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Coca-Cola India: San Francisco State University MKTG 432-02 Fall 2010 Professor Veronica A. Papyrina
Coca-Cola India: San Francisco State University MKTG 432-02 Fall 2010 Professor Veronica A. Papyrina
San Francisco State University MKTG 432-02 Fall 2010 Professor Veronica A. Papyrina
Group 3
TABLE OF CONTENTS
1. Problem Definition .................................................................................................................................. 3 1.1 Coca-Colas Concerns ........................................................................................................................ 3 1.2 Coca-Colas Problem .......................................................................................................................... 3 1.3 Coca-Colas Decisions........................................................................................................................ 3 1.4 Companys Challenges ....................................................................................................................... 4 1.5 Companys Opportunities ................................................................................................................... 5 2. Data Analysis ........................................................................................................................................... 5 2.1 Who found out what, when and how? ................................................................................................ 5 2.2 Timeline and events that produced the current the situation .............................................................. 5 2.3 Opinions anchored by evidence from the case ................................................................................... 7 3. Solving the problem ................................................................................................................................ 7 3.1 Alternative Generation........................................................................................................................ 7 3.1.1 Where the causes of the problem identified properly? .................................................................... 7 3.1.2 Were other alternatives analyzed? ................................................................................................... 8 3.1.3 Was the decision implemented carefully? ....................................................................................... 8 3.1.4 Suggested Alternatives..................................................................................................................... 8 3.2 The Preferred Alternative ................................................................................................................. 10 3.3 Implementation Plan ......................................................................................................................... 10 3.3.1 Who, what, where, when, and how? .............................................................................................. 11 3.3.2 Short term and long term actions ................................................................................................... 12
4. References .............................................................................................................................................. 12
1. Problem Definition
1.1 Coca-Colas Problem
Coca-Cola, deemed the #1 Brand in the World, has been a successor in the soft drink industry for over 100 years. Along with their success they have incurred crises along the way. One in particular is the Coca-Cola India Case Study. On August 5, 2003, Coca-Cola India was attacked by The Center for Science and Environment (CSE), an activist group of engineers, scientists, journalists and environmentalists in India, for unsafe products, said to contain pesticide residues which surpassed global standards. Coca-Cola Indias products were attacked in a press release stating: Twelve major cold drink brands sold in and around Delhi contain a deadly cocktail of pesticide residues. The tests done on three samples of 12 PepsiCo and Coca-Cola brands were said to contain 30-36 times the global standards of pesticide residue. The pesticides found were known to cause disease such as cancer, birth defects, and severe disruption of the immune system, among other health conditions.
NGOs have high instinctive credibility and reliance by the people, making it difficult for companies to compete with such trustworthiness given to NGOs. Another problem posed is the socially responsible reputation of Coca-Cola as a corporate company in the U.S. The United States is a flourishing, developed country; yet, India is a developing nation with a different set of standards. Should Coca-Cola withhold their social responsibilities internationally? Is the company economically upheld to do so?
growth. Financially, these allegations could lose Coke a significant amount of revenue. Taking action is a necessity against the pesticide allegations.
2. Data Analysis
2.1 Who found out what, when and how?
August 5, 2003, CSE issued that three samples of 12 PepsiCo and Coca-Cola brands from across the city were found to contain pesticide residues surpassing global standards by 30-36 times including lindane, DDT, malathion and chlorpyrifos; pesticides known to cause cancer, damage to the nervous and reproductive systems, birth defects, and severe disruption of the immune systems. The results were based on tests conducted by the Pollution Monitoring Laboratory (PML) of the CSE. In February this year, CSE had blasted the bottled water industrys claims of being pure when its laboratory had found pesticide residues in bottled water sold in Delhi and Mumbai. This time, it analyzed the contents of 12 cold drink brands sold in and around the capital. They were tested for organ chlorine and organ phosphorus pesticides and synthetic pyrethroids all commonly used in India as insecticides. However, the process in which was used to determine these allegations were declared baseless by Coca-Cola.
2.2 Timeline and events that produced the current the situation
Regulations on soft drinks were weak in India, and there were no standards to define clean or portable water. An NGO such as the CSE called on the government to put in place legally enforceable water standards and chastised the multi-nationals for taking advantage of the situation at the expense of consumer health and well-being. Moreover, The CSE turned to the United States and the European Union for international norms. However, Coca-Cola Company argued that:
There are no standards for soft drinks in the US, the EU, or India. In India, water used for beverage manufacture must conform to drinking water standards. The water used by Coca-Cola conforms to both [the Bureau of Indian Standards (BIS)] and EU standards for drinking water and our production protocols ensure this through a focus on process control and testing of the water used in our manufacturing process and the final product quality.
From 1993-2003, the Coca-Cola company expensed $1 billion (US) in Coke India making them one of the countrys highest investors. A large portion of this allowance was used to test quality of its products. Over 400 tests were done to assure that the quality of Coca-Cola was nothing short of the best. The Coca-Cola Company uses the same state-of-the-art manufacturing facilities in India as they do in the US. Though the company was in a public scare, it deeply expressed that the company is constantly monitoring its ingredients.
We test for traces of pesticide in groundwater to the level of parts per billion. This is equivalent to one drop in a billion drops. For comparisons sake, this would also be equivalent to measuring one second in 32 years, or less than one person in the entire population in India. These tests require specialized equipment at accredited labs to have accurate results. Even at these stringent miniscule levels we are well within the internationally accepted safety norms.
Despite Coca-Colas confidence, On August 20, 2003, President and CEO of Coca-Cola India, Sanjiv Gupta, had faced a period of crisis due to environment sustainability problems that issued a press release stating, Twelve major cold drink brands sold in and around Delhi contain a deadly cocktail of pesticide residues. In only two weeks, sales had dropped by 30-40 percent, because many leading clubs, retailers, restaurants, and college campuses across the country had stopped selling Coca-Cola. The initial response of Coke and Pepsi denied of the validity of the CSEs claims, and the companies attacked the credibility of the CSE and their lab results, citing regular testing t independent laboratories providing the safety of their products. They promised to provide this data to the public, threatened legal action against the CSE while seeking a gag order, and contacted the United States Embassy in India for assistance. In the following days, the Delhi High Court asked the government to convene an expert committee to test and report on the safety of soft drinks within three weeks and to revise existing standards to include pesticide norms. Coca-Cola and Pepsi launched independent campaigns to reassure the public, taking out full-page newspaper advertisements and directing consumers to their corporate Web sites to review test results and safety protocol in greater detail.
and provided Myths and Facts from Coca-Cola India on the Coca-Cola India Web site. Furthermore, Coca-Cola hired a public relations firm, Perfect Relations, to rebuild the companys reputation, and the head of communications for Coca-Cola Asia moved to India from Hong Kong to try to deal, in a PR way, with the growing resistance in 2004. After the time of the incident, the company launched Coca-Cola India eKO Management System, an initiative to translate environmental policy into action in daily operations, in order to regain public trust as well.
beverages contained pesticide residue. Another is the possibility that by agreeing to collaborate with the CSE and performing a second round of tests, Coca-Cola could be perceived as admitting that the CSEs report was actually correct the first time. - Alt. 2: Status Quo: This alternative is denial through argument from ignorance and would entail CocaCola remaining silent and waiting for the buzz to go away. After all, Coca-Cola is a large organization and is probably the target of many investigations by several NGOs. Coca-Cola is a powerful brand though, and the company should deny the CSEs claims by simply ignoring them. Indian consumers are likely to forget about it after a while anyway. In fact, in rural areas consumers might not even hear about the report. This alternative is easy to implement; Coca-Cola has to do nothing at all. Even so, there is a risk that this alternative will go wrong. Reporters like to criticize large, powerful corporations and are likely to give the issue media attention. Also, NGOs might be small in size, but consumers tend to trust them and this issue could turn out to be devastating for Coca-Colas brand. American consumers might also take the report seriously and see the company as another multi-national corporation that just wants to sell more products and does not care about consumers health. Eventually they might abandon Coca-Cola in favor of competitors such as Pepsi. - Alt 3: PR campaign: Just as in Belgium a few years earlier, Coca-Cola could implement a PR-campaign to retain consumer loyalty. The PR campaign could include vouchers and coupons for free product delivered to [all households], sponsored [events], and significant television advertising. This might have been successful in Belgium, but Belgium is a small country with 4.4 million households. India has a population of 1 billion and sending every household a coupon for free product would be impossible. Due to both cultural and infrastructure differences, the same campaign could not be carried out in India. A PR campaign could produce many benefits, but it would need to be tailored to meet the parameters of the Indian market. Another PR campaign in the US could inform the American public about Coca-Colas efforts as a global citizen who gives back to communities. This ingratiation strategy, an argument by example, would show that Coca-Cola is not just a large, greedy corporation, and would demonstrate the companys social and environmental responsibility.
Alternatives Alt 1: Collaboration with the CSE Reducing Offensiveness Recovery Paradox
Advantages - Consumers like NGOs - Image strengthened - Reputation improved - Through the Recovery Paradox higher trust for the brand will be built
Disadvantages - CSE might not be willing to collaborate - Can be understood as an apology for actually doing wrong - Second round of pesticide tests are positive - Recovery paradox might backfire
- Worked well in Belgium - Loyal consumers - Chance to show Coca-Colas corporate social responsibility (CSR)
After analyzing the options outlined in the table above, it is recommended that collaboration with the CSE, combined with a PR campaign (a modified version of the one used in Belgium), is the most beneficial strategic alternative for Coca-Cola.
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will also help retain brand loyalty and should be widespread especially in lower-income areas. These promotional activities, combined with the collaboration with CSE will greatly contribute to rebuilding the Coca-Cola name throughout the country.
4. References
Fraser P. Seitel (2010), The Practice of Public Relations, 11th Edition, Pearson Prentice Hall, Upper Saddle River, New Jersey Kaye- Jennifer (2005), Tuck School of Business, Dartmouth College, Coca Cola India, Journal Case Study Competition in Corporate Communications
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