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COCA COLA CRISIS CASE STUDY

Prashanth Jothi 16690426

12/27/2012

. Analysis..................... This controversy is the biggest crisis in Coca Cola India which affected the company in a big and negative way.......3-4 3..............................................8 6............................................................................................................ Recommendations.............................................................. References........................................................................................................................................................ Introduction...........5 4...... CONTENT 1..... It analysis the controversy to how the stakeholders were affected and also recommends the different strategies that could have been used to tackle the situation in a better way.....6-7 5................9 16690426 PRASHANTH JOTHI 2 ..... Stakeholders theory.............................COCA COLA CRISIS EXECUTIVE SUMMARY This case study states the controversy of Coca Cola Company in India because of the allegations of CSE (Centre for Science and the Environment) which stated the presence of high levels of pesticide in 12 cold drinks in and around Delhi.....................................3 2.................................... Conclusion.........

social. Coca Cola offers almost 400 brands in more than 200 countries. nerves and reproductive systems. The pesticide that has been found is harmful for the human body.INTRODUCTION Coca Cola Company is the world‟s largest beverage company with manufacturing. In a matter of only 2 – 3 weeks the sale of Coca Cola dropped by 40 percent. leaked into the groundwater which Coco Cola uses for the manufacturing of the drinks. The President and CEO of Coca Cola India. which were known to cause cancer. environmental. Most of the industries in India are required to meet an acceptable amount of pesticide allowed but when tested. the level was far more than the acceptable level (Coco-cola in India. Since the Bureau of Indian Standards (BIS) has an unclear and indeterminate standards for pesticide residues. CSE had a press release which stated “some 12 cold drink brands in and around Delhi contained a deadly cocktail of pesticide residue in it”. Coca Cola brand and formula was bought by Asa Candler in 1889 who integrated the Coca Cola Company in 1892. ANALYSIS Many of the scientists have been arguing that the pesticide which is a by-product of India‟s agriculture industry. Sanjiv Gupta 16690426 PRASHANTH JOTHI 3 . birth defects and severe damage to the immune system. 2012). CSE used the European standard for maximum acceptable limits for pesticide in package water. ethical and political. All these aspects. distributing and marketing of non-alcoholic beverage concentrates around the world. are affected and each play an important part in the whole crisis in Coca Cola (India KayeJennifer 2005). The tests were conducted by the Pollution Monitoring Laboratory which found 12 cold drink brands containing pesticide residue exceeding the global standards by 35 times (Sanjeev Gupta 2003).

States like Gujarat and Madhya Pradesh banned the Coca Cola products and wanted a nationwide ban (Amelia Gentleman 2012). the cost of distribution and also the effect of the false pesticide accusation which led to a decline (Brady. 16690426 PRASHANTH JOTHI 4 . This caused a backfire as stated by Richard. Coca Cola teamed up PepsiCo on a campaign to prove that their products were safe and they also issued a combined statement in the crisis through ISDMA (Indian Soft Drinks Manufacturers Association). They even challenged the credibility of CSE and their results and plan to make the data public. Later Coca Cola hiked the prices by 15 percent in India giving the reasons that the hike in prices will cover up the increase in raw material. This is arguably the biggest controversy in Coca Cola Company in India (Reynolds. In India. environmental issue and political issue (Fraser P. resulted in the exceeding presence of pesticide in those 12 samples but on the other hand when the government did the tests. quality issue. This uproar also crossed across to the United States where the University of Michigan stopped the sale of Coca Cola products along with universities like New York University. J 2007). The Indian Supreme Court also pressurized the company to reveal the secret recipe which has been kept a secret for almost 120 years. so that more testing could be done. who even attacked the shops in Delhi which sold Coca Cola products.4 million contract with Coke.Coke concentrated more on arguing the allegation made by CSE of the pesticide charges instead of concentrating on getting back the support of the customers. it found no unsafe level of pesticide which was stated by the Minster of health and family welfare (Indian Resource Center 2012). D 2007).S. CSE disputed the testing and stated that both the results cannot be right. Seitel 2010). Sales dropped by 40 percent and also the Coca Cola Bottling Company stock went down by 5 percent. All this led to the main concern of winning back the support of the consumers. Coke was under a lot of pressure by the protestors. especially in India.Lewick who specialises in crisis management. Rutgers University New Jersey and Santa Clara University California which also stopped the sale of Coca Cola products.denied the allegations made by CSE and also stated them to be unaccredited and misleading. On one hand the tests done by CSE. All these universities had a 1. They also stated that the customer safety was their priority and that the soft drinks which are manufactured in India fulfil the international as well as the national norms and regulations (India's cola crisis bubbles up 2003).

THE STAKEHOLERS THEORY MANAGEMEN EMPLOYEE S T INVESTOR S LOCAL COMMUNI TY COCACOL A COMPANY SUPPLIERS GOVERNMENT CUSTOMERS CONSUMERS The table below states the degree of importance and the power of influence of each stakeholder individually: STAKEHOLDERS DEGREE OF IMPORTANCE Employees Investors Suppliers 5 5 5 4 4 4 POWER OF INFLUENCE 16690426 PRASHANTH JOTHI 5 .

16690426 PRASHANTH JOTHI 6 . procedure and the new policies. The company should also have increased the transparency by making the lab results public on quality control etc.Management Consumers Customers Government Local community 5 5 5 5 4 5 4 5 5 3 RECOMMENDATIONS I hope the following recommendations and strategies will help Coca Cola rebuild its image and reputation in India to increase sale of Coca Cola products. Internal recommendations: The first priority should be to re examine the testing amenities and update the water purification system throughout the plants in India since the company dedicates to offer healthy and refreshing products (Earth Talk 2012). The employees should also be regularly updated on how the crisis is being administered. External recommendations: Immediately after the CSE allegations and the press release of high level of pesticide in Coca Cola products. A mandatory bi monthly meeting should be held which will brief on the lab results. the President and CEO of Coca Cola India should have held a news conference addressing the issue and assuring the public that the company is dedicated to offering high quality product and that the Coca Cola independent tests have resulted in the support of the standards set by the European Economic Commission (EEC). A toll free 800 number can be created where the customers can call and ask the operators with any questions they might have and want cleared. improve the ratings and also earn back and regain the trust of the people in India. on their website. and the officials also should take care of not admitting to the guilt but assuring that the company is dedicated and loyal to the safety of the people and always keeps on researching on improving all the products..

Coca Cola Company could also have stated that the tests done by CSE. was done by a third party. 16690426 PRASHANTH JOTHI 7 . This will not only show that the product is safe for consumptions but also that it is not harmful to the environment. ponds etc (Cokes crime in India 2004). joining forces with them would help a lot in solving the problem which would avert the loss of customers in India and also around the world. A regular taste testing could be organised in the urban and rural communities so that the people themselves could give feedbacks on the quality of the product and as to how to make it better. Coca Cola India could arrange a PR campaign which would help them regain customer loyalty. a couple of years earlier.4 million households which is comparatively less to that of India. streets.e. So the PR campaign plan has to be tailored to reach out to the people in India. by just ignoring it because eventually after a while the people will forget about it. This strategy will also help build an image which will show the company as to being responsible both socially and environmentally. In the case of Belgium. The company could have been less offensive which would make the public believe that the company is taking this matter seriously and they do care about the health and safety of the public (Nandlal Master. the company there arranged a PR campaign in which vouchers. products were being delivered to the house and offered which worked for Belgium because it only consists of 4. Coca Cola India can go green and create a ‘green’ logo which can be put up and stamped in all the bottles and cans of the soft drinks products so when the people buy the product they have an assurance and a satisfaction that the product is safe. Coca Cola India can just ignore the allegations made by CSE. It can also show and demonstrate that Coca Cola is not just a huge greedy company which concentrates only on profits but is a global citizen which also gives back to the people of the community. Coca Cola being a powerful brand could deny the allegations. This can also include community services with the people cleaning the river. This is a simple alternative but it can also backfire because the reporters are known to criticise and make an issue through media. Another recommendation can be a case of DENIAL i.Instead of attacking the CSE for the allegations made by them. Lok Samiti Amit Srivastava 2008). Just as in the case of Belgium. Even though the NGOs are small. but the public trusts them more which could turn out to be a disaster for Coca Cola.

16690426 PRASHANTH JOTHI 8 . which cannot be taken lightly and is a serious matter which needs to be made a priority and the quality of the product should continually be examined and updated.ecological and political changes. Coca Cola India learnt a lot of things from this crisis as to making public safety their priority and not neglecting the main issues which concerns with the safety of the consumers and also the environment. all are covered here as in the government taking a stand.co and its profit. The transparency of Coca Cola India was also questioned. CONCLUSION It can be assured that the recommendations and strategies mentioned above will prove itself to be socially and environmentally responsible which prioritizes the safety of the public in providing safe and delicious soft drinks which will eventually lead to the sustainability of Coca Cola India.When the improvement in the quality is made the public will automatically start working in behalf of the company to restore and promote the product while the company continually keeps on the quality of the product and the public safety as their priority. environmental measures and public safety (Desertplace 2009). The crisis spotlights on the factors and commodities like clean drinking water. The analysis of the crisis regarding socio.

com/2009/04/22/coca-cola-crisis-in-india/ Earth Talk. (2009). 4038. (2012). BusinessWeek.REFERENCES Amelia Gentleman. Seitel (2010). „„Pepsi: repairing a poisoned reputation in India‟‟. Case study.com/od/waterpollution/a/groundwater_ind.rightsforpeople.about. ISSN 0007-7135. No.wordpress. (2012). 46-54.html?pagewanted=all&_r=0 Brady. pp. coco-cola crises in India. (2007). Upper Saddle River.nytimes. (2012).2562750. 11 June.com/2006/08/22/business/worldbusiness/22ihtcoke. (2004). Pesticide allegations trip up Coke and Pepsi . Coco-cola in India. http://www. Accessed on December 24.Business International Herald Tribune.htm Fraser P. http://www.org/IMG/pdf/cocacola_cs_english_final_final. Pearson Prentice Hall. Accessed Dec 26. 11th Edition. The Practice of Public Relations.pdf Cokes crime in India. New Jersey 16690426 PRASHANTH JOTHI 9 .php Desertplace. http://desertpeace.org/crimes_india. http://environment. overexploitation and pollution of water sources in India. Coca cola charged with Groundwater Depletion and Pollution in India. http://killercoke. D.

indiaresource.dartmouth. CNN World. (2008). India: Major Protest Demands CocaCola Shut Down Plant. (2003). Lok Samiti Amit Srivastava. (2003). J.pdf 16690426 PRASHANTH JOTHI 10 . Accessed December 25. Accessed December 25. http://articles. (2012).drinks_1_coke-pepsi-cola-coca-cola?_s=PM:asiapcf Kaye. Tuck School of Business.cnn.globalresearch. „„Is there still fizz in Coke?‟‟. ISSN 0141-9285. http://www. (2007). 17 May. Marketing Week. Dartmouth College. Journal Case Study Competition in Corporate Communications Nandlal Master.com/2003-0818/world/india. Coco cola India.Jennifer (2005). http://mba.org/campaigns/coke/ India's cola crisis bubbles up. Campaign to hold Coca cola accountable http://www.tuck. 22-3.Indian Resource Centre. pp.ca/india-majorprotest-demands-coca-cola-shut-down-plant/8591 Reynolds.edu/pdf/2004-1-0085. Coca Cola India. Sanjeev Gupta.

The affect of institutional investors on corporate governance was also explained.REFLECTIVE JOURNAL The Corporate Governance classes have been interesting. Meaning of „stakeholder‟ is contested. The most interesting topic for me was stakeholder/stakeholders theory. The broad view includes issues of accountability and control but also focuses on relations and behavioural aspects of corporate activities and outside influences. We were taught who the stakeholders are and the relationship between them and the businesses. investors. corporations and other parties that have a role in developing good corporate governance. individuals. Stakeholder theory is supported by a rich literature containing many conflicting arguments. & state leads to considerations of Corporate Responsibility & Ethics. Stakeholder are all those on whom company‟s activities may have an impact. The stakeholder theory was explained through a diagram with the relation to CSR and ethics. Till the last seminar we were taught about the narrow and a broad view of corporate governance and of good corporate governance. The narrow view represented by the OECD Principles focuses on accountability and control and mechanisms for achieving these. Nature of stakeholder theory & its significance is in dispute. We were also taught about the triple bottom theory in relation to political.the main aim of OECD is to assist governments in their efforts to evaluate and improve their frameworks for corporate governance and to provide guidance for stock exchanges.Its concern with Value & Relations between enterprise. economical and social perspective which consists of 16690426 PRASHANTH JOTHI 11 . It questions much of the conventional assumptions about corporate governance in the light of research and uses a wide range of theoretical tools. It mostly examines corporate governance within agency theory.

profit and planet. The class discussion helped me a lot to understand the subject with the interaction with various students from around the globe.people. 16690426 PRASHANTH JOTHI 12 .