Earlier this year disaster struck Blue Bell, the nation’s third-largest ice cream maker. The Centers for Disease Control and Prevention linked its desserts to 10 infections, including three deaths, forcing it to shut down production in April and recall all its products from 23 states.
Diehard fans of the 108-year-old, family-run operation went into mourning—but more for Blue Bell than the victims. In Brenham, Texas, site of its headquarters and a company town of 16,000, residents held a prayer vigil in the town square. On the presidential campaign trail, Texas Senator Ted Cruz posed for a photo with a sign reading: God bless Blue Bell.
Lost among the laments was the fact that Blue Bell had found listeria—the bacteria implicated in the outbreak—in a plant two years earlier but failed to solve the problem. And what was identified as an infection outbreak in 2015 was actually sickening people as early as 2010.
The episode reveals not only how difficult it is to trace the source of food-borne illness but also what happens when a company is slow to tackle the causes—and doesn’t come clean with its customers. Experts say Blue Bell’s responses this year were an example of “recall creep.” That occurs when executives hope that taking limited action—as the company did five times when informed of findings of listeria—will solve the problem and minimize commercial damage, only to find themselves forced to expand the recall repeatedly. It’s the opposite of Johnson & Johnson’s actions in the 1982 Tylenol-tampering episode, when the brand famously saved its reputation by swiftly recalling every bottle of the medication.
Citing pending litigation, Blue Bell declined requests for interviews. (The company resumed limited sales on Aug. 31.) “If you have listeria persisting in a plant, one of the mandates is to root it out,” says Craig Hedberg, a food-safety expert with the University of Minnesota’s school of public health. “If it’s there and you don’t, it’s pretty clear you’ve failed to do your duty to your customers.”
Blue Bell is beloved in the South—in part because it has masterfully marketed itself as a small-town family business whose ice cream is a labor of love. “We eat all we can, and sell the rest,” went one longtime slogan. Blue Bell promoted its products as coming from “the Little Creamery in Brenham,” even as production expanded to four factories and annual sales, according to Euromonitor International, grew to some $880 million.
The problems started to emerge on Jan. 28, when tests by South Carolina state inspectors revealed Listeria monocytogenes in two products made in Blue Bell’s flagship Brenham plant. (Listeria monocytogenes is the bacteria that causes listeriosis, blamed for 1,600 serious infections a year, including 260 fatalities. Listeriosis is the third-leading cause of food-borne death in the U.S.)
Using a nationwide bacterial registry, the CDC matched the Blue Bell bug to listeria strains blamed for an unsolved 2014 outbreak at a Wichita hospital: Five patients, already hospitalized with serious illnesses, had been infected; three died. Investigators later confirmed that four drank milkshakes made with Blue Bell ice cream. Further testing would link the company to 10 listeriosis cases dating back to 2010. Experts believe there are many more illnesses where the connection will never get made.
Blue Bell executives first learned about the listeria finding in South Carolina on Feb. 13. Three days later the company began retrieving 10 different products made on the same factory line—without any public announcement that it had sold a tainted product. (Neither the FDA nor state regulators insisted on disclosure, reasoning that the only two products then known to contain listeria were single-serving items. These items tend to be sold to institutions and convenience stores, which meant they were in a limited number of places and could be retrieved.)
Blue Bell learned on March 9 that the listeria strains identified in South Carolina had been linked to the deaths in Wichita. The next day it stopped making ice cream on the tainted Brenham production line. It later shut the machine down permanently.
On March 13, Blue Bell announced a recall, “the first … in 108 years.” Actually, the company was just making public the steps it had already taken a month earlier. Blue Bell explained that it had pulled “a limited amount” of frozen snacks with “a potential listeria problem,” while emphasizing that the action “in no way” involved its other products.
On March 22, Kansas authorities advised Blue Bell they had found more listeria at the Wichita hospital—in a three-ounce chocolate ice cream cup. This item had been made in Oklahoma, extending the problem to a second plant. Blue Bell responded with statements acknowledging the Kansas deaths for the first time, expressing regret and adding ice cream cups made in Oklahoma to the recall.
By April 3 the CDC had linked the bacteria found in the chocolate cup with five more listeriosis cases as far back as January 2010. Citing “an abundance of caution,” Blue Bell announced it was “voluntarily” suspending all manufacturing in Oklahoma to “thoroughly inspect” for any possible contamination sources.
On April 6 the CDC recommended that consumers “not eat” any product made at the Oklahoma plant. That day Blue Bell announced it was “voluntarily withdrawing” everything made there, insisting: “It is important to note that these products HAVE NOT BEEN RECALLED.” A day later the FDA notified Blue Bell that it had found listeria in another flavor made in Oklahoma. Blue Bell then announced a “recall” of seven more flavors—which it was already pulling as part of its “withdrawal.”
On April 20, after more listeria was found in tubs of Chocolate Chip Cookie Dough ice cream made in Brenham, Blue Bell finally recalled all its products. CEO Paul Kruse apologized, saying everyone at Blue Bell was “heartbroken.” Although the company had “initially believed this situation was isolated to one machine in one room,” he explained, “we now know that was wrong.” He said the company had hired “one of the world’s most respected food-safety microbiologists” to “get to the bottom of this issue.”
Experts call Blue Bell’s initial piecemeal responses “recall creep.”
In fact, Blue Bell knew it had a listeria problem two years earlier. The FDA released inspection reports showing that the company had found the bacteria in its Oklahoma plant, on surfaces such as floors and catwalks, on 17 occasions beginning in March 2013. Despite this, the FDA found, Blue Bell hadn’t followed up “to identify sanitation failures and possible food contamination,” taken proper steps to root out the problem, or informed the agency of its findings. FDA inspections of multiple plants, starting in March, found not only listeria but also condensation dripping from machinery into ice cream and ingredient tanks; poor storage and food-handling practices; and failures to clean equipment thoroughly.
Immediately after its national recall, Blue Bell spoke of cleaning up in a few weeks, then resuming sales. It soon became clear that was wildly optimistic: Blue Bell’s plants and practices required a massive and expensive overhaul. Kruse announced drastic measures. Blue Bell would lay off 1,450 of its 3,900 employees and furlough 1,400 more. Even this wasn’t enough. Only a $125 million loan commitment from billionaire Sid Bass kept it from going under, according to a letter Kruse wrote to the private company’s shareholders, first reported by the Wall Street Journal.
Blue Bell signed agreements with state regulators promising stringent new safety procedures, including that all ice cream be sampled and found bacteria-free before being released for sale. According to the company’s website, it has “thoroughly cleaned and sanitized” its facilities and re-trained its workers. With regulators’ blessing, Blue Bell resumed production in Alabama in July, then in Oklahoma in September. No date has been set to restart the two Brenham plants.
Blue Bell has been criticized for its failure to apologize more fully or explicitly acknowledge those sickened by its ice cream. But Gene Grabowski, a consultant who helped map Blue Bell’s PR response, defends its approach. “In my playbook, you apologize sincerely once and then you move on.” (He has been supplanted by a team from PR giant Burson-Marsteller led by Karen Hughes, who served as a top White House communications adviser to George W. Bush.) “Had the company known then what it knows now,” Grabowski says, “it would have done a full recall of all products earlier than it did.”
Blue Bell’s plan for a five-stage comeback anticipates a smaller footprint, slowly expanding into 15 states, instead of the previous 23. Even as the company struggled to banish listeria from its plants—and deal with civil litigation and possible regulatory penalties—it built excitement over its return. Blue Bell staged a daily Instagram reveal of the first flavors it planned to reintroduce on Aug. 31. This generated giddy media coverage—and social media ecstasy: “thank baby Jesus,” wrote one fan. Vowed another: “I’ll be at Walmart at midnight.”
Read more about food contamination in “The food industry’s $55.5 billion safety problem.”
A version of this article appears in the October 1, 2015 issue of Fortune magazine with the headline “How Blue Bell blew it.”