Swine flu takes a bite out of pork industry: perception, reality and “efficient markets” myth

 

The pork industry is desperate for politicians and the media to quit referencing “swine flu.” But A-H1N1 doesn’t exactly roll off the tongue, does it?

The World Health Organization, the Food Standards Agency and other authoritative agencies the world over continue to tell the public that this strain of flu is not spread by the consumption of infected pork. But pork sales, and the stock prices of pork sellers such as Smithfield Foods, are down sharply.

It’s not hard to see why the public isn’t taking any chances with the “other white meat.” The media has, of course, clamped onto the storyline of the swine flu outbreak as a deadly menace of potentially Biblical proportions, often invoking the memory of the global flu pandemic of 1918 that killed tens of millions worldwide. Of course, medicine has advanced a bit since then..

(Meanwhile, countries such as Russia and China, have used the scare to enact protectionist trade barriers to North American pork exports. Never let a good crisis go to waste, eh comrade?)

So while the reality is that pork is safe, the widespread perception is that pork is best avoided, at least until the flu scare passes. This is not a trivial distinction. Perception drives consumer behavior.

There are still those on Wall Street (and perhaps your IR department?) who cling to the notion of the “efficient market.” Press coverage, good or bad, according to this theory does not affect stock prices because the stock market is super-efficient at sorting through hype and nonsense, driven only by the facts, ma’am. Proponents of the efficient market theory look down their noses on media relations practitioners’ quaint fascination with positive story placement and the moderation of negative stories. “It doesn’t matter,” the old-school IR types sneer, “the market is efficient.”

Even if you still believe that Wall Street is all-knowing (an absurdity in post-meltdown 2009, if you ask me), you still have to concede that financial markets must respond to changes in consumer demand. Consumers are bombarded with far more information than they can process so they often make decisions based on superficial impressionsand perceptions. Perceptions drive consumer behavior.

So yes, it’s incredibly important that a corporation’s messages be succinct, clear and memorable. That’s true when you are brand-building and it’s even more true when you are defending a brand in a time of crisis.

- Jon Harmon

 

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