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
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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?

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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?

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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

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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

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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