Comments (9) | RELATED TICKERS: JNJ

In my column today for Fool.com, I discuss the dangers that a company's reputation might be ruined before investors even fully realize it, if they always assume its brand is somehow bulletproof. Has anyone been following a seemingly constant string of Johnson & Johnson recalls? This is mind-blowing for a company that has such a good reputation (and brings to mind pain relief!). I feel like maybe people have been tuned out for a long while on this but may finally start to notice, and that could be very negative for this stalwart company that so often tops the charts when it comes to a good reputation.

I hope everyone has a great weekend, and for goodness' sake, don't anybody take any Rolaids soft chews!

9 Comments – Post Your Own

#1) On December 10, 2010 at 4:25 PM, lemoneater (77.43) wrote:

I rarely get indigestion, but I'll be careful all the same!

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#2) On December 10, 2010 at 4:49 PM, goalie37 (92.77) wrote:

I am long JNJ, but they are really getting me close to hitting the sell button.  They really need to get their act together.

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#3) On December 10, 2010 at 5:42 PM, TheDumbMoney (48.32) wrote:

I have been following it.  As far as I can tell, it is emanating from their McNeil unit.  So I don't think it is a sign of systemic problems throughout the company, which is what I would really care about.  The executive in charge of the McNeil unit has (surprise-surprise) decided to retire effective March 2011.  So while it is very bad, and the Rolaids recall prompted a serious WTF moment on my part, which is why looked into this, I am not convinced it signals a permanent decline for the company, or a permanent diminution of the brand.  Also, with J&J, investors think of it as an investing brand, but I don't think most consumers think of it as a unified brand.  (Put another way, how many consumers at your average WalMart would be able to put together a list from memory of brands owned by JNJ?  Not many.)  They look to particular brands.  So Tylenol in particular has been severely harmed.  But fewer people than you necessarily think are standing around at CVS connecting Rolaids with Tylenol with JNJ.  That's what made the Rolaids news so bad, since the more this happens the more the news helps people make those connections.  But, for now at least, I think it is more likely to be a buying opportunity than a sign of the End of Times for JNJ.  We shall see though.

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#4) On December 10, 2010 at 9:32 PM, vriguy (77.51) wrote:

You make some good points dumberthanafool but I got fed up with all the screwups and sold a couple of weeks ago.  No regrets yet on my part.

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#5) On December 11, 2010 at 8:55 AM, TMFLomax (52.14) wrote:

Thanks for the thoughts everybody! And you do make good points, dumberthanafool. It's funny, for a long time I know I wasn't even really making the connection with JNJ even while I remotely realized there were recall notices but suddenly it added up and I was like, wait a second! And 40 recalls this year is shocking. We shall see, but it does make me wonder at what point regular consumers start putting it all together and yeah, maybe a lot of them won't (and maybe JNJ will get its act together, which they clearly need to do as goalie37 said!). But... yeah, clearly I think it's a major concern/risk at the moment, even if it seems focused on the McNeil unit. 

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