The Impact of the Belgian Crisis to the Coca-Cola Image

The Impact of the Belgian Crisis to the Coca-Cola Image

In June 1999 Coca-Cola Company faced a health/communication crisis originating in Belgium, one of the countries with the highest consumption of Coca-Cola per capita. The crisis began when several children at the same school in the north of Belgium started suffering from similar symptoms, including headaches and nausea, after having consumed Coca Cola products. This was the beginning of what was later described as a mass hysteria regarding Coca-Cola’s products in Europe. The fact that Belgium was an important market because of high per capita consumption also enforced the situation. Coca-Cola was unfortunate to have this scandal just two months after the Belgian “chickengate” crisis, which had already made customers highly sensitive to health issues related to consumer products. In addition to the already sensitive situation, the crisis management of Coca-Cola could have done much better in handling the situation.

A

As the world leader in the soft drink industry, Coca-Cola’s brand is the most valuable brand in the world, and, as written in the mission statement, it is the core of their business. However, the stronger and more internationally recognized a brand is, the more severe are the effects of a crisis on a brand. And this was exactly the case with Coca-Cola’s brand, because during the crisis consumers started to lose their trust in the brand. The consequences were crucial – The brand was distorted and, thus, the value decreased. This was all triggered by the lack of trust consumers showed, and, further amplified by mass hysteria and bad international press. The negative economic impact was not just demonstrated by expenses for the retraction of the contaminated products, but also due to a decline in market share and sales.

The Crisis As a Local, European and Global Problem

The discussed crisis is at first to be considered as having a local dimension limited to Belgium where it arised. The first problem that the company needs to locally address the illness of around 100 children in Bornem, that occurred after having consumed Coca-Cola branded products. The firm is having operational issues within plants belonging to the bottler Coca-Cola Enterprises, which are supplying the Belgium market. Two irregularities have been identified that need to be solved: first of all the contamination of carbon dioxide with sulphide used in the Wilrijk (Antwerp) plant and secondly the contamination of the outside of some cans with phenol-based fungicide within the Dunkirk factory (see appendix 1). The Belgian government has introduced an overall ban on sales of Coca-Cola products throughout the country, affecting 30 million bottles and cans. The problem of Coca-Cola in Belgium is also more profound as consumers are already susceptible and fearful of food contamination due to the already mentioned ‘chickengate’ scandal which occurred shortly before the Coca-Cola incident.

However, the problem also extended regionally European countries, such as Luxembourg, France, Spain and Switzerland, when contaminated products were identified in these countries, leading in some cases to additional bans. The company is unable to properly track its products along the distribution chain, which in conjunction with past difficulties with European authorities related to attempted acquisitions of companies such as Pernod Ricard’s Orangina and Cadbury Schweppes, does not emend Coca-Cola’s image. It is perceived as having a rather aggressive and not always transparent style, wanting to monopolize the soft-drink industry. This current incident might also have an amplified effect on other countries in Europe due to these previous confrontations.

The problem should also be considered as having global consequences, since the Coca-Cola brand is extensively known worldwide. With international media coverage, the spread of such a crisis is extremely rapid. As seen in the case, stock prices immediately fell after the problem occurred. The overall brand image of Coca-Cola is affected. The incident might also question the firm’s entire business model and raise concerns about the lack of control of its bottlers. Individuals may worry that such a problem could theoretically arise anywhere.

To conclude on the scope of the issue, Coca Cola has to deal with variable kinds of stakeholders due to the three different dimensions of the problem. This makes acting very complex, because varying stakeholder groups have different, and sometimes, contradicting interests.

The feasibility of Coca-Cola’s image retrieval

As the Coca-Cola brand is the Coca Cola Company’s (CCC) most valuable asset, it is of paramount concern that all efforts are made in trying to restore the image. The main issues throughout the crisis that started in Belgium, were the perceived lack of communication and slow measures addressed at solving the origin of the problem. It can be argued that the CCC’s silence, as they tried to find the source of the problem, appeared to be a concealment and thus led to a loss of public trust.

It is reasonable to assume that people closer to the origin of the problem will remember the effects for a longer period than people in the circumference. Hence, the effects on the brand will be more long-term in and around Belgium, whereas the rest of the world will tend to forget at a faster pace. In addition, it can be assumed that the greater the response time to the incidents is, the greater the company’s brand is negatively affected on a long-term basis.

Coca-Cola’s efforts should be directed towards regaining sales in the short term and restoring the trust of the brand in the long run. In doing this, it is crucial that the company addresses all stakeholders, i.e. customers, suppliers, government, media, retailers, shareholders etc. An aggressive marketing campaign should be undertaken ensuring the CCC’s uncompromising concern about customers’ health and safety. In addition, a crisis management plan needs to be developed that is more responsive to local needs, improved quality assurance standards to be implemented (such as no fungicide pallets, guarantee certificates on carbon dioxide) and advanced racking systems for locating