Case Study: Coca-Cola Crisis in Belgium

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 products. Any
medical costs that customers incurred should be compensated if causality can be medically
proven. In sum, the company needs to be prepared to bear the short-term cost to ensure
customer safety in order to sustain it’s long-term brand image.
If handled correctly, previous crises, such as Johnson & Johnson’s Tylenol crises in the
1980’s, show that the CCC should be able to recover its market share rapidly. In the case of
Johnson & Johnson, a woman died in 1986 due to cyanide poisoning after taking a Tylenol,
a market leading pain reliever. This incident was preceded by a previous Tylenol crisis in
1982, which included the death of seven people. All the poisonings were caused by
sabotage. However, Johnson & Johnson had taken measures after the first crisis and had
implemented crisis management plans. After the second crisis, the company managed to
recover 96 % of its market share within five months and did not sustain any significant
negative long-term effects.1 This result was achieved by acting swiftly, communicating the
concern about customers’ health and safety and bearing the necessary short-term costs to
ensure that the company’s promises were fulfilled. Hence, the CCC should pay the outmost
attention to reduce the importance of their initial wrongdoings in Belgium by restoring the
consumers’ trust and, thus, minimize the impact of the crisis on the brand.

An Advertising campaign, it’s objectives and other actions to tackle the crisis.

Undoubtedly the main objectives of the advertisement campaign would be to regain

customers’ trust, brand image and market share. Throughout and after the scandal, the
scandal Coca-Cola, also due to the poor management of the whole crisis, lost reputation
and credibility in the eyes of customers. Therefore, a massive communication campaign
focused on transmitting a precise image to consumers as well as to apologize has to be
used to improve the perception of the company by the mass market. It has to communicate
the image of a company which takes full responsibilities for the happenings and which will
make sure that this never occurs again, revealing the insights of investigations on the
issue. At the same time the campaign would also be focused on remembering customers
how the company built a strong brand and image by working very hard and providing top
quality products during the years. However this efforts has to be done aggressively in the
short-run and return to normal in the medium term for a short period and afterwards it
should go back to normal communication, not addressing the issue anymore.
In addition to the advertising campaign, there are several crucial steps to reach the set
goal:
- Sponsorship of local events
- Establishment of a crisis management plan (as mentioned above)
- Awareness of different stakeholders

Sponsoring local events would help Coca-Cola in getting closer to the Belgium audience as
well as in improving the company’s perception/reputation.
One of the main problems with the handling of this crisis by Coca-Cola was the lack of a
crisis management plan. If a sound plan aimed at minimizing the possible costs and loss
would have been in use, probably the company would have suffered lower losses.
Therefore we would suggest the development of a specific plan to manage this kind of
situations.
The crisis management plan can only work in a company where the level of local
responsiveness is high. This has not been the case during the Belgium crisis where the
company took a centralized approach in communications heavily involving the
headquarter.2 Therefore it is reasonable to reorganize the company to have a less
centralized structure in order to react faster. This would help to balance global
coordination and local responsiveness/autonomy.
During the whole crisis (and even before) the company seemed too fail to correctly
address the relationships with the main stakeholders involved and rather focused on
trying to find the ‘facts’. Better relationships with the main stakeholders (e.g. the Belgian
government) would have probably helped Coca-Cola to minimize losses and repercussions
on the company’s image.

1 Johnson & Johnson’s recovery, Published in NY Times 5th July 1986

2Michael Regester, Judy Larkin ‘Risk Issues and Crisis Management in Public Relations’ – Kogan –
London - 2008
Appendix 1: Plants supplying Belgium and raw material procurement sources (in June 1999)

Sources:

http://www.nytimes.com/1986/07/05/business/johnson-johnson-s-recovery.html
(accessed 2010-10-26, 18:51)