Tylenol's "Miracle" Comeback

A year after the poisonings, public confidence is restored

One year ago last week, James Burke made a decision that will probably be studied in business schools for a long time to come. Going against the advice of Government agents and some of his own colleagues, the chairman of Johnson & Johnson decided to spend whatever millions it would cost to recall 31 million bottles of Tylenol capsules from store shelves across the U.S. Officials at the Food and Drug Administration feared that the recall would increase the panic already touched off by the poisoning deaths of seven Chicago-area residents who had taken capsules that had been laced with cyanide. The FBI argued that such an expensive action would demonstrate to potential terrorists that they could bring a $5.9 billion corporation to its knees. But Burke prevailed, and his move proved to be decisive in a remarkable and unparalleled win-back of public confidence in his company's product.

By last week, Tylenol had regained more than 80% of the market share it held before the still unsolved poisonings. "It's a miracle, pure and simple," said Joseph Riccardo of the Bear, Stearns investment banking firm. "The consensus among shrewd advertising executives on Madison Avenue was that the brand name would never recover." Indeed, after the deaths the nonaspirin drug's share of the $1.2 billion painkiller market fell from 35% to 7%. In a poll, a majority of Tylenol users said they probably would never return to the capsules.

Against such odds, though, Johnson & Johnson and its McNeil Consumer Products subsidiary, the manufacturer of Tylenol, seemed to do everything right. Instead of becoming defensive about the deaths, the company opened its doors and its checkbook. Chairman Burke appeared on Donahue and 60 Minutes. The company fully dedicated itself to the investigation, says Tyrone Fahner, who headed the probe during his term as Illinois attorney general. Said he: "Anything we wanted from them, we got. The president of the company called and asked if I thought a reward might help. Before I could raise the possibility of $20,000, he was asking if $100,000 would be enough."

Following the recall, which cost $50 million after taxes. Burke started the campaign to relaunch the red-and-white capsules. In just ten weeks the company managed to begin putting them back on store shelves in new, triple-sealed packages. To break the ice with consumers, Johnson & Johnson gave away 80 million $2.50 coupons redeemable toward any Tylenol product.

Even before the appearance of the repackaged capsules, Burke was host at a pep rally for the company's 2,250 sales representatives. The theme: "We're coming back." Burke exhorted them to call on physicians and pharmacists to aid the company in reassuring consumers. By the end of the year, 1 million such calls had been made. Testimonial-style TV ads were aired. In one, a woman professed her trust, saying, "My first experience with Tylenol was in a hospital, after my son Christopher was born. Since then it's become one of the things we can count on."

Says one Wall Street observer: "Johnson & Johnson management were quick to cast themselves in the role of self-sacrificing servants of the people. They generated enormous public sympathy and managed to convince most Tylenol consumers that [the consumers] owed the company cooperation in saving the product." Tylenol's share of the market has climbed back to nearly 29%, despite the fact that other nonaspirin brands, including Anacin-3, Panadol and Datril, are offering stiffer competition than the company faced a year ago.

The search for the Tylenol killer has been less successful. The Illinois task force, now reduced to ten agents from 150, has checked out 60,000 tips and compiled 25,000 pages of reports. Though the investigators work relentlessly, one of them concedes that the trail is "stone cold, and has been for six months." James W. Lewis, who is accused of trying to extort $ 1 million from Johnson & Johnson by offering to "stop the killing," goes on trial this week. Police have failed to find evidence connecting Lewis directly with the poisonings.

Johnson & Johnson's $100,000 reward still stands, but Illinois agents doubt that anyone will ever collect it. Says Thomas Schumpp of the Illinois department of law enforcement: "With Tylenol there was never a message or a clue to the reason. Not only can't we say who, but we can't say why." This file is automatically generated by a robot program, so viewer discretion is required.