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 worlds 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 Exchanges attacks on Starbucks over fair-trade coffee and against Nike over sweatshops in Asia, like the Center for Science and Environments (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 CSEs allegations of pesticide-contaminated Coke and Coca-Cola Indias response provide an important example of the worlds 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 Indias 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 governments legal limits for pesticide residue in beverages, the countrys 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 Cokes 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 companys responsibility stop at following the law? 4. Coca-Cola is the worlds 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 Cokes 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 Indias 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-Colas 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 Companys 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 CSEs allegations? 4. What is your recommendation for Cokes 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 dont manage them 7. Transparency and action are key to rebuilding trust with constituents