Shenzhen Surprise

General Mills gets a crash course in global spin

On a recent Wednesday evening the Häagen-Dazs at Shanghai's City Plaza mall was packed with affluent, fashionable young Chinese. Cell phones trilled as waitresses in black berets maneuvered between tables with silver trays and $3 single scoops of tiramisu ice cream. In Shanghai, where 21 of the 48 Chinese Häagen-Dazs outlets operate, the high-end brand has become a symbol of middle-class affluence and an unabashed success for its parent company, Golden Valley-based General Mills.

So it came as a surprise when, one Saturday last month, an obscure newspaper in the southern Chinese city of Shenzhen announced that Häagen-Dazs had been busted for running an ice-cream sweatshop in a three-bedroom apartment. Four workers doing two twelve-hour shifts. Paint flaking off the walls. Soon, Chinese newspapers were giving national play to a photo of a uniformed officer standing over ice-cream cakes stacked haphazardly on the floor.

But most provocatively, Shenzhen media began to report that the apartment was a hei gongchang, or "black factory." In China, "black," when attached to a noun, indicates corruption (bribes, for example, are paid in "black money"), and so the term "black factory" is typically applied to manufacturers of fake CDs, DVDs, and other expensive goods. In effect, the company was accused of making bootleg versions of its own products. "Hei gongchang!" exclaims Gary Chu, General Mills' Managing Director for the Greater China region, during a phone call from Shenzhen. "I've talked to our lawyers and I'm gonna sue those guys. It wasn't a factory at all. It was a cake decorating kitchen."

General Mills has operated in China since 1998, and unlike most foreign consumer-products companies in the country, the Minnesota-based multinational has actually been successful. In 2002, General Mills acquired Pillsbury, and with it, Häagen-Dazs, which was already well-established in China. The first Häagen-Dazs in Shenzhen was located in a first-floor storefront. Because the space was small, Pillsbury rented a tenth-floor space in the same commercial building, which it used for decorating ice-cream cakes trucked in from Shanghai.

A week after the bust, I was ushered into the Shenzhen facility and provided a hair net, face mask, lab coat, and disposable booties. In a large refrigerated room, workers were decorating ice-cream cakes for distribution throughout Shanghai; undecorated cakes were being prepared for shipment throughout China. Though preparations were no doubt made for my arrival, the safety and cleanliness of the facility appeared to be a permanent feature of its operation. Last year, Häagen-Dazs closed its first Shenzhen store, but the tenth-floor cake decorating facility remained open. "The only problem was that when we closed down the first-floor shop nobody renewed the permit for the tenth-floor kitchen," Chu says.

Enter the Shenzhen Evening News. Perhaps in search of greater journalistic glory in a country where such pursuits are difficult, reporters from the paper accompanied local authorities on their June 16 raid of the Häagen-Dazs kitchen. Why the authorities were tipped off is murky, but there is no question that the paper was responsible for the photo of ice-cream cakes stacked on the kitchen's floor. Despite the paper's colorful descriptions of garbage cans in the middle of the kitchen and "open" toilets, the local hygiene authorities only cited Häagen-Dazs for not having a permit.

Immediately, the kitchen was closed and Chu issued an apology. The Shenzhen authorities belatedly--and under extreme media pressure--determined that the kitchen did not, in fact, meet hygiene standards, and so they levied a $6,000 fine against it. The size of the fine indicates the company wasn't entirely faultless. "We made a mistake," Chu concedes. "But it was a small mistake, and I don't think it really deserved to be exaggerated in the media."

Before leaving Shenzhen, Chu was hoping to meet with representatives from the local reporters' association in hopes of addressing their veracity and ethics. Chu concedes that the treatment that General Mills received from China's media was not unusual. Indeed, foreign multinationals are a favorite target of China's newspapers, and Chu can list the companies that have received similar coverage. "I used to work in finance at the Daily News," Chu recounts of his early career at one of New York's tabloids. "And these Shenzhen papers make that paper look ethical."

 
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