| BUSINESSWEEK ONLINE : JUNE 28, 1999 ISSUE | ||||||||
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| INTERNATIONAL BUSINESS
Things Aren't Going Better with Coke The European scare is among the company's worst PR crises Veronique Mees used to think nothing was safer than Coca-Cola (KO). But as the Belgian housewife pushed her baby daughter's stroller into her local Brussels supermarket on June 16, the shopkeeper was pulling cans and bottles of the soft drink from shelves. Across the country, supermarkets were doing the same. More than 200 Belgians and French were suffering from stomach upsets, nausea, and head-aches after drinking Coke produced at bottling plants in Antwerp and Dunkirk. ''I'm afraid,'' Mees says. The Belgium scare marks one of the worst public relations problems in Coke's history. For the first time, the entire inventory of Coke products in one country was banned from sale. After Belgium's action, Luxembourg and the Netherlands followed with similar recalls of Coke products. The Antwerp plant apparently had used substandard carbon-dioxide to produce Coke. And France suspended sales of Coke from a plant in Dunkirk after it learned that some cans were contaminated with a wood preservative during shipping. To contend with the crisis, the Atlanta-based company quickly dispatched a team of scientists to Europe. ''We deeply regret any problems encountered by our European consumers in the past few days,'' said CEO M. Douglas Ivester in a statement. But these moves may not be enough to calm European fears--and restore Coke's image. The scare is just the latest of a series of controversies over tainted food in Europe. It follows revelations that huge quantities of Belgian pork and chicken contained cancer-causing dioxin. The public was so outraged that it toppled the Belgian government in June 12 general elections. Now, despite Coca-Cola's initial steps, European analysts already are raising questions about the company's handling of the crisis. And they are concerned about quality control at its European plants. ''No one would have thought that this would happen to [Coke]. But they should have planned for it,'' says Jan Lindemann, director for brand valuation at Interbrand Group in London. The worry for Coke, he adds, is that its image will be long tarnished just as Perrier's was in the 1980s when benzene was found in water shipments. It took years for Perrier's sales to recover. INSURANCE. For now, the financial impact on Coca-Cola is tiny. The four countries account for less than 2% of the company's annual global sales. Coca-Cola's revenues were $18.8 billion in 1998. ''It's not going to make or break them,'' says Emanuel Goldman, a Merrill Lynch & Co. beverage analyst. By rooting out the cause of the contamination and correcting it, Coke is hoping to convince the governments to allow sales to be fully restored within days. ''Our strategy is to quickly identify the problem, take corrective action, and work closely with the government to make sure that they have all the necessary insurance,'' says Paul Pendergrass, director of communications in London. A more high profile approach may be necessary. ''I think Ivester should consider a trip,'' says Patrick Worms, a crisis manager at Ogilvy & Mather in Brussels. ''Coke must get out in front and give an impression of openness--and only the top guy can do it.'' Until that happens, even if the company succeeds in solving quality-control problems at its plants, Coke may still have a lot of work to do to win back European consumers. By William Echikson in Brussels with Stephen Baker in Paris and Dean Foust in Atlanta. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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