Scenario 1 A European Crisis for Coca Cola The situation Rev.docx

Scenario 1: A European Crisis for Coca Cola The situation:
Review the two articles for Scenario
I in this week’s Learning Resources. Imagine that you are an
intercultural communication
consultant (ICC) entering the Coca Cola Headquarters in
Atlanta one month after the first four
Belgian children claim they are ill due to consuming Coke
products. You are there for another
job but are invited into the meeting that is analyzing the
handling of this crisis.
To prepare for your Assignment, consider the following:
• Former Coke CEO Robert Goizueta states, “Business will be
the institution of the future. It’s
the only global institution” (Greising, 1998, p. 145). Is this
accurate? What implications does this
have for ICC?
• All businesses working across national borders deal with
conflicts between corporate culture
and the national cultures in which they operate. How would you
recommend translating the
corporate culture of Coca Cola to the national Belgian culture?

• Leaders are symbolic representatives. What recommendations
would you have for the CEO,
Doug Ivester?
• How does the fact that Coca Cola has more revenue per year
than the gross domestic product
(GDP) of two thirds of all the world’s countries play a role in
how they operate in a crisis?
• What additional questions would you ask or what additional
information would you need in
order to give the most effective recommendations?
Your Task: Analyze the countries affected by this product issue.
Consider how you would
advise the leaders of Coca Cola on how they should have
approached the situation from an
intercultural communication perspective in order to have
minimized the impact on sales and
satisfied the needs of the countries affected. Provide
recommendations of how Coca Cola could
handle similar situations in the future more effectively. Cite at
least two of the theories/tools
from your Learning Resources to support your
recommendations. Reference: Greisling, D.
(1998). I’d like the world to buy a Coke: The life and leadership

of Roberto Goizueta. New
York, NY: John Wiley and Sons, Inc.
from The New Yorker
July 12, 1999
TALK OF THE TOWN
Dept. of Straight Thinking
Is the Belgian Coca-Cola hysteria the real thing?
by Malcolm Gladwell
The wave of illness among
Belgian children last month
had the look and feel--in the
beginning, at least--of an
utterly typical food
poisoning outbreak. First,
forty-two children in the
Belgian town of Bornem
became mysteriously ill after
drinking Coca-Cola and had
to be hospitalized. Two days
later, eight more school
children fell sick in Bruges,
followed by thirteen in

Harelbeke the next day and
forty two in Lochristi three
days after that--and on and
on in a widening spiral that,
in the end, sent more than
one hundred children to the
hospital complaining of
nausea, dizziness, and
headaches, and forced Coca-
Cola into the biggest product
recall in its hundred-and-
thirteen-year history. Upon
investigation, an apparent
culprit was found. In the
Coca-Cola plant in Antwerp,
contaminated carbon
dioxide had been used to
carbonate a batch of the
soda's famous syrup. With
analysts predicting that the
scare would make a dent in
Coca-Cola's quarterly
earnings, the soft-drink giant
apologized to the Belgian
people, and the world received
a sobering reminder of the
fragility of food safety.
The case isn't as simple as it
seems, though. A scientific
study ordered by Coca-Cola
found that the contaminants
in the carbon dioxide were
sulfur compounds left over
from the production process.

In the tainted bottles of Coke,
these residues were present at
between five and seventeen
parts per billion. These
sulfides can cause illness,
however, only at levels about a
thousand times greater than
that. At seventeen parts per
billion, they simply leave a
bad smell--like rotten eggs--
which means that Belgium
should have experienced
nothing more than a minor
epidemic of nose-wrinkling.
More puzzling is the fact that,
in four of the five schools were
the bad Coke allegedly struck,
half of the kids who got sick
hadn't drunk any Coke that
day. Whatever went on
Belgium, in other words,
probably wasn't Coca-Cola
poisoning. So what was it?
Maybe nothing at all.
"You know, when this
business started I bet two of
my friends a bottle of
champagne each that I knew
the cause," Simon Wessely, a
psychiatrist who teaches at
the King's College School of
Medicine in London, said.
"It's quite simple. It's just

mass hysteria. These things
usually are."
Wessely has been collecting
reports of this kind of
hysteria for about ten years
and now has hundreds of
examples, dating back as far
as 1787, when millworkers
in Lancashire suddenly took
ill after they became
persuaded that they were
being poisoned by tainted
cotton. According to
Wessely, almost all cases fit
a pattern. Someone sees a
neighbor fall ill and becomes
convinced that he is being
contaminated by some
unseen evil--in the past it
was demons and spirits;
nowadays it tends to be
toxins and gases--and his
fear makes him anxious. His
anxiety makes him dizzy and
nauseous. He begins to
hyperventilate. He collapses.
Other people hear the same
allegation, see the "victim"
faint, and they begin to get
anxious themselves. They
feel nauseous. They
hyperventilate. They

collapse, and before you
know it everyone in the
room is hyperventilating
and collapsing. These
symptoms, Wessely stresses,
are perfectly genuine. It's
just that they are
manifestations of a threat
that is wholly imagined.
"This kind of thing is
extremely common," he
says, "and it's almost
normal. It doesn't mean that
you are mentally ill or
crazy."
Mass hysteria comes in
several forms. Mass motor
hysteria, for example,
involves specific physical
movements: shaking,
tremors, and convulsions.
According to the sociologist
Robert Bartholomew, motor
hysteria often occurs in
environments of strict
emotional repression; it was
common in medieval
nunneries and in
nineteenth-century
European schools, and it is
seen today in some Islamic
cultures. What happened in
Belgium, he says, is a fairly
typical example of a more

standard form of contagious
anxiety, possibly heightened
by the recent Belgian scare
over dioxin-contaminated
animal feed. The students'
alarm over the rotten-egg
odor of their Cokes, for
example, is straight out of the
hysteria textbooks. "The vast
majority of these events are
triggered by some abnormal
but benign smell," Wessely
said. "Something strange, like
a weird odor coming from the
air conditioning."
The fact that the outbreaks
occurred in schools is also
typical of hysteria cases. "The
classic ones always involve
schoolchildren," Wessely
continued. "There is a famous
British case involving
hundreds of schoolgirls who
collapsed during a 1980
Nottinghamshire jazz festival.
They blamed it on a local
farmer spraying pesticides."
Bartholomew has just
published a paper on a
hundred and fifteen
documented hysteria cases in
schools over the past three
hundred years. As anyone
who has ever been to a rock
concert knows, large numbers

of adolescents in confined
spaces seem to be particularly
susceptible to mass hysteria.
Those intent on pointing the
finger at Coca-Cola in this
sorry business ought to
remember that. "We let the
people of Belgium down,"
Douglas Ivester, the
company's chairman, said in
the midst of the crisis. Or
perhaps it was the other way
around.
© 1999 Malcolm Gladwell
More Fizz Than They Bargained For 1
More Fizz Than They Bargained For:
Coca-Cola and the 1999 Belgian Crisis
Gary W. Carson

The Crisis Begins with a Pop
Dateline Brussels, Belgium - May 1999: Forty – one school
children became nauseous with
headaches that required medical attention. When questioned,
they reportedly drank “Coke that
smelled funny”. Treated at a local hospital, the students were
sent home for the rest of the day.
After investigating, Coca Cola Corporation immediately pulled
100,000 cans of their product off
of shelves and promised to pay for medical care and compensate
victims. Upon testing the
“tainted cans” no source of the illness could be found. On the
heels of a questionable and
botched poultry contamination scare, the Belgian Government
Health Ministry was at the
forefront of the investigation and media coverage. Within a few
days nearly 200 people reported
to a Lille, France hospital with nausea and headaches they
attributed to contaminated Coca Cola
products. Medical investigators found no connection between
the soft drink and the illness,
claiming it was “viral in nature” (Haggerty, Barrett, 1999)

The Belgian government demanded a recall of Coke products
until the company could
identify the problem. The French Health ministry called for
removal of Coke products. Both
countries refused to wait for testing that could identify the
source of the problem. The
governments of Spain, Luxembourg, and the Netherlands also
called for removal of all Coke
products from the shelves and counters of their respective
countries. One week later the
governments still refused to allow Coca Cola products to be
sold in their countries. Queries about
product safety spread to Switzerland and even the African
continent.
Framework
This paper will consider the communication of Coca Coal
Company in the midst of this
crisis and the aftermath. The theoretical view of the Belgian
crisis is that what happened was a
product problem that escalated into a clash of competing
cultures. These cultures being the

European Union, particularly embodied by the Belgian
Government, and the Coca Cola
Company.
A History of Coca-Cola Corporation
In a 1942 letter, William D’Arcy, advertising executive for the
Coca-Cola account said,
“Since 1886… changes have been the order of the day, the
month, the year.
These changes, I may add, are partly or wholly the result of the
very existence of
The Coca-Cola Company and its product…They have created
satisfactions, given
pleasure, inspired imitators, intrigued crooks…. Coca-Cola is
not essential, as we
would like it to be. It is an idea – it is a symbol - it is a mark of
genius inspired.”
(Pendergrast, 1993: p v).
From its 1886 beginnings in the mind and kettle of John
Pemberton the Coca Cola
Company has become an icon of American capitalism.
Capturing significant market share
in nearly every corner of the globe it is the world leader in the
beverage industry. Bought
by the a group of investors in 1919, a $5 share of Coke stock,
by 1991 had split to yield

1,152 shares worth over $2 million if dividends were reinvested
(Pendergrast: p 134).
The stability of the company is shown by the fact that it has
had only 11 CEO’s in
its 116 year history. The consistency of stock value, dividends,
return on investment and
the value for collectors of its advertising artifacts, speaks of its
place in the social and
business heavens. The 2001 Annual report states with pride, “In
2001, Coca Cola
connected with people around the world on over 250 billion
occasions. In other words,
someone chose a Coca Cola – diet, light or classic, with cherry
or with lemon, with or
without caffeine – nearly half a million times every minute of
every day”
The Role of Brand Management and Brand Value
The value of Coke is not in the caramel colored sugar water
with extracts of coca leaves
and added caffeine. The value of Coke is, in D’Arcy’s words, in
the symbol it represents. The
protection of this symbol is known as brand management. David
Bickerton makes the case that

companies can organize using the brand as an architectural tool
for business processes that
generate brand value. Contrast this with the more traditional
approach; where brand is an
organizational tool serving to create alignment between internal
culture and external image.
(2000: p 42). The brand and its perception, internally and
externally become the organizing
principal, the goal and the raison d etre of the corporation’s
existence. It can be seen why, “To
win the game, you must add style to substance…. Branding by
reputation, not product, is the
name of the new game” (Gibbons, 2001). The CEO becomes the
prima fascia symbol of the
guardianship of the brand entrusted to all stakeholders.
Brands are a symbol but they are also “intangible assets in
many a corporations’ balance
sheets.” As such their value can be calculated. Taking the total
market capitalization of a
corporation (its stock value) subtracting out all tangible or hard
assets, you can calculate a brands
value to the corporation and the world. With total stock value

exceeding $180 billion the value of
Coca Cola brand alone “could be in the tens of billions of
dollars” (Brummer, 1999).
The importance of the brand for Coca Cola cannot be
emphasized enough. Since it is a
symbol, the communicative practices of the corporation found
in rituals, artistic expressions,
personal embodiment, corporate culture, legal challenges,
internal and external utterances, and
publications are the lifeblood of the brand. This is magnified at
a time of crisis. In a global
economy and global media coverage there is no such things as
local problem. While corporations
can be situated in time and space, brands transcend these
limitations. Financier Warren Buffet
said, “A great brand builds a moat around a product that
protects it from upstart competitors”
(Greising p 178). It also insulates it from some of the effects of
product and media driven crises.

The European Union
As the European Union incrementally implements governmental
and policy changes
across its 15 members, doing business in Europe is like trying
to hit a moving target. While the
January 2002 conversion to the Euro was perhaps the most
publicized EU action, the
introduction of the CE standard may be the most pervasive
activity to date. “As the European
Union begins to flex its collective muscle, industries of every
stripe are beginning to take notice
of the way the world’s largest economy is doing business. The
centerpiece of the EU way of
business is the CE standard. This standard covers product,
service, packaging and labeling
specifications from everything to industrial work gloves to
chocolate” (Wagner, 2001). What
once was a hodgepodge of regulations and compliance
requirements, unique to each national
government and sometimes within governments to
municipalities, is now an international
standard.
On the surface this single international standard simplifies
doing business because there

is only one benchmark setting agency. Yet the difficulties for
businesses are twofold. The first is
during the transition and the interpretation of these benchmarks.
What was acceptable before, say
in the Netherlands but not in France, now may be no longer
acceptable in either place.
Established markets and business practices are put in jeopardy.
In addition, local interpretation
and EU adjustments to these standards in light of practical
considerations, revealed only through
implementation, leaves things in an unsettled state.
The second difficulty for business is the change in status of
international companies
regarding the collective economic might of the EU. For many
countries throughout the world,
dealing with international companies is an uneven playing field,
tilted to the benefit of the global
corporation. The Gross Domestic Product of Belgium is on the
same order of magnitude as the
total value of Coca Cola : $230 billion to $180 billion
respectively ( McGeveran, 2001 p 787).

When the bottlers and auxiliary suppliers that Coke owns in
whole or in part are added to Coke’s
value, the scales weigh in on behalf of Coca Cola. Companies
have used this to their competitive
advantage. The collective might of the EU gives the advantage
in negotiations and standard
setting back to the countries. This “unified approach to the
industrial marketplace,”(Wagner)
significantly changes the landscape.
In addition you have the influence in the EU of forces that are
more socialist in ideology
than they are capitalist. What The Wall Street Journal calls,
“…the growing power of fringe
parties, such as the Greens, in Germany, France and the Low
Countries and in the corridors of
the European Commission….” (Melloan, 1999). Under Ivester,
Coca Cola ran into this in
opposition to the attempted purchase of Orangina and Cadbury
Schweppes. The “anti-big-
American-business backlash” (Morris, Sellers, 2000) coupled
with an inflexible acquisition
strategy stymied these purchases which are now under appeal.
The Europe of Douglas Ivester’s

Coca Cola is vastly different than the world even of his
predecessor, Roberto Goizueta
(Measuring the Future 2000).
The climate in Belgium was ripe for a product crisis and, with
its new found muscle and
authority, a government - business confrontation. Two weeks
before the Coke scare, “the ever-
active European Commission had put out a red alert that had
caused an even bigger flap,
announcing that diners were at risk because dangerous amounts
of a carcinogenic substance
[dioxin] had found its way into Belgian chicken feed.” In the
wake of the much publicized
British mad cow disease crisis and the “surprise” EU banning of
Genetically Modified
Organisms [GMO’s] ( Measuring the Future 2, 2000) public
sensitivity was heightened, turning
the Coke “situation” into a crisis (Melloan, 1999).
The Belgium Health Ministry failed to respond in a timely,
effective manner to the dioxin
scare. “This one laid Belgian Prime minister Jean-Luc Dehaene

low when his government was
charged with negligence (Melloane). It led the government to
take a more aggressive approach
to the school children’s illness. The Belgian government’s
contact with Coca Cola
representatives may have added to the crisis as well as led Coke
to violate a cardinal rule of crisis
management (more on this later). “The company says it kept a
low profile early on because the
Belgian government asked it to. Ivester said the Belgian Health
minister told him not to manage
the crisis in the media” (Cobb, 1999).
The changing face of doing business in Europe began, for
Coke, in Belgium and spread
to France, Luxembourg, Spain, the Netherlands, and beyond.
Two days after the problems in a
Belgian school, 200 people reported to a Lille, France hospital
complaining of nausea after
consuming Coke products. Marylise Lebranchu, French
consumer affairs minister “complained it
took Coke 48 hours to provide information on how to identify
which soft drink cans might pose
further risks….’Forty –eight hours is just too long’” (Haggerty).
This led to the incongruous

situation where the minister claims that Coke products are safe
but still orders all canned Coke
products off the shelf.
The local crisis in northern Belgium became an international
event as a result of EU
interconnectedness and telecommunication speed. Regarding the
Coca Cola product crisis,
“every issue becomes very public and there are a lot of people
out there commenting, whether its
on the internet or in newspapers and on TV stations all over the
world…. Its hard to say how
people in the early 1990’s would have reacted to the same
crisis. (Measuring the Future 2).
Although locally bottled, the message of tainted product spread
to where a health minister in the
Central African Republic advised its citizens to not drink Coke
“until further notice” (Haggerty).
Unable to control the government responses “the company
appears to have badly underestimated
how much explanation governments would demand before
letting it [Coca Cola] go back to

business as usual.” (Haggerty).
In 1986 then CEO Roberto Goizueta proclaimed, during Coke’s
100th anniversary
celebration, “Business will be the institution of the future. It’s
the only global institution”
(Greising, p 145). For global corporations, business may be
global in scope and brand influence
but it is still spatially and temporally situated. The changing
culture of the European Union; the
Brussels government need to save face and an opportunity to
flex its authority;
deterritorialization of national borders; an apprehensive public
nervous on recent scares, and the
information spillovers of a wired world created a milieu for
Coke unlike any it had known
before.
Coca Cola Culture
As an icon of American entrepreneurial activity, Coca Cola has
been able to maneuver
through the business cycles, competitor’s challenges and
changing global situation to expand its
business remarkably since its 1886 inception. Surely the blue
chip company has created a culture

that is built, not only to last - but to grow. Just as the European
Union is not the same as it was
20 years ago, neither is the Coca Cola Company. The significant
changes and strategies that
developed under Roberto Goizueta set the stage for the cultural
clash precipitated by the Belgian
crisis. This corporate culture, joined with the personal
characteristics of Goizueta’s successor,
Douglas Ivester, created a confluence of forces where the
parties involved were following their
scripts for crisis communication exchange but missing the
connection.
“An organizational culture is a way of life in a particular
organization…. Not only do
organizations have their own cultures, organizations are
cultures – systems of values, beliefs,
artifacts – that are constituted through the process of
communication” (Witherspoon, 1997, p 74).
For Coca Cola the culture begins over 100 years ago and is
celebrated in its own company
sponsored Coke Museum in Atlanta. We have seen where brand

management has been the
primary focus of the corporation, selling a lifestyle and
worldview as much as a soft drink. To
maintain its image Coca Cola has entered into thousands of
lawsuits over brand name protection
and imitation products (Pendergrast, p 103). It has used these
same lawsuits as a tactic fighting
the competition of Pepsi in the U.S. and abroad (Pendergrast, p
194). It could be argued that
protection of the image and the name is the number one job of
the corporation from the CEO to
the deliverer.
While Coke came to own the American market, its forays
overseas were spotty and
erratic. The strongest showing was in Germany (Greisling, p
174). During Goizueta’s tenure as
CEO, expansion to overseas markets would evolve into the
major strategic focus. Along with
Douglas Ivester, emphasis on world market share and in
individual countries along with the goal
of selling one billion gallons of syrup a year dominated the
strategic thinking and quarterly
planning of the CEO and upper level management. The success
was unparalleled. During the

sixteen years of his leadership revenues went from $4 billion to
$18 billion and stock market
value jumped from $4.3 billion to $180 billion: a 3500%
increase (Greisling, p xvii).
This unprecedented increase was achieved on a number of
different fronts. Greisling
catalogues the methods utilized. First Goizueta, “changed the
formula by which chief executives
will be measured from this point forward. More than anything
he did it by taking lip service
about serving shareholders and turning it into a life’s creed” (p
xvii). Secondly, he refocused the
company away from diversification into other industries [like
Sony/Columbia entertainment] to
do what Coca Cola Company did best - sell soft drinks. At least,
Goizueta reasoned, they were
predictable (p 167). The next three profit increasing strategies
were directly attributed to his
Chief Financial Officer, Douglas Ivester. Thirdly, Coca Cola
learned to make money by selling
their newly created foreign proceeds for a profit on the foreign

currency exchange markets (p
147 ), Fourthly Ivester designed the “49% solution,” to spin off
bottling (see below) and other
assets, significantly reducing corporate debt and substantially
increasing investment income
( pp147-154). Lastly the securitization of future profits,
particularly in relation to syndicated
television and movie rights and later to other tangible assets
added to the bottom line (p 150).
Foreign expansion centered around the untapped Asian market
and the Iron Curtain
coming down. While Pepsi had a 10 year exclusive right to sell
its product in the Soviet
Union/Russia, by 1996, Coke had gained a 60% market share.
Along with the aforementioned
profit enhancement/debt reduction strategies, these activities
enabled the Coca Cola Company to
post 16 years of consecutive quarterly profits, and growth of 7-
8% in syrup volumes and 15 –
20% in per share earnings (McKay, 2000). But, by late 1999,
Doug Daft was named CEO,
succeeding Douglas Ivester. Ivester had resigned, an
ignominious steward of seven consecutive
quarters of declines. He had communicated a rosier picture to

investors than was achievable.
Analysts were noting, “Companies can’t put out goals and
routinely miss them and not lose
credibility. There may not be an investor on this planet who
believes Coke can grow at 15-20%
over the long term” (McKay, 2000).
The culture of Coke, driven by expansion and profits at every
turn, did not allow for
retreat. The storied past includes the story where Coca Cola
bought back most of its stock
because its CEO, Robert Woodruff, foresaw the crash of ’29.
The company not only held its
stock value but increased its value throughout the Great
Depression (Pendergrast, pp 174-178).
Taking significant market share wherever it found itself, by
1998, profits for the Coca Cola
Company were now divided 27 % in the United States and 73%
from the rest of the world
(Schmidt, 1999). Overseas success brought with it a
concomitant set of vulnerabilities at a level
unknown before within the corporation. When Goizueta died

from lung cancer in October 1997,
Ivester took over just at the time Russia devalued the ruble and
the Asian economic crisis would
hit the world markets. Ironically the expansion and success
against Pepsi, contributed to a drop
of profits for 1998 by 14% (McKay, Deogun, 1999).
The structure of the Coca Cola Company is described as
“centralized decentralization,”
known derisively as “Coca-Colonization” (Greising p 173). This
concept is clearly seen in
Ivester’s 49% solution and the relationship between Coca Cola
and its bottlers. This relationship
has a significant impact on the communication processes and
public confusion during the
Belgian crisis. Coca Cola produces and provides the syrup. It
then contracts with independent
and company owned bottlers. Like a franchiser, Coke gives
bottlers territories and sales
strategies providing syrup for their fountain, bottle and can
sales. These relationships have been a
roller coaster throughout the company’s history (Pendergrast
1992: 137-149). Allowing local
ownership and sales and reaping profits that stay within the
area, provides a community stake in

the operation and success of the larger corporation. The 49%
solution was the sale, through Coca
Cola Enterprises, of at least 51% of the Coca Cola Corporation
owned bottlers to outside
investors. This allowed the company to write off much of the
bottlers debt, count the income as
investment profits and still “shape” (read, control) the quality
and operation of the bottling
enterprise (Greising, 151).
“… An important part of organizational culture is the rhetorical
environment in which
individuals work… (Witherspoon, 39). The Coca Cola
Company is the proverbial 800 pound
gorilla in the room. It is good, knows it, proclaims it and uses
this knowledge to its advantage at
every turn. Unrealistic profit expectations, exposures to
heretofore unknown vagaries of the
world marketplace, success of profit making strategies that
followed the law of diminishing
returns, and a culture of expansion and unparalleled success
sustained a fiscally and socially

conservative culture that would and could not recognize or
respond quickly to the changing
environment of business in Europe are part of the corporate M.
O. Now we add to this mix, a
CEO, who’s personal characteristics and professional outlook,
amplified many of the already
stultified aspects of the corporate culture.
The Chief Executive Officer
Corporate culture is defined, to some extent, by the CEO.
He/she embodies the ideals and
goals of the corporation. This aspect increases exponentially in
a crisis where the CEO becomes,
in Karl Weick’s terminology, the sense maker for the
corporation
(Ogrizek, Guillery 1997, p 31). “…Those exhibiting leadership
behavior must understand the
importance of communication as a process that creates, sustains,
and sometimes saves,
organizational cultures” (Witherspoon, p 84). Who the CEO is,
their worldview, their
congruence or difference with the corporate culture, their
communicative patterns and abilities
will all play a part in their role in the midst of a crisis.

Consideration of Douglas Ivester and the
expectations of the CEO as the 1900’s come to a close will help
define the culture clash between
Coca Cola Corporation and the European Union/Belgium
government. It will also illuminate part
of the culture clash within Coca Cola.
An accountant by training, Ivester was a 20 year Coke man
before he ascended to the
position of CEO. He served as CFO under Goizueta and
undertook many of the accounting
maneuverings to elevate stock prices and increase the bottom
line (Pendergrast, pp 149-150). He
was a “numbers man” who wore “financial blinders” (McKay,
Deogun). “Analytical and data
driven, Ivester spent heavily on technology for the quick
effective delivery of vast amounts of
information. His goal was to make Coke the ultimate Learning
Organization.” His big emphasis
was substance over style (Morris, p 116).
The Coca Cola culture is to seek predictable, measurable
results. Ivester fits into this

culture well. Ian Lennie, in Beyond Management, speaks of the
measurable world, the Cartesian
understanding of knowledge as something outside the body.
“The more secure knowledge
becomes, the more it is both everybody’s and nobody’s.
Emotion contaminates objectivity by
embodying world under scrutiny. Emotion then, in this
Cartesian framework, should have no part
in the quality of knowledge itself” (1999, p 18). It is this
objectivity, sought by Coke that seems
to have been and accepted, yea the lifeblood of Ivester’s
professional career.
The 800 pound gorilla syndrome was exhibited even as Douglas
Ivester was being
groomed for the CEO position.
Back in October 1994, Ivester, then newly names president and
COO, took center
stage at a big industry trade show and delivered a speech that
was unforgettable
for its surliness. It was called ‘Be Different or Be Damned,’ and
it was some
debut. Ivester seemed almost to be trying to differentiate
himself from the larger
than life Goizueta. He described himself as wolf – highly
independent, nomadic,
territorial. ‘I want your customers,’ he told a stunned audience.
‘I want your space

on the shelves….I want every single bit of growth potential that
exists out there.’
Make no mistake, he told them, he was their competitor. He
would not pretend to
be their statesman (Morris, p 117).
His very successful time as a COO and CFO allowed him to
know the intricacies of the
financial aspects of Coca Cola. He once said, “I know how all
the levers work, and I could
generate so much cash I could make everybody’s head spin”
(Morris, p 114). This master of his
own destiny and engineer of the train attitude, combined with
the wolf metaphor, Ivester’s
penchant for details and intricate data machinations, exhibited
itself as the singular head of the
corporation. He failed to appoint a second in command despite
the urging of the Board of
Directors. (Morris) (McKay, Deogun) (Dearlove, Cranier, 2002
p). In fact, it was his failure to
heed the advice of Board members in a number of areas that led
to their lack of confidence in
him and his resignation after 26 months at the helm. University

of Southern California President,
Steven Sample states, “A primary challenge for any leader is to
surround himself with people
whose skills make up for his [sic] own shortcomings” (2002, p
125). He echoes others who decry
the attempt to lead as an individual without the support of a
solid management team and a
cramped management style (Measuring the Future 2000 2)
(McKay, Deogun) (Morris).
The difficulty of corporate leadership is not unique to Douglas
Ivester. Managing the
complexities of the global corporations requires a great variety
of skills and competencies. A
CEO is required to be able to handle multiple, concurrent crises,
and multiple constituencies
(Lublin,1999), manage the Board of Directors, (Lublin, 1999)
(Dearlove) and deal with
performance problems (How to Tell 2002). Questions
concerning the wisdom of a second in
command succeeding a leader are raised in light of a number of
CEO resignations after a short
time in the position. The skills for being second do not readily
translate into the abilities needed
for being number one (Lublin).

Perhaps the clearest shortcoming of Ivester’s abbreviated tenure
at the top is his lack of
multi-cultural sensitivity. Whether it blossomed from the
biggest, baddest corporation on the
block attitude or a lack of concern for others as long as the
numbers were right, it cannot be
determined. But two major events highlight this. Concerning the
challenges of expanding the
French market, a traditionally, culturally sensitive market,
Geisling writes, “The rest of the move
on France was vintage Ivester, brash, aggressive, and not
particularly concerned with fine details
such as cultural sensitivity… he pushed for accepting the
importation of William Hoffman,
Coke’s Atlanta bottler who had never before visited France and
did not speak the language.”
Hoffman promptly created an uproar by placing a Coke vending
machine at the base of the Eiffel
Tower (p184-185).
The second circumstance revolves around Carl Ware, an African
American with the

highest position in the Coca Cola Company. In the midst of a
highly public racial discrimination
suit with Johnny Cochran as one of the plaintiff’s lawyers,
Ivester demoted Ware. This lead to
Ware’s much publicized and lamented resignation and a meeting
with two Board members
resulting in Ivester’s stepping down. The Board of Directors
were already blaming part of the
racial discrimination suit on Ivester’s lack of cultural sensitivity
and communication deficits
(Hamilton, 2000). This was the last straw.
While it is clear that leaders create and manage culture
(Witherspoon, p 89), it is also
clear that leaders are influenced by the corporate culture they
help create. Following the
legendary Goizueta was an invitation to disappoint, for few can
live up to legends. Poor timing
surrounding external events were beyond his control. The
“automatic” second in command,
taking over for the unquestioned legendary boss who’s star rose
even higher in corporate lore
when he died while in office may have set Ivester up for a fall.
His personal proclivities seem to

exacerbate the corporate hubris and unachievable expectations
measured not in brand value but
in bottom line numbers.
Clashing Cultures
The news of school children becoming ill because of Coke
products immediately throws
management into the murky waters of crisis management. In a
world where information,
especially solid information, is hard to come by, rumors abound
and the safe repetitions and
rituals of the past are of little value. Flying by the seat of your
pants means maneuvering through
a variety of stakeholders with competing and often antagonistic
needs and agendas all done
before the cameras and media seeking a story du jour.
Describing crisis as a successive series of waves that build up
and break, Ogrizek and
Guillery describe P. Lagadec’s five states of a crisis. 1.
Outbreak/overflow
2. Disorder 3. Loss of credibility 4. Divergence of many kinds
5. Destabilization (p xiv). When

the word gets out that a Coca Cola product is perceived to have
caused a crisis the crisis
management team and a series of responses are set into action.
An attempt to determine the
extent of the crisis, gather the facts of the situation, assess the
damage and begin responding as
quickly as possible are the goals. In the case of a product crisis,
one key determination for the
company is whether this is a result of product tampering, ala the
Tylenol scare of 1972, a
production problem, ala Perrier water and benzene
contamination of 1990 or not related to the
product at all. While the answer to these and a myriad of other
questions may not be readily
ascertained, certain actions are recommended.
Coca Cola immediately offered to pay for any needed medical
treatment, to reimburse the
victims and pulled 100,000 units of product off the shelves in
order to test and determine the
safety of the product (Haggerty). Following the precedents of
Tylenol and Perrier, Coca Cola
assured the public it would do all it could to insure the safety of
its valued customers. Even while

the students, who were in the middle of exams, returned to
school, four significant events took
place that would magnify this situation into a crisis. 1. As
previously mentioned, the Belgian
Health ministry requested that Coca Colas not mange the crisis
in the media. Coke agreed to this
creating a vacuum in the media for soft drink consumers. 2.
Confusion in the public and the
media arose over who was speaking for Coke. Was it the bottler,
a part of Coca Cola Enterprises,
the major 49% solution company spun off a few years before
with assets that rivals Cokes? Or
was it the head of the European operations for the Coca Cola
Company? Perhaps it was Coke’s
world headquarters in Atlanta? 3. The media, in its varied
forms, picked up the story and began
running a lot of different “takes” on the crisis. 4. Investigators
for Coke were unable to find a
clear link between the illness and the children’s ingestion of
what they described as funny
smelling Coke. Their lack of definitive information made them
reticent to say anything.

When Coke did make a statement it centered on speculation
that the tainting of the
product may have been due to a fungicide that was on pallets
used to transport the product. It
was external, on the can, not internal, so the product was safe.
The bottler complained loudly in
their own press conference that this was not their fault. The lack
of control of the message made
what seemed to the public of a schizophrenic Coca Cola
Corporation and Coca Cola Enterprises
slinging accusations back and forth, confusing and upsetting all
parties. It gave the beleaguered
Health Ministry in Belgium and later France and the EU, a
target and a cause. In the interim
Ivester said from Atlanta, “There is no evidence linking the
illness to the product.” Going on to
explain that the nauseous children had all recovered hinting that
it wasn’t a significant event
(Bell,1999, p 15). The Corporation and the bottler got into the
mix again by speculating that a
bad batch of carbon dioxide provided by a Swiss company may
be the culprit. A spokesperson
the Swiss carbon dioxide supplier denied the charge. This
international spill over of a supplier

now accusing Coke and the bottler of scapegoating them, played
prominently in the media.
Two days after the initial school problem, people started
reporting to a French hospital on
the Belgium border saying drinking Coke had made them sick.
It would mushroom to 200 within
ten days. The largest recall in Coca Cola history ensued with
2.5 million units pulled off the
shelves. All Coke products ( Fanta, Sprite, etc) were questioned
concerning their safety. The
Health Ministries of France and Belgium, under the guidance of
the EU, expanded its
investigation, accusing Coke of stonewalling tactics creating
more tension. A preliminary
investigation by the hospital in France indicates the symptoms
were not product related but viral
in nature. As noted, the French minister said she believes the
products are safe but calls for their
removal from store shelves. Spain and Luxembourg join the
call.
Ten days after the initial incident Douglas Ivester travels to

Belgium and France for
damage control, to apologize and work with the governments to
get Coca Cola products back on
the shelves. It takes until the end of June before all products are
allowed back.
Crisis management is about perception, symbolic actions and
communication (Ogrizek
xiv, 12, 56). Management in general, and crisis management
intensifies this, “is about keeping
disorder at bay” (Lennie, p 96). Given the culture of the
corporation, after its initial foray into the
situation, Coca Cola lost sight of the admonition that in a crisis
“it is modesty that is needed
more than anything else” (Ogrizek, p 53)
Lessons Learned
In this cultural crisis it becomes clear that the clash of cultures
helped blow a minor
incident into a major crisis event for the Coca Cola Company
and its auxiliary corporations and
suppliers. The communication strategies and practices of the
corporation contributed to this
escalation. At the proverbial wrong place at the wrong time due
to recent events in Belgium and

the “need” for the Health Ministry and government to redeem
itself, created a volatile situation
that was hidden from view for Coke. From a leadership and
communication perspective there are
a number of lessons that can be gained from this situation.
The Golden Rule of Crisis management is that a product crisis
must be handled by the
CEO. “It is the whole corporation that is being targeted and
questioned through the product”
(Ogrizek, p 21). This could not be managed from Atlanta.
Leadership had to be on the ground in
Belgium as a symbolic action of unity and concern. While
Atlanta utilized the restoration
strategies of denial, shifting the blame, scapegoating,
minimization and comparison to other
more egregious product difficulties (Benoit, 1995, p 95), the
citizenry of Belgium heard no one
speak to their fears. While the silence grew to an overwhelming
crescendo of accusation and
blame it was broken only by the shrill finger pointing of
bottlers and suppliers that exponentially

increased fears. The other break in the din, unfortunately, was
the offensive attempt to say it
wasn’t all that bad by a corporate leader safely ensconced in
storied halls 5000 miles away. No
one ever feels better when told to, “Relax. Cheer up! It could be
worse.” This paternalistic
pabulum moved fear into anger for the citizens of the EU.
If Coca Cola is all about brand, then the entire corporation, but
particularly the CEO, lost
sight of that (Brummer, 1999). Dennis Perkins book Leading at
the Edge focuses on the story of
Ernest Shackelton and his expedition gone awry in the Antarctic
ice. Their remarkable survival
was achieved by concentrating on the key elements. “Optimism
is an important leadership
quality, but denial is deadly” (2000, p 54). Despite all the
technology and the voracious appetite
and need for information, Ivester created a culture where the
data was more important than the
interpretation. This Cartesian world view minimized or ignored
the messy emotional responses
given in crisis. “Ivester had all the data but he missed their
larger meaning” (Morris, p 116). A
former Coke executive observed, “ ‘The folks [Coke employees

and Board] didn’t think there
was someone who was keeper of the flame. There was enormous
criticism as to whether Doug
understood the flame or not’”(McKay, Deogun).
Crisis management is all about victim management. Identifying
the victims, anticipating
the needs and concerns of physical victims and those suffering
fears from the incident is a
cornerstone of corporate crisis management. “The key principle
underlying communication with
and about victims is proactivity” (Ogrizek, pp 60-62). Starting
off on the right foot for the
physical victims, Coke failed in their follow through to the
larger society and government. While
the symbolic action of pulling products off the shelf before you
know where the problem lies can
be a double-edged sword from a bottom line perspective, it did
get the point across. However,
communication via press release, appearances by subordinates
and memos, overwhelmed the
initial symbolic concern with the symbolism of aloof

detachment and lack of concern (Bell, p
15). Transparency (Ogrizek, p 9) provides the perception of
forthrightness that breeds trust in an
uncertain situation. Perception in a crisis is the reality,
particularly for the victims. More than
anything else it is the “perceived arrogance” of Douglas Ivester
that garnered the greatest
criticism, bringing the weight of the governments on Coke
(McKay, Deogun)
Patricia Witherspoon notes that decision making is linear only
in theory (p 115) and that
leadership is the integral melding of authority and persuasion (p
4). Intensified during crisis, the
symbols of authority and one’s communicative capabilities
become paramount when the crisis is
a cultural clash. Cultural clashes are played out via
communication in the media, often requiring
extensive reframing. The one who can gain the greatest market
share of the message gains the
upper hand. Decision making and communication are the keys
with communication taking
precedence. Even poor decisions communicated effectively can
lessen the tension and emotions
of the situation but good decisions that are not communicated

well are akin to silence and poor
communication.
Dénouement
The great irony of the Belgian Crisis for Coca Cola Corporation
is that it may never have
happened. No conclusive evidence has been presented for
linking the illness of the Belgian
schoolchildren or the French hospital patients to consumption of
Coke or Coke products.
Bernard Rime, a psychology professor at the Universite
Catholique de Louvain in
Belgium, said, ‘there is an obvious psychological explanation
for at least part of
the situation.’ He said conditions were ripe in Belgium for panic
among students:
Schools were holding exams, and the country is in the midst of
a scandal over
poultry and other foods contaminated with dioxin” (Haggerty).
In a world where phantom product problems can lead to the
greatest recall in a storied
company’s history and the loss of $250 million, perception and
communicative abilities in

uncertain situations may be as important as the goods and
services provided.
Summary
The crisis of Belgian school children attributing their sudden
illness to consuming Coke
has been considered from the perspective of a clash of cultures.
The unique circumstances within
Belgium at the time, as well as the increasing influence and self
understanding and identification
of the citizenry with the European Union was highlighted. The
historical unevenness of
relationships tilted toward the corporation and the role of
Coke’s unparalleled success created
comfortable blind spots in their interaction with the Belgian
people and the government. The
success of Roberto Goizueta set the stage for unrealistic
expectations from stockholders and
management as Douglas Ivester took the reins of power.
Ivester’s personal outlook and personal
penchants heightened the weaknesses of the corporate culture. A
Cartesian worldview
communicated ineffectively in an emotional situation created a
flammable mix.
While considering the clash of cultures in this paper it seems

one of its weaknesses is a
lack of the understanding of the interaction going on within the
corporation. What was the role of
the crisis management team? Was their coordination of
strategies and communication between
the company and the bottlers? While some image restoration
strategies were offered in this
analysis, are there others that may have been more effective if
employed under these conditions.
And finally, consideration of the difference between the actions
of crisis management and the
spirit of crisis management could be pursued. Was the crisis
more a communication failure, a
failure of process, an inevitable growing pain or a lack of
vision? For it seems that many of the
recommended actions were there, they simply do not work,
failing to convince the stakeholders
of this situation of their sincerity or efficacy.

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