Johnson & Johnson and the Tylenol Recall

The story

In 1982, Tylenol was one of the most trusted products in America. It was the best-selling pain reliever in the country, with roughly 35 percent of a market worth about $1.2 billion a year. It was made by McNeil Consumer Products, a part of Johnson & Johnson, often called J&J.

Then, starting on September 29, 1982, people in the Chicago area began dying suddenly. The first was a 12-year-old girl named Mary Kellerman. Within three days, seven people were dead, including three members of one family. Investigators found that all of them had taken Extra-Strength Tylenol capsules that had been filled with cyanide, a deadly poison. Someone had tampered with bottles sold in Chicago-area stores. J&J had not put the poison there, but its name was on every bottle.

J&J's chief executive, James Burke, had to decide what to do fast, with very little information. The poisonings seemed to be limited to the Chicago area. Some advisers worried that a giant recall would make the problem look bigger and might destroy the brand forever. J&J first had its sales force pull about 264,000 bottles from Chicago-area stores. Then, on October 5, 1982, it went much further and recalled Tylenol capsules across the whole country: about 31 million bottles, worth roughly $100 million at the time. It told people to stop using the capsules and offered to exchange them for a safe product. Burke also worked openly with the FBI, the Food and Drug Administration, and the news media instead of hiding.

Burke later said the company's Credo helped him decide. The Credo is a one-page statement of values written in 1943 by Robert Wood Johnson, the company's longtime leader. It lists the people J&J is responsible to, starting with the doctors, nurses, patients, and families who use its products, then employees, then communities, and only last the stockholders. Burke said the Credo gave him "the ammunition I needed" to persuade shareholders and others to spend the money on the recall. In other words, the hard choice had been made years earlier, when the company wrote down what it cared about most.

The damage was real. Tylenol's share of the pain-reliever market crashed to about 7 percent. Many people, even inside the company, thought the brand was finished. But J&J used the pause to make the product safer. On November 11, 1982, it showed off new tamper-resistant packaging with three layers of protection: glued box flaps, a plastic seal around the cap, and a foil seal over the mouth of the bottle. Tylenol came back to stores within weeks. By about a year later, its share had climbed back to around 30 percent.

The crisis changed the whole industry. Sealed caps and foil liners became normal on medicines and many foods. In 1983, Congress passed a law that made tampering with consumer products a federal crime. Sadly, the person who poisoned the capsules has never been caught. A man named James Lewis was convicted of sending J&J a letter demanding $1 million to "stop the killing," but he was never charged with the murders.

The Tylenol story is taught in business schools because it shows that trust is a company's most valuable possession. J&J lost a lot of money in the short run. In return, it kept the faith of millions of customers, and that faith kept Tylenol alive.