Osem CEO Aviezer (Gezi) Kaplan says the company is focusing on correcting administrative procedures rather than drawing "personal conclusions" from a report that exposed improper storage of chilled and frozen products. "We are busy with damage control and not placing blame," Kaplan told TheMarker late last week, after a Channel 10 investigative report revealed earlier in the week that the food giant had allowed frozen foods stored at its central warehouse to stand outside and thaw out before refreezing them.

In the report's aftermath, Osem announced that it had closed the warehouse and destroyed two-and-a-half tons of frozen foods. The brands affected include Tivall, Sabra Salads and Off Tov, all distributed by Osem. The news pushed Osem shares down 4.6 percent Thursday but they recovered 2.9 percent.

"The market fall didn't surprise me"

	Advertisement

Why didn't you issue a statement to the stock market on Wednesday?

Kaplan: "In our best judgment, there was no need to issue a statement Wednesday. The affair involves one warehouse among all the warehouses the company operates. The number of products that pass through there is clearly insignificant. We knew the story was supposed to be released the following Tuesday, and when it broke it was almost at the end of trading. That's not the time to issue an immediate statement. My decision to close the warehouse was one of those decisions I make on a daily basis that are not substantial regarding the company's operations. In line with developments [on Thursday], we found that it was the appropriate time to issue a statement. You need to look at things according to the information we had during the course of the day."

Were you surprised by the stock market?

"In light of the incorrect reports, the decline on the exchange didn't surprise me. Osem doesn't have any frozen or chilled products. There was regretful confusion about that warehouse being associated in general with Osem. During the course of this interview, shares have risen three percent, and I'm sure Osem's capabilities and accomplishments will please the company's shareholders."

Your crisis management tactic was to take full responsibility and to apologize, but you appeared on Channel 10's news broadcast, whose rating is lower than 10 percent. Why didn't you issue an apology through the newspapers? "I decided to appear on the same channel that uncovered the story, to take responsibility, to apologize and to express full faith that Osem would fix the mistakes, and that there is no concern about consuming our products. Currently, in the competitive media atmosphere in which we live, the moment a CEO shows up on one television channel, the message spreads to other channels and other media." You were abroad when the story broke. What was your immediate response and what led to the failure at the warehouse? "After the affair was uncovered, while I was still abroad, I assigned Roni Sagiv, director of the supply chain, to investigate and report in as much detail as possible on the sequence of events, among other things, at the Ostive warehouse. An initial check clearly showed that in recent days there had been an extensive breach of company policies, whose goal is to ensure the full protection of the chilled goods distribution system. "I know and understand that a company like Osem should never have let this kind of thing happen. However, it is important for me to stress that these things happened because of our current activities at the new, $100-million logistics center in Shoham, which has the most advanced facilities, and I am not saying this to be defensive. Because our managers were busy running the [Shoham] factory, there was a serious lapse at Ostive. Upon my return to Israel Tuesday, the company's executive management met and received an initial report compiled the night after the expose by [Channel 10's] Shomer Masach team. After the group looked over the report, it decided to halt operations at the warehouse and to set up a team headed by Osem's chief technologist, Shaul Meirav, which examined our guidelines and suggested ways to prevent a repeat of this kind of phenomenon in future. "Yesterday (Wednesday) the guidelines were revised and training sessions were held for all managers and workers at the warehouse. In parallel, work procedures were reviewed in the remaining company warehouses. After that was completed, we held a comprehensive meeting and presented to the regional veterinarian the findings of our review and the steps we intended to take in order to prevent a repetition of this type of phenomenon. After the meeting, we decided to reopen the warehouse."

Which measures are you taking so this type of lapse won't happen again? "Since we have been operating the new warehouse in Shoham, we beefed up each management team. We decided to have professionals present to supervise the entire chilling process. We have made it clear that under no circumstances is there to be a departure from the chilled goods distribution system guidelines."

How was the atmosphere within Osem on Wednesday? There were reports workers took the affair really hard.

"I wrote a personal note to all company workers, in which I stressed that these days are not easy for Osem workers. I made a personal appeal to please be diligent about rules and regulations. I encouraged each employee who thinks that rules are not being followed to approach me directly, and I expressed faith that Osem would get through this crisis. I think that the very fact that the CEO apologized and took responsibility was a source of pride and strength for many employees."

How will the affair affect sales of Tivall, Sabra and Off Tov?

"I am convinced consumers will continue enjoying our products. Osem is a company that has been around for over 60 years and does not look at its operations over the period of a week or a month. I am convinced that over time there won't be a decline."

Do you think there will be an impact on Osem brands over the short term?

"I want to hope that consumers know that Osem doesn't have any products in the freezer or refrigerator. Therefore, I don't expect ramifications. Through our handling of the crisis there has only been a slight rise in calls to our customer service center, 10 percent higher than on normal days."