The Cocacola Case

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Case Study: “Coca-Cola crisis in Belgium”

1. How could the Belgian problem have damaged the Coca-Cola image? Coca-Cola incurred in a very sensitive crisis intensified by the fact that a “mass hysteria” was still spread in Belgium, after the Chickengate scandal. This explained the overreaction of the Belgian Government. Besides, the fact that children were affected, meant that parents were also being concerned, and hence that the crisis emotionally affected more people than other crisis. Furthermore, Management was giving neither information nor reasons to both customers and Media for what was happening. This meant that Coca-Cola’s image was being damaged due to a loss of credibility. In this sense, although we may argue that the guilt was mainly from the bottler company (40% owned by Coca-Cola), consumers also questioned the control Coca-Cola had over its suppliers. Moreover, a lack of Crisis Management Plan was being a testimonial of Coca-Cola’s poor governance. All this meant a critical dissatisfaction from customers, leading to numerous rumours that were harming Coca-Cola’s image. The rumours make it evident that Coca-Cola need to destruct the products, withdraw them of the market and ban them of sail. This entailed a lot of costs, and could have been avoided if Coca-Cola had had a Crisis Management Plan and an immediate response. Into the bargain, we think that the overall scandal had an impact on sales, and revenues, as well as it could foster that competitors overtake Coca-Cola at any point. Pepsi in this case, wasn’t really a preoccupation for Coca-Cola, since it only represents 3% of the market share in Belgium) but, still, it could take profit from the situation. Investors were also afraid about the money they had invested in the company. For this reason, stock prices felt down on Wall Street by June 1999. Coca-Cola lost 1% of its worldwide sales and in ten days only, they suffered a -13% of value in Wall Street. Douglas Ivester had to make public apologies on the international website of the brand, when stock prices went down. Finally, to sum up, we can say that the scared had been mishandled, the communication was inadequate and the company was unprepared for a crisis of this magnitude. However, a research indicated that core users of Coca-Cola still reported the same intent-to-purchase levels than before the crisis.

2. Is the problem limited solely to Belgium? Solely to Europe? Or is it a global problem? We think that the scandal is a global problem, above all because Coca-Cola is a worldwide known brand and the most famous word after “OK”. Remember that one of the company’s maxims is “to conduct business on a global scale while maintaining a multilocal approach”. This explains that even a problem affecting a small country such as Belgium can have huge repercussions in all Europe. Indeed, cans were withdrawn not only from Belgium plants but also a French one. This is due to a quick spreading of the scandal to cross-border countries (Luxembourg, France...). Even the European Commission blamed the global company for not giving enough reasons and information about the causes of the scandal.

Besides, in the age of instantaneous communication, Internet availability and satellite media coverage, the amount of information and the speed at which customers can be informed have increased exponentially. That’s why, due to the virality of information, the mass hysteria alarmed the media from all over the world and every country was aware of it.

However, Coca Cola is produced locally rather than being exported and that’s why the crisis only affected cans sold in Europe. For this reason, we may argue that Coca Cola could have at least minimized a global effect by offering more information about the production and distribution process to the public so that it was possible to track its products and keep the scandal more local. Indeed, French Consumer Affairs Minister stated that Coca-Cola was unable...
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