A Maturing Experience

Last Halloween found Odwalla Inc. yanking all its products off store shelves after an outbreak of E. coli illness was linked to its unpasteurized apple juice.

A year later, the episode--which sickened more than 60 individuals and caused the death of a Colorado toddler--continues to haunt Odwalla, based in the seaside hamlet of Half Moon Bay, south of San Francisco. It has wrought dramatic changes in the company and its products, most of which are now pasteurized.

“A year ago we were a company that had worked hard to get where we were, with [several consecutive] years of 40% [sales] growth,” said Greg Steltenpohl, Odwalla co-founder and chairman. “We were coping with the typical problems of success.”

That all changed when health officials in Washington state revealed that they had found an epidemiological connection between a cluster of intestinal illnesses caused by E. coli O157:H7 and the company’s unpasteurized apple juice and smoothies that included apple juice.

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As Odwalla scrambled to reformulate recipes and improve its safety measures, sales, profit and the price of the company’s stock plunged. Layoff notices went out to about 30% of the staff, many executives and employees took pay cuts, and a federal grand jury began an investigation that is still underway.

“We got 10 years’ worth of maturity in one year,” Steltenpohl said.

Today, although the atmosphere at Odwalla is not as effervescent as it was, things are looking up. Production has recovered to about 85% of the pre-recall level. New meal-replacement beverages called Future Shake, introduced earlier this year, had the most successful launch in the company’s history. And analysts predict a return to profitability in the 1998 fiscal year, which began Sept. 1.

Meanwhile, the company has invested $1.5 million to upgrade and add to its safety measures. Among other steps, it dismantled the mixing and bottling room and rebuilt it as a “clean room,” with an improved air-filtration system. And it implemented a multi-step program of safety controls that experts say sets the standard for the industry. Odwalla said it believes that any harmful bacteria or pathogens have a 99.999% chance of being killed.

Over the summer, the U.S. Food and Drug Administration called for fresh juice companies to put warning labels on unpasteurized apple cider until they can institute such programs.

With its program already in place, Odwalla says it is way ahead of the curve.

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Long an advocate of “fresh,” unpasteurized juices for both health and taste reasons, Odwalla in December acknowledged the benefits of using “flash pasteurization”--a method of quickly heating beverages to kill any harmful bacteria. After weeks of consulting with experts, the company decided that was the quickest way to guarantee safety and thus restore consumers’ confidence. The method is now used on all products except citrus juices.

Safety must be the No. 1 priority, Steltenpohl said, but companies should look for creative ways to ensure it.

“You don’t have to bludgeon the products to make them safe,” he noted.

Chief Executive Stephen Williamson said employees are comfortable with the company’s steps. But, he added, there is an element of “it has been a rough year, and we’re tired.”

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Martha Groves can be reached by e-mail at martha.groves@latimes.com or by fax at (213) 473-2480.