Coca-Cola India Teaching Notes

Introduction

The Coca-Cola India case offers students a unique opportunity to look inside a crisis for one

of the world’s most important brands as it occurs inside a developing nation. The case

focuses specifically on issues related to brand, reputation, and Corporate Social

Responsibility (CSR), and the intersection of all three.

History reveals that companies with the strongest brands, most proactive policies of social

responsibility, and deepest relationships with their consumers are the most attractive targets

for NGO attacks. The very assets that define these leading companies provide the fodder

NGOs are looking for to further their agendas. Global Exchange’s attacks on Starbucks over

fair-trade coffee and against Nike over sweatshops in Asia, like the Center for Science and

Environment’s (CSE) attack on Coca-Cola India, are all examples of NGOs using

companies’ powerful reputations against them.

Being an attractive target, however, need not imply vulnerability. Organizations and their

leadership teams need to start thinking systematically, proactively, and strategically about

their reputational risk from crises concerning CSR (corporate social responsibility) and take

actions to mitigate these risks before they become reality. The CSE’s allegations of

pesticide-contaminated Coke and Coca-Cola India’s response provide an important example

of the world’s most important brand under attack and the steps taken in the aftermath. This

example highlights the importance of a strong reputation, a willingness to collaborate, and a

strategic response to successfully weathering the crisis.

Purpose of the Case Study

1. To give students the opportunity to apply a strategic framework to corporate

communications, in a foreign context, with a global brand

2. To identify how, why, and where an organization is vulnerable to a crisis

3. To help students understand that:

a. Successful and responsible companies are the most attractive targets for NGOs

b. Prior credibility helps you weather a crisis

c. Public perception not reality or “truth” matters most

d. Anticipation and preparation for crises before they occur are critical

Coca-Cola India

2

e. Prior experience informs current crisis strategy

f. Globalization and international markets make effective, relevant, and proactive

Corporate Social Responsibility (CSR) strategy more important than ever

g. Local problems quickly take on global significance if handled poorly

h. Cultural context and norms make optimal strategies for crisis communication

management different in India versus the United States

Key Business Issue

On August 5, 2003, The Center for Science and Environment (CSE), an NGO in India,

attacked the safety of Coca-Cola India’s products in a press release titled “Twelve Major

Drink Brands Sold in and Around Delhi Contain a Deadly Cocktail of Pesticide Residues.”

Though Coke was well within the Indian government’s legal limits for pesticide residue in

beverages, the country’s standards were weak and full of loopholes, making them effectively

meaningless.

Coke India CEO Sanjiv Gupta and his team had to decide how to rebuild public trust and had

to weigh a larger policy decision at the same time: should Coke take on a leadership role and

help create higher standards for food and beverage safety?

Problems

1. The CSE attacked Coke for this same issue surrounding bottled water in February of the

same year; they should have seen it coming and been prepared.

2. NGOs have automatic credibility while corporations, particularly large multinationals

(MNCs) automatically lose credibility when under attack. How should this inform

Coke’s approach to the attack?

3. Coca-Cola is a socially responsible company that takes care of the communities in which

it operates yet India is a developing nation with a different set of standards; should Coke

be held to the same standards internationally as they are at home? Is this economically

sustainable? Does a company’s responsibility stop at following the law?

4. Coca-Cola is the world’s most valuable brand and that value is largely driven by the

image of the company and its products. How does a company that derives a

disproportionate amount of its value from its image manage reputational risk? How does

the importance of Coke’s brand inform the best strategy?

5. Consumers outside the US, particularly in developing nations, have a love-hate

relationship with MNCs. Can Coke do anything about this? Do they address the issue

already?

Coca-Cola India

3

6. Coke seems to have a history of dealing ineffectively with crises. Have they learned

from their mistakes or are they likely to repeat their unwillingness to deal head-on with

problems?

7. The Carbonated Soft Drink (CSD) market in India is fiercely competitive between Coke

and Pepsi and the need for differentiation is important. Effective handling of this crisis is

an opportunity to gain tremendous upside in the battle for market leadership.

8. Parliament has banned Coke and Pepsi products and numerous schools and other

organizations have followed suit. Coke must deal effectively with all key constituents

and solve its sudden distribution problem in addition to its image woes.

9. The role of Coca-Cola Corporate Communications from Atlanta is not mentioned in the

case. Is it a problem that they were not actively involved?

Communication Strategy

A strategic communications model that incorporates an understanding of Coke India’s

objectives, constituencies, and channels should be used to analyze this case. This framework

allows students to appreciate that objectives drive both the right strategy and the best

execution of that strategy. In addition, the communication strategy should incorporate a

framework for managing reputational risk, underscoring the link between reputational capital

and corporate performance.

In this case, Coca-Cola’s clear, primary objective is to regain the trust of consumers, the

media, and the government but it has many secondary objectives as well. These include:

• Reassuring the global community, specifically global consumers of Coca-Cola

products as well as investors in the Coca-Cola Company

• Leveraging the situation to gain competitive advantage and precious reputational

capital through addressing the charges in a responsible and thoughtful way

• Resolving this issue thoroughly, beyond the hype of the moment, so that it does not

arise in the future and hamper business in the critical Indian market

After articulating the Company’s objectives, students should explore the execution of a

communication plan. Who are the most important constituencies? How do they rank and

how should you prioritize them? What are the best channels to use for each? What is the

timeline of the communication messages needed (ie which are short-term and which should

be ongoing)? What are the opportunities for increasing reputational capital? What safety nets

should be put in place to manage reputational risk?

Coca-Cola India

4

Solutions

1. Communicate openly with key constituents, including the public, the media, employees,

franchisees, the trade/channel, state and national government, and suppliers. Open,

honest communication is key to communicating a spirit of partnership and a willingness

to resolve the issue in a way that benefits the Indian consumer.

2. Attempt to collaborate with the CSE, acknowledging that your goals may be closer

together than you initially imagine. Take the time to discover their true motivation,

ultimate goal, and ideal outcome. Recognize the enormous reputational benefits that

could come from such a partnership, or even a willingness to partner.

3. Choose to differentiate as a more socially responsible company. Though a united front

for Coke and Pepsi was a successful tactic when the crisis first broke, now is the time to

take advantage of an opportunity to demonstrate leadership in a sphere that is critically

important to your key constituents.

4. Enhance your relationship with the government. Whether or not a relationship with the

CSE is possible, the government will be closely involved in developing the new

standards that Parliament has demanded. Strong government relations are important in

India and give you an opportunity to communicate all the benefits and investments you

provide to the economy.

5. Recognize the upsize for reputational risk on a corporate level if the situation can be

turned into a positive. By correcting the pollution in India and alleviating tensions at the

local level, The Coca-Cola Company has made a deposit in its global reputational capital

account.

6. Launch a campaign (which they did: eKO) to educate the public, the government, and

the media about environmental stewardship activities.

Application of the Page Principles

Tell the truth

This case study allows students to push on the definition of truth for corporations. Did Coke

"tell the truth" by sticking to the facts, or does truth imply a greater responsibility? Is truth

sticking to the letter of the law or accountability to a higher standard? The Coca-Cola case

also blurs the distinction between truth and facts. The CSE, the government, and Coke all

had different facts regarding the nature and degree of pesticides in soft drink products; what

does a company do when the truth is not black and white and consumers form their own

truths on the basis of perception?

Prove it with action

At the time of the case, Coke falls short of meeting this principle, which contributes to the

continued erosion of consumer confidence in the company and its products. Collaborating

with Pepsi to address the issue was a good first step, but Coke falls short of actions that

Coca-Cola India

5

demonstrate a commitment to problem resolution and product safety including collaboration

with the CSE or independent, transparent product testing. After the time of the case, the

Company launched Coca-Cola India eKO Management System, an initiative to translate

environmental policy into action in daily operations. This action was important in the

process of rebuilding reputational capital and regaining public trust.

Listen to the customer

Coke is forced to listen to the customer because they have spoken with their wallets. With

sales down over 30% in less than two weeks, the company knows customers are concerned

about this issue. At the same time, Coke needs to hear the customer's voice to motivate them

to the next level of responsibility: even if the company is technically 'in compliance' with

legal standards, customers demand and expect more from a company with Coca-Cola's

reputation.

Manage for tomorrow

Coke missed this opportunity in the past by ignoring the Kinley bottled water crisis but can

redeem itself by taking a long-term perspective on resolving the current situation. India is

one of the company's most important markets for the future and the company must take this

into account when considering the investment needed to thoroughly resolve this crisis. By

taking a long-term perspective on its reputational capital, both in India and around the globe,

the best response for Coca-Cola becomes clear.

Conduct public relations as if the whole company depends upon it

In Coke's case, with over half of its market value attributed to the brand, the whole company

really does depend on PR and the company's image. Many would say that Coke is built

almost exclusively on image, which implies an important focus on public relations.

A company's true character is expressed by its people

Sanjiv Gupta was an admired leader who knew the Indian consumer. He became the

company's face during the crisis and was an important reminder that Coke in India was more

than just a faceless MNC.

Remain calm, patient, and good-humored

This case gives students the opportunity to think about the importance of projecting calm

and confidence in the midst of a crisis.

Teaching the case

Distribute the case prior to the session to allow students an opportunity to read the case

thoroughly, meet in study groups to prepare their remarks, and tie case issues to readings for

that particular day.

Students should spend the first third of the class focusing on key problems as described

Coca-Cola India

6

earlier in this teaching note. Once all of the problems have been discussed, present key

frameworks from either a textbook or reading that can help students to put the problems in

context. We recommend focusing specifically on issues of corporate communication strategy

and reputational risk.

Allow students an opportunity to determine solutions given the problems and the

frameworks for the last third of the class. You should also include information about how the

company actually handled the situation as well as key takeaways based on the class session

for that day.

Questions for discussion

A focus on these key questions will help students to thoroughly prepare the case:

1. What are the key problems that Gupta should focus on in the short term and in the long

term?

2. How would you evaluate the crisis?

3. How well-prepared was Coke India to deal with the CSE’s allegations?

4. What is your recommendation for Coke’s communication strategy? Who are the key

constituents?

5. Could Coke India have avoided this crisis?

6. What should Gupta do now?

Key Takeaways

1. Don't underestimate the power of NGOs or antagonists in general

2. Realize that socially responsible companies are likely targets for NGOs but also

attractive collaborators

3. Recognize the value of strategic communications

4. Understand your reputational risk and what you can do to build reputational capital

5. Prepare in advance for crises and then improvise from a strong foundation

6. Small regional problems can turn into big issues if you don’t manage them

7. Transparency and action are key to rebuilding trust with constituents