BUILDING CASE “COCACOLA”

BUSINESS ETHICS

BILINGUAL CLASS

MID TEST - BUILDING CASE

“COCACOLA”

BASED ON CHAPTER 6

BY :

FELICIA MONIKA

1511011032

S1 MANAGEMENT

ECONOMICS AND BUSINESS FACULTY

UNIVERSITY OF LAMPUNG

2016/2017

ARTICLE

Coke products recalled

LONDON (CNNfn) - A new health scare confronted Europe Tuesday as several countries withdrew soft drinks made by Coca-Cola Co. from store shelves just a day after the Belgium government ordered a recall of the beverage giant's products.
     Luxembourg and the Netherlands imposed blanket recalls on Coke products Tuesdays as officials at the company scrambled to isolate the source of a tainted batch of beverages believed responsible for the sudden illness of dozens of schoolchildren in Belgium.
     The Belgian unit of the U.S.-based beverage giant recalled 2.5 million bottles of Coke (KO) last week after about 30 children became ill after drinking it. Altogether, more than 100 children have reportedly fallen ill with headaches, nausea and shivering symptoms after drinking Coke products.
     Coca-Cola Belgium said last week it had withdrawn the 20-centiliter glass bottles in response to consumer complaints of an "off taste." The company said a subsequent analysis by an independent laboratory turned up no harmful substances.
     A Coke official professed bewilderment Tuesday at the cause of the illness, though the company stressed it would comply with the order to withdraw its products.
     "We are searching frantically and hope to have a definitive answer in the next few days," Maureen O'Sullivan, a Coke spokeswoman in Brussels, was quoted as telling the local VRT radio station.
     O'Sullivan confirmed that Coke was complying with a Belgian government order to withdraw the company's products -- including the flagship Coke brands, Diet Coke, Fanta, Sprite and Nestea -- from store shelves.
     In Luxembourg, sales of Coke products such as Minute Maid, Cherry Coke, Fanta and Sprite were banned. In France, meanwhile, a suspect batch of Coke products from a factory in Dunkirk was recalled, though sales of Coke products elsewhere were not believed to be affected.
     German and Spanish health authorities played down the scare by insisting they do not import Coke products from Belgium. In the U.K., a Coke official maintained the company's products were made with ingredients from local suppliers.
     The spate of recalls comes as Europe grapples with the fallout from a contaminated-feed scare, originating in Belgium, that affected large stocks of chicken, beef, eggs and pork. The incident forced two Belgian ministers to resign in disgrace amid allegations that they withheld information about the contamination from the public. The scandal has also sparked a stand-off with the European Commission, which accused the Belgians of failing to fully purge their markets of contaminated food.
     Belgium's Health Ministry ordered a ban Monday on the sale of all Coke products after children at six Belgian schools developed headaches and nausea after drinking the company's beverages.
     The ministry also advised citizens not to drink Coca-Cola products until the tainted source had been tracked definitively.
     A European Union spokesman said the impact of the tainting appeared to be limited to a few countries. Belgium's health ministry said a toxicology test traced hemolysis, a blood disorder, in those who had ingested the suspect batch of Coke products.
     Coke's withdrawal also seemed to be affecting sales of Nestle's Nestea soft drinks, which are bottled and distributed by Coca-Cola.
     A Nestle spokesman told Reuters it was too early to tell how seriously the Coke recall in Belgium would affect company sales.
     The latest series of food scares are the worst in Europe since Britain's "mad cow" beef scandal three years ago. The episode led to a blanket ban on British beef exports -- since lifted -- to other European Union member states.
     --from staff and wire reports

http://money.cnn.com/1999/06/15/europe/coke/

ANALYSIS

COMPANY PROFILE

The Coca-Cola Company, which is headquartered in Atlanta, Georgia, but incorporated in Wilmington, Delaware, is an American multinational beverage corporation, and manufacturer, retailer, and marketer of nonalcoholic beverage concentrates and syrups.

The company is best known for its flagship product Coca-Cola, invented in 1886 by pharmacist John Stith Pemberton in Columbus, Georgia. The Coca-Cola formula and brand were bought in 1889 by Asa Griggs Candler (December 30, 1851 – March 12, 1929), who incorporated The Coca-Cola Company in 1892.

The company has operated a franchised distribution system since 1889, wherein The Coca-Cola Company only produces syrup concentrate, which is then sold to various bottlers throughout the world who hold exclusive territories. The Coca-Cola Company owns its anchor bottler in North America, Coca-Cola Refreshments.

The company's stock is listed on the NYSE (NYSE: KO) and is part of DJIA, the S&P 500 index, the Russell 1000 Index, and the Russell 1000 Growth Stock Index. As of 2015, its chairman and its CEO is Muhtar Kent. In December 2016, it was announced that James Quincey, the chief operating officer would replace Kent as CEO.^[5][6]

Coca-Cola Company is the world's leading manufacturer of soft drinks and syrup concentrates that introduce consumers to one of the most popular soft drinks in the world. At that time CCC has distributed over 230 other brands of CCC trademark bearings sold worldwide. In addition, CCC provides advertising and other promotional support for Coca-Cola brands. Meanwhile Coca-Cola Enterprises (CCE), is the world's largest manufacturer and distributor of CCC

Trademark Bearings products, including bottle making, syrup, and manufacturing and distributing product. Europe is an important market for CCC and CCE with around 23 per cent of worldwide sales coming there. CCE is licensed solely in Belgium, the United Kingdom, Luxembourg, the Netherlands, and most of France.

PRODUCT PROFILE

Coca-Cola is a carbonated soft drink product sold in stores, restaurants and vending machines in over 200 countries, including Belgium. The profile of the product that in the crisis of 1999 in Belgium is prohibited to circulate among others are as follows:

a)      Coca-Cola Light, a sugar-free soft drink commonly known as Diet Coke

b)      Fanta, ie Coca-Cola soft drinks from fruit carbonation

c)      Sprite, a caffeine-free soft drink with lemon flavor

d)     Nestea, Nestle's Nestle tea beverage which is a joint venture with Coca-Cola Company

e)      Aquarius Lemon, sports drink

f)       Bon Aqua, a grape flavored sports drink

g)      Kinley, a carbonated beverage with many flavors such as apples, sodas, lemons, vanilla, oranges, etc.

h)      Lilts, soft drinks are produced in Europe with fruit flavors such as grapes, pineapple and bananas.

GENERAL PROBLEMS

 When the Coca-Cola case occurred, Belgium was experiencing a health crisis. Belgians are still shaken by mad cow disease and from the news that carcinogens, dioxins have been introduced accidentally into animal feed. Newsletters say that carcinogens and dioxins are the cause of cancer of dioxins that direct the attractiveness of certain meats and eggs from the super market.

Then, from the same crisis, Coca-Cola emerged from the taste and smell in the packaged soft drinks and by reports that more than 100 consumers had become ill after seeing an odor outside of a soft drink can. As a result, Coca - Cola Company, under the instructions of the Belgian Ministry of Health, pulled products from the Belgian market. The impact of this crisis is felt not only in Europe, but also in such distant countries as Japan and India.

 This time is a soft drink which is a cause for concern. On June 14, 1999, in a move that cost more than $ 200 million in lost fees and profits and caused damage to the brand image of the product trade-marked from The Coca-Cola. The Belgian health ministry ordered that coca cola products be withdrawn from the market and warned Belgium not to drink any trade of their Coca-Cola-marked products in their homes.

Then, France, Luxembourg and the Netherlands are also prohibited or restricted sales of Coca-Cola products. This incident resulted in substantial finances. Charges for The Coca - Cola Company and sufficient damage to its image and global reputation.

CCC, with headquarters in Atlanta, Georgia, USA, is the world's leading manufacturer of soft drinks and syrup concentrates that introduce consumers to one of the world's most popular soft drinks. At that time CCC has distributed over 230 other brands of CCC trademark bearings sold throughout the world.

In addition, CCC provides advertising and other promotions support for the Coca-Cola brand. While Coca-Cola Enterprises (CCE) is the world's largest producer and distributor of CCC Trademark Bearings products, including bottle making, syrup, and manufacturing and distributing products. Europe is an important market for CCC and CCE with around 23 per cent of worldwide sales coming there. CCE is licensed solely in Belgium, the United Kingdom, Luxembourg, The Netherlands, and most of France.

THE RECALL

On June 13, 1999, the US-based Coca-Cola Company (Coca-Cola), the world’s largest carbonated beverages company, recalled over 15 million containers of the soft drink after the Belgian Health Ministry announced a ban on Coca-Cola’s drinks, which were suspected of making over 100 school children ill in the preceding six days.

This was in addition to the 2.5 million bottles already recalled in the previous week. The company’s products namely Coke, Diet Coke and Fanta, were bottled in Antwerp, Ghent and Wilrijk, Belgium, while some batches of Coke, Diet Coke, Fanta and Sprite were produced in Dunkirk, France.

Children at six schools in Belgium had complained of headache, nausea, vomiting and shivering after drinking Coca-Cola’s beverages, leading to their hospitalisation. Most of them reported an ‘unusual odour’ and an ‘off-taste’ in the drink.

In a statement to Reuters, Marc Pattin, a spokesman for the Belgian Health Ministry, described the seriousness of the issue, “Another 44 children have become ill with stomach pains, 42 of them at a school in Lochristi, near Ghent, northwest Belgium.

We have had five or six cases of poisoning of young people who had stomach pain after drinking (the suspect beverages).”

The same week, the governments of France, Netherlands and Luxembourg also banned Coca-Cola’s products while the company’s Dutch arm recalled all products that had come from its Belgium plant.

The entire episode left more than 240 Belgians and French, mostly school children, ill after drinking Coke produced at Antwerp and Dunkirk. The company had to assure its British customers that the products made in its UK factories were safe.

REASON FOR RECALL

According to Coca-Cola's Chief and CEO, Doug Invester issued on June 16, 1999 that Coca-Cola Company in cooperation with Belgian health minister, withdraws its products from the Belgian Store because:

1.      Unusual coca-cola flavors such as those produced by coca-cola and the smell of bottled beverages

2.      Over 100 consumers (students in 6 schools) get sick after reporting an unpleasant odor from outside the Coca-Cola bottle

Symptoms of the disease are headache, abdominal pain, chills and nausea, and severe enough to cause students to be hospitalized. The recycled products are Coca-Cola, Coca-Cola light (Fruit, European version for diet), Fanta, Sprite, Nestea, Aquarius lemon, orange and wine, Bon Aqua, Kinley tonic and Lilt. There are about 15 million bottles and cans that are recalled.

A week after that, Ivester said that:
"The highest priority of Coca-Cola Company is product quality. For 113 years our success has been based on consumer confidence by having that quality. I want to convince consumers, customers and government officials in Europe that The Coca-Cola Company takes all necessary steps to ensure that all our products meet the highest quality standards.

Nothing less so acceptable to us and we will not stop until we make sure that this work is done. We are deeply sorry for all the problems faced by European consumer in the last few days. "
At that time, the Company identified two production and distribution issues:

(1)   '' Off-quality '' carbon dioxide that affects the taste and smell of some bottled drinks.

(2)   Bad smell from outside of some canned drinks. The smell is more stinging when the cans are stored in machine-vending.

On 22 June 1999, the Belgian Minister of Health froze the CCC trademark product (except for products sold in vending machines, pending further review) under CCC and CCE conditions using fresh ingredients, plant-wide cleaning, increased security and some measures.

Ivester Response:
"We appreciate the government's policy to pay more attention to issues related to public health." Nothing is more important than that and we have to work intensively with the ministers again. We apologize for what happened to Belgian society and we will try to increase people's trust again. "

Ivester states that the CCC's Empowerment products and products should improve the quality of its products and continue to improve and destroy the smelly products that move in the community. The impact of this crisis is felt not only in Europe, but also in such distant countries as Japan and India. As a result of this crisis Coca-Cola had to swallow a loss of $ 200 million and cause damage to the brand image of Coca-Cola products. The recall had a negative impact on Coca-Cola's overall net profit in the second quarter of fiscal 1999, down by 21% to $ 942 million (icmrindia.org:2014).

Belgian health ministry for Coca-Cola products to withdraw from the market and penetrate no products at any time-their Coca-Cola products in their homes. Then, France, Luxembourg and the Netherlands also started sales of Coca-Cola's sales of products. This incident applies substantial finance. Charges for The Coca - Cola Company and quite damaging to global image and reputation.

AGGRESSIVE MARKETING BOLTERS IMAGE

Mid-July, Ivester and CFO Coca-Cola, James Chestnut met with 100 analysts to renew their business, crisis, and world economic conditions. Ivester reports that the CCC must be aggressive in marketing campaigns in Europe to gain consumer confidence again. Promotions such as "The Coca-Cola Beach Party" with California beach music, dancing, and 20 tons of "imported" sand: "Belgium's annual Coca-cola summer tour" in more than 90 locations in Europe and other campaigns.

Mass Hysteria?
Nearly four months after all the restrictions on distribution and sale of the CCC brand were stopped, four students in Tienen, Belgium were rushed to a local hospital and complained that they had consumed Coca-Cola products. Tests conducted on bottling products in Belgium and the United Kingdom say that the consumed coca - cola products are normal and of high quality. No action is taken against the CCC or CCE by the Ministry of Health.

Five months later and nine months after the real case, Isy Pelc, head of the psychiatry and psychological medicine service at Brugmann Hospital in Belgium stated that the cause of the student / childhood illness was caused by a psychosomatic reaction caused by the unpleasant odor of Coca -Cola consumed it. His research was based on 110 students who were said to be sick after drinking coca - cola products and 40 people who did not become victims.

Case Notes
Incidents aimed at demonstrating organizational issues and challenges that can threaten the company's short and long-term performance, as well as the implications of strategic decisions made by management. CCC and CCE websites provide additional information on finance and press release.

Discussion
The crisis management plan should be part of the overall strategic management plan. If the planning process includes a SWOT analysis, which is the company's weaknesses should be identified. In instant communication and media coverage, response time is very important in reducing adverse impact on image / brand name. Contingency planning is very important in facing opportunities and threats to the company.

Moreover, since the case is influential in different countries and cultures, it is important for companies to develop response plans for each location and include from local management and public officials.

For decades, Coca - Cola Company has measurable management standards and leadership practices in areas such as quality assurance, product development, manufacturing and distribution, brand marketing, customer service, relationship stakeholders, and corporate social responsiveness. So the case of the company in Belgium was a severe blow when the health crisis erupted in Belgium.

Historically, companies have been skilled enough to face the challenge of minimizing risk with little or no permanent financial or financial damage. However, the impact of mad cow disease and the case of dioxin contamination that has threatened the health and safety of Belgian citizens raises suspicions of other products.

Therefore, a social approach should be made coca cola during a management crisis. Response of an unprecedented product recall, including identifying two very specific products and distribution problems that seem to cause quality damage, take steps to eliminate problems, and rebuild communities of trust and confidence.

The problem in this case. The situation is not whether the Company is able to accomplish this task, but when and how it actually does it. When the crisis started, the Company executives took several days to create a top priority issue. The Company does not identify and openly acknowledge that a manufacturing error has occurred. However, according to some observers, Coca-Cola stumbles over and over, aggravating the situation.

For example an apology to consumers came more than a week after the first public report of the disease. It took ten days after a child became dizzy and nauseous for top executives to arrive in Belgium and early Coca-Cola response who sought to minimize the number and severity of the disease.

SOCIAL RESPONSIBILITY FOCUS

Many companies do not realize the importance of having a connection with the community and to be seen in their eyes as a very strong ethical company. Coca-Cola has taken up a few different social projects that have given them a good amount of support from the public. For example, they have done a philanthropy known as "Education On Wheels," in which children are placed into a classroom that history is brought to life, giving them a very rich learning environment.

They do different activities that really get the children thinking and force them to develop critical thinking methods. This is a huge thing for Coca-Cola and in our opinion for companies as a whole. The first thing that you must engage in a customer is their emotions, the strongest buying point that people act on. If people start recognizing that a company is doing community based activities for children, they are going to be very prone and likely to want to support and buy the products from the company.

The second thing that Coca-Cola has done is setup multiple scholarship funds available for high-school seniors as they make their way into college and the real world. "In addition to grants, Coca-Cola provides scholarships to more than 170 colleges, and this number is expected to grow to 287 over the next four years" (Ricci, 2010). Coca-Cola was very smart when they went about setting up these different funds for students.

There is a huge market with kids graduating high school and those who are currently in college, appealing to these kids will grow a strong interest in their company and will build up their brand image more than ever. It states in the book that it is beneficial to the shareholders by doing this. This is so true with every company because shareholders and people who are invested in the company want to make sure that they are involved in a company that is making ethical decisions and who are giving back to the community in some way, shape or form.

As long as Coca-Cola keeps being persistent with how they give back into the community and monitor what they are doing on an ethical standpoint, they will keep their customers and stakeholders happy.

SWOT ANALYSIS

The following SWOT analysis of Coca-Cola Company poisoning case:

1)      Strength

a)      Coca-Cola Company has long been established and trusted by the community as a quality product.

b)      Coca Cola is a company with a good reputation which has a trustworthy leadership management

2)      Weakness

a)      Human Error as the cause of the case.

b)      Product crisis in a country may affect other countries

c)      Belgians are very sensitive to rumors of product contamination that they consume

3)      Opportunities

a)      If Coca-Cola Company is able to solve the crisis well, the Coca-Cola image will get better.

b)      Have the opportunity to show concern to the consumer.

c)      If crisis management successfully done ccc will have a positive opinion on business practices

4)      Threat

a)      Financial losses

b)      Competitors seize the market

c)      Crisis of trust in Coca-Cola

ETHICAL RECOVERY

Even after all of these problems presents, the customers in Europe said that they still feel like coke would behave correctly during these times of crises. Even after all of this they are still ranked third in a PricewaterhouseCoopers survey of the most respected companies in the world. Coke then donated $50 million to a foundation to support programs in minority programs, and hired an ombudsman who reports directly to the CEO in order to settle the racial discrimination lawsuit shown above.

Coke is taking the initiative to fix their problems and the international community is seeing that. It seems that since they are taking these precautions to prevent further problems in the future, the European nations, in addition to the United States will be more trusting of Coke in their decisions in the future.

CONCLUSION

 

Coca-Cola is one of the most successful and recognized brand in the world. These ethical problems that have been presented in this paper were not just minor problems for the company, but it seems that they have been able to keep the Coke name relatively untarnished. Coke today strives to reduce their ethical issues to a minimum in order to focus on reaching all around the world.

The issues presented to us were all problems that could be fixed and while we gave examples of how they could have handled the problem differently, Coke seems to have handled it in the way that they see fit, and their name still stands as one of the top companies in the world. A company this big has to be very careful with what they do in the public eye, one fatal mistake can be the end of a very successful business.

BIBLIOGRAPHY

http://money.cnn.com/1999/06/15/europe/coke/

https://en.wikipedia.org/wiki/The_Coca-Cola_Company

https://prpretaporter.wordpress.com/2012/09/07/case-study-coca-colas-belgian-crisis

https://www.ukessays.com/essays/business/the-coca-cola-company-struggles-with-ethical-crises-business-essay.php

I just want to share some information that might help you. Please enjoy my blog! Subscribe my youtube channel www.youtube.com/c/feliciamonika13 and follow my instagram account www.instagram.com/feliciamonika