Coca Cola: Belgian PR Crisis

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Project Summary:

• Company History
• Marketing Strategies
• 1999 Belgian PR Crisis and Solution
• SWOT Analysis
• Recommendations

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Coca Cola: Belgian PR Crisis

  1. 1. Principles of Management&It’s Domiciliary in“The Emerging Markets”A Presentation by..Abhizar Bootwala
  2. 2. The Company..• Pharmacist, John Styth Pemberton first introduced the refreshing taste ofCoca-Cola in Atlanta, Georgia in 1886.Pemberton concocted a caramel-coloured syrup in a brass kettle in hisbackyard. He first "distributed" the new product by carrying Coca-Cola in ajug down the street to Jacobs Pharmacy.• Initially sold as a patent medicine for 5 cents a glass.• Pemberton claimed that it cured diseases such as headache, impotence,and morphine addiction.
  3. 3. The First Coca-Cola Ad
  4. 4. The yester years..• 1886 - Sales of Coca-Cola averaged nine drinks per day.• 1887 - Businessman Asa Griggs Candler acquires stake in the companyand in 1888 incorporates it as the Coca Cola company.• 1893 - In January "Coca-Cola" was registered in the U.S. Patent office.• 1917 - 3 Million Cokes sold per day.• 1919 - Buy-over of Coca-Cola to business-man Asa Griggs Candler for $25 million.• 1925 - 6 Million Cokes sold per day.• 1927 - The first Coca-Cola Radio advertisement.• 1929 - Coca-Cola was made available through vending machines.• 1950 – First television Advertisement.• 1977 - The Coca-Cola contour bottle was patented.• 1978 - Two litre plastic bottles introduced.
  5. 5. • 1982 - Diet Coke was introduced in July targeting health consciousconsumers.• 1993 - Coca-Cola exceeds sales of 10 Billion cases worldwide.• 1993 - Advertising slogan -"Always Coca-Cola".• 1995 – Coke consumed aboard the Space Shuttle Discovery• 1907-1948The Coca-Cola expands its bottling operations in:Hawaii, Philippines, France, Belgium, Bermuda, Colombia, Honduras, Italy,Mexico, Haiti and Burma, China, Guatemala, Holland, Spain, Venezuela,Morocco, Germany, Australia, Scotland and many more.
  6. 6. Prologue:• 1999 - Coca-Cola Enterprises has one of their worst public relationsnightmare in its 113 year history.• 8th June, 1999 - Students in Bornem, Belgium noticed that the coke theyhad purchased had a bad smell. School administrators called the Coca-Cola Enterprises (CCE) plant that morning to complain.• CCE is a European bottler owned 40% by Coca-Cola with plants inAntewerp, Dunkirk & Ghent.• At the same in the town of Belsele, city officials called and complained ofbad smelling coke from vending machines• Now Coca-Cola realized that a crisis was occurring.
  7. 7. • 14thJune, 1999 - Luc Van den Bossche bans sales of all Coca-Colasoft drinks from the three plants Antwerp, Dunkirk, and Ghent.CCE withdraws15 million cans and bottles.• Coca-Cola, Coca-Cola Light, Sprite, Nestea, Aquarius lemon, orange, and grapefruit,Bon Aqua, Kinley Tonic and Lilt.• However continues to mishandle the situation by not giving clear informationto the public and health officials. They declared that there was no realproblem and all bottles with codes DU, DV and DW had been removed.• Despite this 38 more students became ill.• CCE later realises that list was incomplete and that all cans stamped withthe code DX and DP should have been removed.• Problems continue. France officials complained that incorrect informationwas being provided by CCE.
  8. 8. • With additional problems being reported in France, Coca-Cola finally putits public relations damage control into action.• 24thJune, 1999 – Belgian health authorities end a 10 day ban on Cokeproducts.• 25thJune, 1999 - CCE holds a news conference in Brussels denying that thedrinks posed any health risk.• Douglas Ivester CEO and Chairman said that production would resumeimmediately and that he expected Coca-Cola products to be back in Belgianstores within two weeks. He also offered to pay medical costs if anyone fellill.• Damage had already been done.• Information was delayed and often misleading.• People in Europe lost confidence in Coca-Cola products.• At least 100 people became legitimately sick.
  9. 9. Predicament:• Coca-Colas financial performance suffered a major setback due to theBelgian crisis.• Negatve impact on Coca-Colas overall second-quarter net income in thefiscal year 1999, coming down by 21% to $942 million.• Entire operation of destroying recalled products cost CCE $103 million• 5% decline in the bottlers revenues.• 6% decline in cash operating profit.
  10. 10. SWOT FragmentationStrengths:• Strong brand recognition across the globe.• Coca-Cola is the second most recognizable phrase after “Ok”.• Company valued at $ 67000 Million in 2006.• It has become a part of the World culture. Emotional attachment with the brand.• Owns 4 of the top 5 soft drink brands in the world: Coca-Cola, Diet coke, Spriteand Fanta.• Largest manufacturer, distributor and marketer of non-alcoholic beverages.• Operations supported by strong infrastructure owning 32 beverage concentrateand syrup manufacturing plants. Also now manufactures juice concentrate.• Aggressive branding and advertizing resulted in re-building a powerful image ofthe company
  11. 11. Weaknesses:• The proposition demonstrated the gap in capabilities of the companyofficials as they issued statements contradicting one another.• An apology to consumers came more than a week after the first publicreports that people had fallen ill. It was not until June 18,10 days after thefirst schoolboy became dizzy and nauseated after drinking a Coke that topcompany officials arrived in Belgium. And when Coke did begin to respond,it tried to minimize the reports of illness.• Also the company officials initially viewed the contamination to be a minorproblem clearly proving the lack of foresight.• Being addicted to Coca-Cola also is a health problem, and has other side-effects on teeth which is an issue for health care.
  12. 12. • Sheer carelessness, chaos, panic caused an incomplete transmission ofrecall codes further worsening the case.• All of these un-coordinated and disarrayed activities led to the ban on salesof all of Coke’s products. The situation had worsened to the extent that thehealth minister of France was quoted saying that “That a company soexpert in advertising and marketing should be so poor incommunicating on this matter is astonishing.”• This definitely had an evident effect on the sales numbers and the revenueof the company.
  13. 13. Opportunity:• Coca-Cola’s bottling system also allows the company to take advantage ofthe infinite growth opportunities around the world.• The incident of the European children gave Coca-Cola the opportunity todevelop a system that will quickly respond to crisis.• This incident also gave the company an opportunity to look into otheravenues of solutions and not to just rely on the first instinct.• These opportunities improves the brand image and also will help increasethe affection for the company in the hearts of the people.
  14. 14. Threats:• Such a crisis also has the competitors on their heels de-faming the brandname as is evident with the advertisement campaigns amidst the cola wars.• The consumers can easily switch to other beverages with little cost orconsequences.• With Coca-Cola not responding neither quickly nor with its senior mostspokesperson it definitely threatened the company’s image as 74% of thesales revenue was being generated from the European nations.• Such an incident can also result in the withdrawal and even severing ofsupport from the co-branding partners where a good amount of revenue isgenerated by means of sponsorship and partnership.• With the company taking such a weak stand for the issue its also faceddejection from the political and the legislative fronts of the locale.
  15. 15. Synopsis:• The planning and implementation process of the SWOT analysis of theproblem clearly highlights the importance of a crisis management plan sothat major areas of vulnerability can be identified and therefore addressed.• Response time is critical in minimizing damage to image and/or brandimage.• Contingency planning is crucial to ultimate success in dealing withopportunities and threats to companies.• Moreover, because factors of impact vary from country to country andculture to culture, it is very important that response plans are developed foreach location and include input from local management and public officials.• We must understand that Perception does become Reality. In this case,the company’s silence as they attempted to identify the source of theproblem led to a loss of public confidence.• The longer the management delays a response, the more the opportunityfor permanent damage to the psychological bond that connects theconsumer to company image and reputation.
  16. 16. • The crisis management was more complicated in Coke’s crisis as thebottler’s were not owned directly by the parent company.• Thus the company needs some way to bring members of its top corporatemanagement together with other decision makers and other informationproviders so that a response can be made public quickly.• It took CCE an entire week to get Douglas Ivester, Coke’s CEO to Europe.In a crisis of such a magnitude, the public looks for the No. 1 person to bedoing something significant.• So while we do not know what Coke’s crisis management process was, itappears not to have moved speedily.• It is also important that the company have evolved a culture that in a crisislike this will put foremost on the table the health of the customer.• In coke’s instance the company had information about people who hadbecome ill weeks prior to these incidents. They should have released thatinformation. Instead they chose to not disclose the same thinking that it wasirrelevant.• Even though you feel the information is irrelevant, one should get it out –because that allows people who may think it is relevant to go throughwhatever process they want to go through.
  17. 17. • It is imperative that the local personnel who have built a rapport andcredibility with the local customers and political units be included as a visiblepart of the immediate response plan. In our case, there was a recentchange in the political leadership in Belgium, and the necessary rapportbetween the company and the government had not been established.• Another important consideration in critical incidents such as this is thepreservation of brand image. Thus nostalgic memories, product, confidenceof the people in the company and other such intangibles must bemaintained to preserve and protect the company and its long term positionin the market.

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