Lessons from Belgium

                 In 1999, the Coca-Cola Company (CCC) and its subsidiaries manufactured, marketed, and distributed concentrated syrups and beverage bases for over 230 brands worldwide. Coca-Cola Enterprises (CCE) along with other bottlers around the world produced and distributed the final beverages that bear the CCC trademark. At the time, the European market accounted for 23% of worldwide sales for CCC and CCE was the sole licensed bottler in Belgium, Great Britain, Luxembourg, The Netherlands, and most of France.

                It is worth noting that, at the time, much of Europe was reeling from a Mad Cow Disease and dioxin poisoning in animal food. With that in mind, on June 16, 1999 the Belgian Health Ministry withdrew all CCC trademarked products from stores due to two “unrelated” seemingly simultaneous, incidents. First, consumers reported an irregular taste and odor from bottled products and second, approximately 100 students and six schools became ill after reporting an unpleasant odor emanating on the outside of CCC-branded products.

                In the wake of the unprecedented recall, CCC went into action . . . sort of. The company devoted significant effort into uncovering the causes that lead to the recall, which led to the conclusion that the beverages produced and distributed were of “highest quality”. It was determined that the elements leading to the unusual taste or odor were not presents in amounts significant enough to lead to illness. Studies conducted on the student illnesses later concluded that illness was likely a “psychosomatic” reaction likely sparked from recalling the recent Mad Cow and dioxin scares.

                CCC launched an aggressive marketing campaign and by August of 1999 research indicated that the company had recovered nearly all of its “core” Belgian users.  But to this day, many have a bad taste (no pun intended) for the Coca-Cola Company with respect to how they handled the entire incident. The story has become part of business management case study lore, not for what CCC did, but what CCC didn’t do. The 1999 Belgian crisis places a spotlight on the significant failures of the Coca-Cola Company in the following concept areas:

1.       Crisis management

2.       Business continuity planning

3.       Political, legal and socio-cultural environments in international business

4.       Leadership and decision-making

5.       Marketing

                History teaches that the more time it takes to respond to a critical incident, the more long-term damage is likely to be done. Given the Belgian public was extremely skittish given the resent crises; CCC should have made themselves aware of the sensitive social and political environment in which they were operating. At the time, CCC had no significant local decision-making presence in Belgium, and thus crisis management strategies were not developed or revised to address such incidents. Due to this seemingly blatant ignorance, CCC failed to issue any kind of public statement until nearly a week after the initial incidents were reported.  It took ten days after the initial incidents were reported for a top executive from Atlanta to bother to show up in Belgium. Overall, this gave the appearance that CCC had little concern for its product quality and customers. The after-effects of this incident prompted executive resignations and the company has subsequently worked to flatten the organization, including establishing a decision-making presence in significant local markets.

                The Belgian crisis is a lesson in the importance of brand image. “Brand image is created in the minds of the consumers and convinces them that the products have value-added components above and beyond products offered by the competition” (Johnson, 21). The value-added components include, but are not limited to:

1.       Quality

2.       Price

3.       Design

4.       Status (intangible)

5.       Nostalgia (intangible)

6.       Confidence in company leadership (intangible)

7.       Positive record of corporate social responsiveness (intangible)

With this in mind, a plan must be developed that its sole purpose is protection of the brand. The plan identifies potential threats and expeditious solutions. The plan could be constructed similar to a SWOT analysis. At a minimum, the plan should consist of emergency response plans, quality assurance systems, effective communications processes, and an ongoing reinforcement of the company’s commitment to the community. Bottom line: The brand is your company’s most valuable asset. It should represent everything that your company stands for. Do everything to protect and uphold it.

Resources:

“Coca-Cola Executive Says Firm Mishandled Scare” Los Angelis Times June 28, 1999 (accessed February 10, 2012) http://articles.latimes.com/1999/jun/28/business/fi-50859

Hays, Constance L., “A Sputter in the Coke Machine; When Its Customers Fell Ill, a Master Marketer Faltered” The New York Times, June 30, 1999 (accessed February 10, 2012) http://www.nytimes.com/1999/06/30/business/sputter-coke-machine-when-its-customers-fell-ill-master-marketer-faltered.html?pagewanted=all&src=pm

Johnson, Victoria and Spero C. Peppas, “Crisis Management in Belgium: the case of Coca-Cola” Corporate Communications: An International Journal (Emerald Research Register: 8:1, 2003) 18-22.