Tuesday, April 13, 2010

Crisis Management

A crisis can happen at any point to any company. You can not predict what exactly will occur but you can be prepared. Before explaining what happened to Coca-Cola, it will be useful to give some background information about Coca-colas presence in India.

Coca-Cola was the leasing soft drink brand in India until 1997. The corporation decided to leave rather than reveal its formula to the government and reduce its equity stake as required by the Foreign Exchange Regulations Act. Finally, Coke returned in 1993 which insured that Coke was now the leading soft drink brand of the world. From 1993-2003, they invested more than US$1 billion in India, making it one of the country;s top international investors. By 2003, Coca- Cola India won the Woodruf Cup among 22 divisions of the Company based on three broad
parameters of volume, profitability, and quality. They achieved 39% volume increase in 2003 while the industry only grew 23% nationally. Because of these statistics, Coke planed to double its capacity at an investment of $125 million between Sept. 2002 and March 2003. In 1998 the consumption of bottles was 5,670 million and that increased to over 10, million in 2002.

Now on to the actual crisis. On August 5, 2003 The Center for Science and Environment (CSE), an activist group in India, issued a press release (pg 14) stating: "12 major cold drink brands sold in and around Delhi contain a deadly cocktail of pesticide residues." This caused a title wave to sweep through Coca colas profits in India and the stock market back in the United States. The facts are that three samples of twelve Pepsi Co 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. These four pesticides were known
to cause cancer, damage to the nervous and reproductive systems, birth defects, and severe
disruption of the immune system. Due to these finding, the India government decided to ban these products. The share of Cola-Cola dropped $5 in the stock market and the huge market and potential expansion of the India market was in jeopardy by not only Coke brand but Pepsi brand as well.

Coke immediately took action. However, in my opinion, Coke made a terrible mistake from the beginning. The following day of the accusations, Coke and Pepsi had a joint press conference. Instead of telling the public they are looking into the allegations against them and will try to insure there beverages are safe for everyone, they attacked the credibility of the CSE and their lab results, citing regular testing at independent laboratories proving 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.

Here is the statement that was published by the CEO in India for Coca-Cola.
"You may have seen recently in the media some allegations about the quality standards of our products in India. We take these allegations extremely seriously. I want to reassure you that our products in India are safe and are tested regularly to ensure that they meet the same rigorous standards we maintain across the world. Maintaining quality standards is the most important element of our business and we cannot stand by while misleading and unaccredited data is used to discredit trusted and world-class brands. Recent allegations have caused unnecessary panic among consumers in India and, if unchecked, would impair our business in India and impact the livelihoods of our thousands of employees across the country. This site is about the truth behind the headlines. It provides some context and facts on these issues and we hope it helps you understand exactly why you can trust our beverage brands and continue to enjoy them as millions of Indians do each day. Sanjiv Gupta, Division President, Coca-Cola India"

While the products were being tested, Coke decided to run campaigns to gain the public interest back. (Facts and what should have been done from India Resource Center) They took out full page ads, directed people to their website so they could view the test results themselves. On page 29 of the article posted above lists what was place onto Cokes website. It was a list of myths and facts about the company's toxic allegations and how they treat the marketplace in India. However, what happened next is very eye opening. They never did anything after the statement was released. The company just campaigned to get the bans lifted. To this day there is still a ban in Parliament cafeteria and residents are campaigning to ban Coke entirely. They have done nothing to change it. Coca-Cola maintains that its products in India are completely safe, and that it has one global standard for all its products.But looking at the actual data that no one really wants to see, tells a different story.

Coca-Cola India is diverting the attention given to this crisis, but they are alone in that. The United States will not allow products made in India by the Coca-Cola company to be shipped into the country,
close to 20 colleges and universities in the US and UK have rejected contracts with the Coca-Cola company until they clean up their act. They are now facing another crisis in India, with the usage of water around where the factory is, their waste residue and how they are effecting the lives of India's population because they are taking up water and producing toxins. I firmly believe if Coca-Cola took the right actions the first time around and cleaned up their act, then this new crisis would not be forming. This is how I would have took on the first crisis. Come out to the public announce that it is sorry and will be doing its own testing to just verify if this information was correct. After results were found, I would then release it to the public and fix the problem. As the company was fixing the toxic problem release monthly reports on how the company is doing. This would have allows customers to remain faithful that Coke cares about the consumers and is doing everything possible to be a sage product. .(Old and New Crisis - To similar)

Cokes PR has spent millions of dollars campaigning about how great their products are. They are wasting money on these campaigns that should go towards improving their products. If everything continues to go as it has been going in recent years, soon Coke may become nonexistent. The brand is slowly starting to lose alliances with colleges, schools, gover
nments all over the world. Although, this is highly unlikely because products in the U.S. are made correctly.

The Public Relations team representing Coca-Cola has done a terrible job. To this day when the company was asked by The India Resource Center, publicly, to share the studies that must have conducted to convince themselves that the average Indian can consume poisons at a level 30 times higher than the average European and American.

All they have heard was silence.

Here is an entire website full of anti-coke: videos, articles, photos and more.

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