Coca Cola Case Study
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On August 2003, Coca Cola India faced a sales drop due to pesticides residues issue brought by a non-government organization called CSE (Center for Science and Environment). This report aims at covering the case study from the Corporate Communication 5th Edition by Paul A. Argenti ‘s book page 284-299 (Case 10-1). These papers will include the case questions with answers, to analyze the key problems that Coke India should focus and how well-prepared was them in dealing with the crisis, as well as the key constituents and communication strategies that Coke India must do to endure the problem along with the conclusion of whether they have avoided the crisis or vice versa. The conclusion of study and references will also be inserted at the end of paper.
I. What are the key problems that Gupta should focus on in the short term and in the long term?
Firstly, Gupta must understand that Coca Cola has faced several crisis in the past. On February 2003, CSE (Center for Science and Environment), an activist group in India has already brought the issue about Coca-Cola’s Kinley Bottled water which was declared containing pesticides residues, six months before they brought up the same issue about Coca Cola. Since Coca Cola India remained silent about the first issue, the buzz was created and spread, made it even harder to maintain the situation. While in 1997, Coca Cola also had a problem in India. They had to leave India, instead of revealed their formula to government, when Janata Party led India and oblige Coca Cola, and other foreign companies, to dilute their equity stake until 40%, as written under Foreign Exchange Regulation Act (FERA). Any other crisis were happened too on other countries such as in Belgium and Atlanta.
Moreover, The sales drop is an important to be focused on. With the decrease of the sales, it showed that consumers believed the allegation more than their loyalty to Coca Cola, and the investors were afraid to keep their feet on the company.
The competition with Pepsi was crucial too as Pepsi entered the India’s market first in 1988 through join venture as PepsiCo with the Punjab Argo Industrial Corporation, and Voltas India Limited and with Unilever in 2003. At one side, it was welcomed by Indian’s market and marked as liberalization accepted, but on the other side, it had disadvantage for Coca Cola when entering India’s market in 1997. Pepsi already had a strong spot in consumers mind, while Coca Cola was still assumed to bring American way of life. Thus, the crisis which brought Pepsi too but tended more to Coca Cola, make Coca Cola in India has a worse name compared to Pepsi and especially, competitive local brands.
Even if Coca Cola India already had local brands which marked the combination of global trends and domestic market, engaging 7,000 local employees and indirectly added another 125,0000 Indians, invested more than US$1 Billion, had a documented quality control and assurance program, and entrust such an important position like Vice President to Indian (Sanjiv Gupta in 1997), Gupta during this crisis must focus to manage their reputation as it will influence the future of Coca Cola company, not only in India, but worldwide and the other brands under Coca Cola company. Besides, Gupta must also focus on the efforts to bring back costumers loyalty and gain trust more to get vision from potential consumers.
II. How well prepared was Coke India to deal with the allegations?
Coke India wasn’t good at dealing with the allegations about pesticides contain in Coca Cola. Firstly, CSE had already brought the issue for Kinley bottled water months before they further involved the Coca Cola itself. Instead of revealing the truth, Coca Cola, and Pepsi, mentioned that CSE’s allegation was baseless and even questioned their testing method. When the first issue came, Coke India should have been noticed and clearly explained to CSE and public, not remained silent until another issue was carried. Coke as an International and famous brand, in India, should also learn from past crisis and how to deal with different problems, especially the crisis in Belgium which has similar issue of contamination.
III. What is you recommendation for Coke’s communication strategy? Who are the key constituents?
The key constituents that Coke India must deal with are primarily their consumers, NGOs, public, medias, then their investors, employees, and its suppliers/distribution channels. Coke India must do any strategies to bring back their trust. Coke must be honest in revealing the problem so that they can assure the consumers to believe them again. Besides, doing social responsibilities are important to gain more trust from public and potential customers as a proof that Coke is a reliable brand. Building a better relationship with their employees are important as well, as Coke India employed many Indians in their company. Coke must remember that employees are not only playing part as workers, but also consumers. They also must try to build a good relationship with the government and CSE as they played important role in India. By this, Coke will have a chance to get back their position as a leading soft drink brand, thus regain their credibility from its suppliers and distribution channels to work well together again and for investors to increase the investment and improve their economy decrease. Those efforts then will create a good publication which make the media covers the good side of Coke India and how good they deal with the crisis.
To communicate to the constituents, Coke must do the best practices:
a.Tell the truth
To gain back the trust means Coke must reveal the truth regarding the issue that hit them. Instead of being angry against CSE’s allegations by denying and questioning their testing method and keep silent since the first issue came, Coke itself must reveal the truth as soon as possible, before the situation gets worse. Just like myths & facts that was revealed by Gupta in Coke India website (see Exhibit 10.9 P.298) it clearly stated the issue versus the reality. But the declaration through website wasn’t enough, Gupta should explaining the truth as long as people haven’t believed them yet.
b.Prove with action
People didn’t only want to listen, but also see. Billion of Indians wants Coca Cola to prove that they are deserved to be trusted once more. Since CSE took an important role in India, Coke India must build a good relationship with CSE. They should have done a transparent product testing to prove the facts they already revealed. Besides, doing corporate social responsibilities will make Coca Cola brought back their reputation, such as their effort in launching Coca Cola India eKO Management System in 2004.
c.Listen to customers
Consumers are the most important part in influencing Coca Cola’s sales and future. The sales drop has proved that consumers are involved to believing the issue. For example came from Delhi’s medical student which declared “For a person drinking at least one bottle a day, the report came as a rude shock. I haven’t picked up a bottle today and most definitely not consume soft drink in the future, the reports of pesticides and other pollutants have made soft drinks a strict no-no and we will now stick to juices and plain drinking water.” It showed how a single person’s act could influence the others. With more than billions people in India, news spread fast from one to another. That was why Coke India must listen to their customers, even if to a small group first in the beginning. Not only prove, but also fulfilling their needs and wants as Coke’s revenue center.
d.Manage for tomorrow
Coke should have been realized that they were not in a good position since CSE brought up the issue about Kinley water. Rather than revealing the truth and prove with action, which was way easier at that time, Coke ignored it and it caused the worse nightmare for them. Coke should now when to solve the problem before it affects the future. India is a very potential market for Coke, with its billion people from low to upper class. By the fact, Coke must have been realized to manage good relationship and reputation in India for their own future.
e.Conduct public relation strategies as if the whole company depends on it Public relation is the best effort to gain public’s attention so that they can help Coke to manage their reputation. Learnt from the crisis in Belgium, the PR campaign strategies were worked well. As Coke India faced the crisis, they also hired a public relation firm to help them rebuild the company’s reputation. Besides, the head communication for Coca Cola Asia moved from Hongkong to India to deal with the crisis which was going worse even in 2004. Doing corporate social responsibilities were also considered as part of PR strategies too.
f.Remain calm, patient, and good humored
Not being so relaxed as if nothing happened, but not also being hasty on taking any actions. Coke, and Pepsi, was actually not in a good term of confronting CSE. Being angry and against the ones who brought the allegation only create further problem. Coke India must remain calm and confident in facing the issue. Slowly but sure, they must prove that they are innocent and their products are free from toxic and contamination.
IV. Could Coke India have avoided this crisis?
In my opinion, Coke India couldn’t avoid the crisis. Coke must already know that India is an agricultural country with many NGOs. They should have prepared to face the crisis like that. Crisis like contamination had already happened in other country and it’s not possible to happen again, moreover in an agriculture country. Besides, years before Coke back to India, they already had problem with government rule in 1997, it should be a lesson for Coke to take a careful steps in entering such a big market like India.
There are some lessons I can get by covering this case study. Overcoming a crisis, especially for an international and big brand such as Coca Cola, as not easy as it seems. They must face the crisis from the day it begins until its aftermath. Not only they must face internal members such as employees but also all the public and the people involved, especially the government and NGO which play an impotant part in some countries. Especially Gupta, as the representative for Coca Cola, he must have been facing a harder situation between his role as CEO and his blood as Indian to confront Indian public. However, he as a leader must show his ability to deal with company’s crisis. Moreover, I have learnt from this case study that as company never dies, Coke was doing anything they could do to rebuild trust and reputation through understanding its constituents and best practices.
PTI (2011). PepsiCo, Unilever revive Lipton Ice Tea joint venture India. Retrieve from http://articles.economictimes.indiatimes.com/2011-06-06/news/29625996_1_lipton-ice-tea-lipton-ice-tea-pepsi-lipton-international
The Economist. (1999, June 17). Coca Cola-Bad for you. Retrieved from http://www.economist.com/node/322736
V. Sridhar. (2003, September 13-26) Playing with Regulations. Retrieved from Frontline magazine volume 20-issue 19.
Argenti, A. P. 2009. Fifth Edition Corporate Communication.
Campaign to Hold Coca cola Accountable. Retrieved from http://www.whale.to/b/coca_crimes.html