Guilt by Association: How Do Consumers Make Their Intuitive Judgments of Foreign Brands During a Food Safety Crisis in China?

Date: 24 September 2009

Location: School of Marketing and International Business at the Pipitea Campus, Victoria University

Speaker: Dr Hongzhi Gao, School of Interntional Marketing and Business, Victoria University


The seminar was held on 24 September 2009 at the School of Marketing and International Business at the Pipitea Campus, Victoria University.

Compared to Western counterparts, the Chinese market is typically considered turbulent, rapidly changing and full of risks and challenges for a foreign business, in parallel with exciting growth opportunities.

A most dramatic demonstration of the turbulent nature of the Chinese market environment is provided by the recent wide-spread food safety crisis involving addition of the industrial plastics chemical melamine during milk processing. A dilemma is faced by foreign food manufacturers in China. Who can they trust? How can they minimize risk? What is safe?

Critical for international food sector businesses in volatile markets is understanding of factors that influence consumer responses during a product harm crisis. Foreign businesses must deal with potential fallout for their brands due to associations with local contaminated brands.

Drawing upon the psychology of heuristics and risk aversion, the current study offers a new perspective for understanding trust erosion of foreign brands in a volatile market like China – a guilt-by-association (GBA) effect in consumer brand judgments.

Erosion of trust in a foreign brand should be looked at not only from the perspective of direct involvement of this brand itself in a crisis; brand trust has to be examined also in terms of its heuristic associations with other parties that are held responsible in a domestic food safety episode.

This seminar presented some findings of a joint research project conducted by Dr Gao and his colleagues from Otago University and Peking University. This project researched the 2008 Chinese milk contamination crisis which had created a great level of controversy regarding the role of New Zealand and Fonterra in disseminating the scandal and handling the crisis.