crisis faced by coke in europe

8/12/2019 Crisis Faced by Coke in Europe

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Crisis faced by coke in Europe

Abstract:

he case discusses the crisis faced by Coke in Europe

when people fell ill after consuming its products. The case

also brings out the ethical dimensions involved in Coke's

exclusive school contracts, which was done to promote

soft drink sales among school children.

he case is designed to help students critically analyse the

ethical issues involved during Coke's European crisis and

the exclusive school contracts controversy in the US.

Students must appreciate the role of sound ethics in doing

business.

Issues:

Understanding the characteristics of ethical issues in business in relation to the sale of soft drinks, food and

beverages as well as advertising in schools through exclusive contracts, analysing them economically, legally and

philosophically and reaching the right, just and proper decision.

Highlighting the ethical, legal and economic aspects involved in promoting a harmful product to schoolchildren

through exclusive contracts with schools.

Discussing the implications of advertising to schoolchildren on moral and social grounds.

Exploring the alternatives to the problems associated with selling soft drinks and other junk foods by

corporations.

Examining the various issues and consequences involved in the campaign for commercial-free schools.

Understanding the government's role in regulating the corporate contracts with schools.

"Our product is quite healthy. Fluid replenishment is a key to health. Coke does a great service because it

encourages people to take in more and more liquids."

- Michael Douglas Ivester, Coke's Chairman and CEO.

"Public schools are funded by the public to educate the children as provided by state law. It is totally

inappropriate that its facilities and employees are being used by corporations to increase their own profits on

public time and with public dollars."

- Dr. Brita Butler-Wall, Executive Director, Citizens' Campaign for Commercial-Free Schools, US.

The Recall

On June 13, 1999, Coca-Cola (Coke) recalled over 15

million cans and bottles after the Belgian Health Ministry

announced a ban on Coke's drinks, which were suspected

of making more than 100 school children ill in the

preceding six days.

his recall was in addition to the 2.5 million bottles thathad already been recalled in the previous week. The

company's products namely Coke, Diet Coke and Fanta


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had been bottled in Antwerp, Ghent and Wilrijk, Belgium

while some batches of Coke, Diet Coke, Fanta and Sprite

were also produced in Dunkirk, France.

Children at six schools in Belgium had complained of headache, nausea, vomiting and shivering which ultimately

led to hospitalization after drinking Coke's beverages.

Most of them reported an 'unusual odor' and an 'off-taste'

in the drink. In a statement to Reuters, Marc Pattin, a

spokesman for the Belgian Health Ministry explained the

seriousness of the issue: "Another 44 children had 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)."In the same week,

the governments of France, Spain and Luxembourg also

banned Coke's products while Coke's Dutch arm recalled

all products that had come from its Belgium plant.

The Recall Contd...

he entire episode left more than 200 Belgians and

French, mostly school children, ill after drinking the Coke

produced at Antwerp and Dunkirk.

he company had to assure its British customers that the

products made in its UK factories were safe. By June 15,

1999, Coke had recalled about 30 million cans and bottles,

the largest ever product recall in its 113-year history.

For the first time, the entire inventory of Coke's productsfrom one country were banned from sale.

As part of a damage control exercise, Coke sent a team of scientists to Europe. During its visit to Europe after a

week of these incidents, Coke's chairman and CEO Michael Douglas Ivester said, "We deeply regret any problems

encountered by our European consumers in the past few days."

Coke Belgium even announced that it would reimburse the medical costs for people who had become ill after

consuming its products. The recall had a significant negative impact on Coke's financial performance with its

second-quarter net income coming down by 21% to $942 million. Moreover, the entire operation cost Coke

$103m (66m) while its European bottling venture showed a 5% fall in revenues.

Analysts felt that the Belgium recall was one of the worst public relations problems in Coke's history. Oneanalyst3alleged that the company had information about people who had become ill weeks prior to the above

incidents...

Dr. John Pemberton, an Atlanta-based pharmacist, developed the original formula of Coke in 1886. It was based

on a combination of oils, extracts from coca leaves (cola nut) and various other additives. The ingredients were

refined to create a refreshing carbonated soda.

Pemberton's bookkeeper, Frank Robinson, suggested that the product be named 'Coca-Cola'. He even developed

a way of lettering Coca-Cola in a distinctively flowing script. On May 8, 1886, Coke went on sale for the first time

in the Joe Jacobs Drug Store...

Exclusive School Contracts
http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/Coke-Ethical%20Issues-Business%20Ethics.htm#3]http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/Coke-Ethical%20Issues-Business%20Ethics.htm#3]http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/Coke-Ethical%20Issues-Business%20Ethics.htm#3]http://www.icmrindia.org/casestudies/catalogue/Business%20Ethics/Coke-Ethical%20Issues-Business%20Ethics.htm#3]


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The exclusive school contracts allowed Coke exclusive rights to sell its products - soda, juices, and bottled water

- in all the public schools of a district. Under the plan, the schools got $350,000 as an "up front"money and a

percentage which ranged from 50 percent to 65 percent of total sales...

The Explanation

While Coke faced a lot of criticism from health experts and

public agencies for targeting school children during 1998-

1999, the company received a major setback during the

European crisis in which school children were the major

victims. After the crisis, Coke investigated the problem by

testing the suspect batches for chemicals. The company

claimed that the tests showed nothing toxic in the

beverages. However, to explain the whole crisis, Philippe

Lenfant, general manager of Coke Belgium, said that there

had been separate errors at two plants...

crisis faced by coke in europe

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