COCA COLA CRISIS CASE

STUDY

5/8/2018
 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. 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. This controversy is the biggest crisis in
Coca Cola India which affected the company in a big and negative way.

CONTENT

1. Introduction............................................................................................3
2. Analysis....................................................................................................3-4
3. Stakeholders theory...............................................................................5
4. Recommendations...................................................................................6-7
5. Conclusion................................................................................................8
6. References................................................................................................9

2
INTRODUCTION

Coca Cola Company is the world’s largest beverage company with manufacturing,
distributing and marketing of non-alcoholic beverage concentrates around the world. Coca
Cola brand and formula was bought by Asa Candler in 1889 who integrated the Coca Cola
Company in 1892. Coca Cola offers almost 400 brands in more than 200 countries.

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”. 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). Since the Bureau
of Indian Standards (BIS) has an unclear and indeterminate standards for pesticide residues,
CSE used the European standard for maximum acceptable limits for pesticide in package
water. The pesticide that has been found is harmful for the human body, which were known
to cause cancer, birth defects and severe damage to the immune system, nerves and
reproductive systems. All these aspects, social, environmental, ethical and political, are
affected and each play an important part in the whole crisis in Coca Cola (India Kaye-
Jennifer 2005).

ANALYSIS

Many of the scientists have been arguing that the pesticide which is a by-product of India’s
agriculture industry, leaked into the groundwater which Coco Cola uses for the
manufacturing of the drinks. 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. 2012). In a matter of only 2 – 3 weeks the sale of Coca
Cola dropped by 40 percent. The President and CEO of Coca Cola India, Sanjiv Gupta
denied the allegations made by CSE and also stated them to be unaccredited and
misleading. They even challenged the credibility of CSE and their results and plan to make
the data public.

On one hand the tests done by CSE, resulted in the exceeding presence of pesticide in those
12 samples but on the other hand when the government did the tests, it found no unsafe level
of pesticide which was stated by the Minster of health and family welfare (Indian Resource
Center 2012). CSE disputed the testing and stated that both the results cannot be right.

3
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, the cost of distribution and also the effect of
the false pesticide accusation which led to a decline (Brady, D 2007).

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,
Rutgers University New Jersey and Santa Clara University California which also stopped the
sale of Coca Cola products. All these universities had a 1.4 million contract with Coke.

In India, 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 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).

Coke was under a lot of pressure by the protestors, who even attacked the shops in Delhi
which sold Coca Cola products. 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. States like Gujarat and Madhya Pradesh banned the Coca Cola
products and wanted a nationwide ban (Amelia Gentleman 2012). Sales dropped by 40
percent and also the Coca Cola Bottling Company stock went down by 5 percent. This is
arguably the biggest controversy in Coca Cola Company in India (Reynolds, J 2007).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, especially in India. This caused a
backfire as stated by Richard.S.Lewick who specialises in crisis management. All this led to
the main concern of winning back the support of the consumers, quality issue, environmental
issue and political issue (Fraser P. Seitel 2010).

4
THE STAKEHOLERS THEORY

MANAGEMENT
EMPLOYEES INVESTORS

COCACOLA
LOCAL
COMPANY SUPPLIERS
COMMUNITY

GOVERNMENT CONSUMERS
CUSTOMERS

The table below states the degree of importance and the power of influence of each
stakeholder individually:

STAKEHOLDERS DEGREE OF POWER OF INFLUENCE

IMPORTANCE
Employees 5 4
Investors 5 4
Suppliers 5 4
Management 5 5
Consumers 5 4
Customers 5 5
Government 5 5
Local community 4 3

5
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, improve the ratings and also
earn back and regain the trust of the people in India.

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. A mandatory bi monthly meeting should be
held which will brief on the lab results, procedure and the new policies. 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.

External recommendations:

Immediately after the CSE allegations and the press release of high level of pesticide in Coca
Cola products, 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), 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. The company should also have increased the transparency by making the lab results
public on quality control etc., on their website.

Instead of attacking the CSE for the allegations made by them, 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. Coca Cola Company could also have stated that the tests done by CSE,
was done by a third party. 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, Lok Samiti Amit Srivastava 2008).

Another recommendation can be a case of DENIAL i.e. Coca Cola India can just ignore the
allegations made by CSE. Coca Cola being a powerful brand could deny the allegations, by

6
just ignoring it because eventually after a while the people will forget about it. This is a
simple alternative but it can also backfire because the reporters are known to criticise and
make an issue through media. Even though the NGOs are small, but the public trusts them
more which could turn out to be a disaster for Coca Cola.

Just as in the case of Belgium, a couple of years earlier, Coca Cola India could arrange a PR
campaign which would help them regain customer loyalty. In the case of Belgium, 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 4.4 million
households which is comparatively less to that of India. So the PR campaign plan has to be
tailored to reach out to the people in India. 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. This strategy will also help build an
image which will show the company as to being responsible both socially and
environmentally.

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. This will not only show that the
product is safe for consumptions but also that it is not harmful to the environment. 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.
This can also include community services with the people cleaning the river, streets, ponds
etc (Cokes crime in India 2004).

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.

7
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.co and its profit. The crisis spotlights on the factors and commodities like
clean drinking water, 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.
The transparency of Coca Cola India was also questioned. The analysis of the crisis regarding
socio- ecological and political changes, all are covered here as in the government taking a
stand, environmental measures and public safety (Desertplace 2009). 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.

8
REFERENCES

Amelia Gentleman. (2012). Pesticide allegations trip up Coke and Pepsi - Business -
International Herald Tribune. Accessed on December
24, http://www.nytimes.com/2006/08/22/business/worldbusiness/22iht-
coke.2562750.html?pagewanted=all&_r=0

Brady, D. (2007), ‘‘Pepsi: repairing a poisoned reputation in India’’, BusinessWeek, No.

4038, 11 June, pp. 46-54, ISSN 0007-7135.

Coco-cola in India. (2012). Case study. http://www.rightsforpeople.org/IMG/pdf/coca-

cola_cs_english_final_final.pdf

Cokes crime in India. (2004). overexploitation and pollution of water sources in

India. http://killercoke.org/crimes_india.php

Desertplace. (2009). coco-cola crises in

India. http://desertpeace.wordpress.com/2009/04/22/coca-cola-crisis-in-india/

Earth Talk. (2012). Coca cola charged with Groundwater Depletion and Pollution in India.
Accessed Dec 26, http://environment.about.com/od/waterpollution/a/groundwater_ind.htm

Fraser P. Seitel (2010), The Practice of Public Relations, 11th Edition, Pearson Prentice Hall,
Upper Saddle River, New Jersey

Indian Resource Centre. (2012). Campaign to hold Coca cola accountable

http://www.indiaresource.org/campaigns/coke/

India's cola crisis bubbles up. (2003). CNN World. http://articles.cnn.com/2003-08-

18/world/india.drinks_1_coke-pepsi-cola-coca-cola?_s=PM:asiapcf

Kaye- Jennifer (2005), Tuck School of Business, Dartmouth College, Coca Cola India,
Journal Case Study Competition in Corporate Communications

9
Nandlal Master, Lok Samiti Amit Srivastava. (2008). India: Major Protest Demands Coca-
Cola Shut Down Plant. Accessed December 25, http://www.globalresearch.ca/india-major-
protest-demands-coca-cola-shut-down-plant/8591

Reynolds, J. (2007), ‘‘Is there still fizz in Coke?’’, Marketing Week, 17 May, pp. 22-3, ISSN
0141-9285.

Sanjeev Gupta. (2003). Coco cola India. Accessed December

25, http://mba.tuck.dartmouth.edu/pdf/2004-1-0085.pdf

10
REFLECTIVE JOURNAL

The Corporate Governance classes have been interesting. Till the last seminar we were taught
about the narrow and a broad view of corporate governance and of good corporate
governance.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, investors, corporations and other parties that have a role in developing good
corporate governance. The narrow view represented by the OECD Principles focuses on
accountability and control and mechanisms for achieving these. It mostly examines corporate
governance within agency theory.

The broad view includes issues of accountability and control but also focuses on relations and
behavioural aspects of corporate activities and outside influences. It questions much of the
conventional assumptions about corporate governance in the light of research and uses a wide
range of theoretical tools. The affect of institutional investors on corporate governance was
also explained.

The most interesting topic for me was stakeholder/stakeholders theory. Stakeholder are all
those on whom company’s activities may have an impact. We were taught who the
stakeholders are and the relationship between them and the businesses. The stakeholder
theory was explained through a diagram with the relation to CSR and ethics. Stakeholder
theory is supported by a rich literature containing many conflicting arguments. Meaning of
‘stakeholder’ is contested. Nature of stakeholder theory & its significance is in dispute.Its
concern with Value & Relations between enterprise, individuals, & state leads to
considerations of Corporate Responsibility & Ethics. We were also taught about the triple
bottom theory in relation to political, economical and social perspective which consists of
people, profit and planet. The class discussion helped me a lot to understand the subject with
the interaction with various students from around the globe.

11