Pandoro-gate Ferragni: crisis management e brand reputation

Chiara Ferragni promoted a commercial action with Balocco (a confectionery brand) disguised as charity and was fined by the Antitrust with a million-dollar fine last December. Let's analyze the crisis communication and the potential consequences on brand reputation.

After a few weeks, let's analyze the reactions of the influencer to understand if and how this mishandled situation can be considered a corporate crisis. 

Several weeks have passed since the beginning of the "pandoro-gate" involving Chiara Ferragni, and it is possible to conduct an initial examination of the situation in terms of crisis communication and brand reputation.

The facts are well-known: starting from December 2022, following an article by Selvaggia Lucarelli, the Antitrust began investigating the promotion of Balocco in collaboration with Chiara Ferragni for the Regina Margherita Hospital in Turin, leading to the multimillion-dollar fine on December 15 for unfair practices. Consumers were led to believe that pandoro sales were linked to the donation, also due to the significantly higher price of the branded pandoro compared to the regular one. The Milan Prosecutor's Office opened an inquiry without suspects, entrusting the Guardia di Finanza with the investigation. Prosecutors in Prato and Trento are also investigating.

The first thing to determine is whether the pandoro-gate can be defined as a crisis. Technically, a crisis occurs when the continuity and existence of a company are jeopardized (in this case, Fenice and TBS Crew, companies handling Chiara Ferragni's brands and rights).

Since December 15th, the digital entrepreneur has suspended activities on social media for several weeks, ceasing to promote numerous companies and brands she collaborates with. The Safilo Group terminated the partnership for producing Chiara Ferragni eyewear, and apart from Donatella Versace, who expressed herself more personally than corporately, none of Ferragni's commercial partners rushed to her aid.

Chiara Ferragni & pandoro Balocco

Business continuity has undoubtedly been affected, but the Ferragni empire is far from imminent collapse. The influencer's reputation has suffered the most, with consequences on business activities that will become evident in the coming months. However, talking about the destruction of the Ferragni brand is undoubtedly exaggerated, as Ferragni still has a million-strong follower base. The sentiment of her community is not entirely positive at the moment (peaking at 74% negative sentiment on December 15th). Still, apart from a physiological drop of about 6% in followers (normal in crises), the user loyalty base remains intact. 

So, are we facing a crisis? The answer is a "no" with a "yes." We are dealing with an issue that was not managed from the beginning and exploded prominently in the media, destabilizing the Ferragni brand (and the companies managing it) but without endangering its existence.

It is interesting to understand how this crisis (we will call it that for simplicity) could have been managed from its prodromal phase, as it was underestimated, perhaps due to a sense of invulnerability that very powerful brands tend to have. Lucarelli's December 2022 investigation did not receive much media attention, so the journalist decided not to publish the one about Easter eggs (following the same principle of commercial action disguised as charity). However, in July 2023, Ferragni's companies learned about the Antitrust investigation and read its documents. They decided, making a huge mistake, to do nothing. This silence will cost dearly in terms of reputation. The first thing to do when caught red-handed is to apologize, take responsibility, and explain the actions intended to remedy the mistake.

If in July Ferragni had decided to "face the music," taking full responsibility regardless of the authority's subsequent decisions, it would have been a different story or at least a story with fewer reputational damages. Instead, the silence was maintained until the case erupted with the hefty fine, and the initial reaction was certainly not textbook. With an annoyed post on social media, Ferragni expresses being "sorry that people persist in seeing something negative in an operation where everything was done in good faith," emphasizing her commitment to charitable activities and deciding to appeal the Antitrust's decision. 

A shining example of what NOT to do when caught red-handed.

• "You are the ones seeing the negative; I acted in good faith." If the Antitrust sanctions you and the company you collaborated with with multimillion-dollar fines, the negative is not an opinion but a fact. 

• "I always do and will continue to do charity work." The same technique was used in December 2022 when, after Lucarelli's investigation, Ferragni decided to publicly announce the donation to an association for the protection of women victims of violence, even going on stage at the Ariston theatre during Sanremo Festival (very popular festival in Italy). Many followers, commentators, and other famous personalities have pointed out that charity should be done without turning it into a "pro-reputation megaphone." Also, leveraging popularity for charitable causes should be a pro bono activity, not rewarded with million-dollar fees. 

• "I find the decision unfair, and I will appeal." This statement highlights the lack of remorse and tries to portray Ferragni as a victim. 

After this terrible response, several days pass, an extremely long period during which public opinion solidifies into negative sentiment.

On December 18th, the apology video arrived, posted on social media. Here, several changes are noticeable, starting from the medium used (video vs. stories), prosody, and stylistic staging. Ferragni appears less made up, dressed in a gray jumpsuit (a color often used in apology videos), sitting on the floor (not in a dominant position looking down). Her face looks tired, and she stammers, almost crying while speaking.

The video follows a predefined script:

1. VALUES: It starts with the brand's values, emphasizing those taught to her children and trying to create a family dimension where the audience can identify, almost wanting to forget that it is a million-dollar company.

2. APOLOGIES: Finally, apologies are directed toward stakeholders. However, they came late, very late. 

3. TAKING RESPONSIBILITY: It downplays the mistake as a communication error. It would have been better to define it as it is, a management and business decision error. 

4. ACTIONS TO REMEDY: She commits not to overlap commercial activities with charitable ones and donates equal to the fee received from Balocco, one million euros, to the Regina Margherita Hospital. However, the decision to donate the potential amount resulting from a downward revision of the fine seems a bit like moral blackmail towards the Antitrust rather than a sincere commitment. 

Certainly, some aspects of the communication may have been exaggerated, but in terms of messages, the video was textbook. The video has an effect, especially on that part of the community that idealizes the celebrity, forgiving any mistake, supporting unconditionally, and attacking detractors. This behavior of the extreme part of a fandom is referred to as "stan culture." The video is scrutinized by the media and the public, inevitably giving rise to fake news, such as the expensive gray jumpsuit being sold out.

The holiday season follows, and Ferragni's silence on social media continues. She only appears in a video with her husband in the background, but this is enough to spark controversy (she seems too happy compared to the narrative that would depict her as devastated by the situation).

In early January, she returns to social media without sponsorships, but using two communication assets to engage the audience and test sentiment.

1. With a selfie (expressing the need for attention), she asks the community how they are doing, without reposting the responses (a not-so-hidden sentiment analysis). 

2. She leverages the most potent engagement weapon, her children, once again in the foreground of a situation where they would have nothing to do, but useful to redirect attention to Ferragni's family and maternal aspect. 

In the meantime, Ferragni has enlisted the help of a communication agency and other professionals to emerge from this situation which has had repercussions on her reputation and will have business implications.

Today's news reveals that Coca-Cola, a commercial partner with whom Ferragni had already recorded an advertisement to be broadcast during the Sanremo Festival, has decided not to use the promotional material produced together with the influencer. In the coming months, the real impact of the pandoro-gate on the business will become clearer, although the empire is far from being razed to the ground.

The lesson that companies can draw from this incident is manifold:

• Intervening at the prodrome of an issue can prevent escalation into a crisis. 

• Never respond instinctively to criticism or issues. 

• The timing of the response is part of the response and validates its authenticity. 

• Never underestimate the domino effect that a crisis can generate. In Ferragni's case, the pandoro-gate was accompanied by the Giochi Preziosi case with Easter eggs, and despite the influencer awkwardly deleting posts from her Instagram page, this will certainly not be a minor issue.