WK 4 Assignment

More Fizz Than They Bargained For 1

More Fizz Than They Bargained For:

Coca-Cola and the 1999 Belgian Crisis

Gary W. Carson

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The Crisis Begins with a Pop

Dateline Brussels, Belgium - May 1999: Forty – one school children became nauseous with

headaches that required medical attention. When questioned, they reportedly drank “Coke that

smelled funny”. Treated at a local hospital, the students were sent home for the rest of the day.

After investigating, Coca Cola Corporation immediately pulled 100,000 cans of their product off

of shelves and promised to pay for medical care and compensate victims. Upon testing the

“tainted cans” no source of the illness could be found. On the heels of a questionable and

botched poultry contamination scare, the Belgian Government Health Ministry was at the

forefront of the investigation and media coverage. Within a few days nearly 200 people reported

to a Lille, France hospital with nausea and headaches they attributed to contaminated Coca Cola

products. Medical investigators found no connection between the soft drink and the illness,

claiming it was “viral in nature” (Haggerty, Barrett, 1999)

The Belgian government demanded a recall of Coke products until the company could

identify the problem. The French Health ministry called for removal of Coke products. Both

countries refused to wait for testing that could identify the source of the problem. The

governments of Spain, Luxembourg, and the Netherlands also called for removal of all Coke

products from the shelves and counters of their respective countries. One week later the

governments still refused to allow Coca Cola products to be sold in their countries. Queries about

product safety spread to Switzerland and even the African continent.

Framework

This paper will consider the communication of Coca Coal Company in the midst of this

crisis and the aftermath. The theoretical view of the Belgian crisis is that what happened was a

product problem that escalated into a clash of competing cultures. These cultures being the

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European Union, particularly embodied by the Belgian Government, and the Coca Cola

Company.

A History of Coca-Cola Corporation

In a 1942 letter, William D’Arcy, advertising executive for the Coca-Cola account said,

“Since 1886… changes have been the order of the day, the month, the year. These changes, I may add, are partly or wholly the result of the very existence of The Coca-Cola Company and its product…They have created satisfactions, given pleasure, inspired imitators, intrigued crooks…. Coca-Cola is not essential, as we would like it to be. It is an idea – it is a symbol - it is a mark of genius inspired.” (Pendergrast, 1993: p v).

From its 1886 beginnings in the mind and kettle of John Pemberton the Coca Cola

Company has become an icon of American capitalism. Capturing significant market share

in nearly every corner of the globe it is the world leader in the beverage industry. Bought

by the a group of investors in 1919, a $5 share of Coke stock, by 1991 had split to yield

1,152 shares worth over $2 million if dividends were reinvested (Pendergrast: p 134).

The stability of the company is shown by the fact that it has had only 11 CEO’s in

its 116 year history. The consistency of stock value, dividends, return on investment and

the value for collectors of its advertising artifacts, speaks of its place in the social and

business heavens. The 2001 Annual report states with pride, “In 2001, Coca Cola

connected with people around the world on over 250 billion occasions. In other words,

someone chose a Coca Cola – diet, light or classic, with cherry or with lemon, with or

without caffeine – nearly half a million times every minute of every day”

The Role of Brand Management and Brand Value

The value of Coke is not in the caramel colored sugar water with extracts of coca leaves

and added caffeine. The value of Coke is, in D’Arcy’s words, in the symbol it represents. The

protection of this symbol is known as brand management. David Bickerton makes the case that

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companies can organize using the brand as an architectural tool for business processes that

generate brand value. Contrast this with the more traditional approach; where brand is an

organizational tool serving to create alignment between internal culture and external image.

(2000: p 42). The brand and its perception, internally and externally become the organizing

principal, the goal and the raison d etre of the corporation’s existence. It can be seen why, “To

win the game, you must add style to substance…. Branding by reputation, not product, is the

name of the new game” (Gibbons, 2001). The CEO becomes the prima fascia symbol of the

guardianship of the brand entrusted to all stakeholders.

Brands are a symbol but they are also “intangible assets in many a corporations’ balance

sheets.” As such their value can be calculated. Taking the total market capitalization of a

corporation (its stock value) subtracting out all tangible or hard assets, you can calculate a brands

value to the corporation and the world. With total stock value exceeding $180 billion the value of

Coca Cola brand alone “could be in the tens of billions of dollars” (Brummer, 1999).

The importance of the brand for Coca Cola cannot be emphasized enough. Since it is a

symbol, the communicative practices of the corporation found in rituals, artistic expressions,

personal embodiment, corporate culture, legal challenges, internal and external utterances, and

publications are the lifeblood of the brand. This is magnified at a time of crisis. In a global

economy and global media coverage there is no such things as local problem. While corporations

can be situated in time and space, brands transcend these limitations. Financier Warren Buffet

said, “A great brand builds a moat around a product that protects it from upstart competitors”

(Greising p 178). It also insulates it from some of the effects of product and media driven crises.

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The European Union

As the European Union incrementally implements governmental and policy changes

across its 15 members, doing business in Europe is like trying to hit a moving target. While the

January 2002 conversion to the Euro was perhaps the most publicized EU action, the

introduction of the CE standard may be the most pervasive activity to date. “As the European

Union begins to flex its collective muscle, industries of every stripe are beginning to take notice

of the way the world’s largest economy is doing business. The centerpiece of the EU way of

business is the CE standard. This standard covers product, service, packaging and labeling

specifications from everything to industrial work gloves to chocolate” (Wagner, 2001). What

once was a hodgepodge of regulations and compliance requirements, unique to each national

government and sometimes within governments to municipalities, is now an international

standard.

On the surface this single international standard simplifies doing business because there

is only one benchmark setting agency. Yet the difficulties for businesses are twofold. The first is

during the transition and the interpretation of these benchmarks. What was acceptable before, say

in the Netherlands but not in France, now may be no longer acceptable in either place.

Established markets and business practices are put in jeopardy. In addition, local interpretation

and EU adjustments to these standards in light of practical considerations, revealed only through

implementation, leaves things in an unsettled state.

The second difficulty for business is the change in status of international companies

regarding the collective economic might of the EU. For many countries throughout the world,

dealing with international companies is an uneven playing field, tilted to the benefit of the global

corporation. The Gross Domestic Product of Belgium is on the same order of magnitude as the

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total value of Coca Cola : $230 billion to $180 billion respectively ( McGeveran, 2001 p 787).

When the bottlers and auxiliary suppliers that Coke owns in whole or in part are added to Coke’s

value, the scales weigh in on behalf of Coca Cola. Companies have used this to their competitive

advantage. The collective might of the EU gives the advantage in negotiations and standard

setting back to the countries. This “unified approach to the industrial marketplace,”(Wagner)

significantly changes the landscape.

In addition you have the influence in the EU of forces that are more socialist in ideology

than they are capitalist. What The Wall Street Journal calls, “…the growing power of fringe

parties, such as the Greens, in Germany, France and the Low Countries and in the corridors of

the European Commission….” (Melloan, 1999). Under Ivester, Coca Cola ran into this in

opposition to the attempted purchase of Orangina and Cadbury Schweppes. The “anti-big-

American-business backlash” (Morris, Sellers, 2000) coupled with an inflexible acquisition

strategy stymied these purchases which are now under appeal. The Europe of Douglas Ivester’s

Coca Cola is vastly different than the world even of his predecessor, Roberto Goizueta

(Measuring the Future 2000).

The climate in Belgium was ripe for a product crisis and, with its new found muscle and

authority, a government - business confrontation. Two weeks before the Coke scare, “the ever-

active European Commission had put out a red alert that had caused an even bigger flap,

announcing that diners were at risk because dangerous amounts of a carcinogenic substance

[dioxin] had found its way into Belgian chicken feed.” In the wake of the much publicized

British mad cow disease crisis and the “surprise” EU banning of Genetically Modified

Organisms [GMO’s] ( Measuring the Future 2, 2000) public sensitivity was heightened, turning

the Coke “situation” into a crisis (Melloan, 1999).

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The Belgium Health Ministry failed to respond in a timely, effective manner to the dioxin

scare. “This one laid Belgian Prime minister Jean-Luc Dehaene low when his government was

charged with negligence (Melloane). It led the government to take a more aggressive approach

to the school children’s illness. The Belgian government’s contact with Coca Cola

representatives may have added to the crisis as well as led Coke to violate a cardinal rule of crisis

management (more on this later). “The company says it kept a low profile early on because the

Belgian government asked it to. Ivester said the Belgian Health minister told him not to manage

the crisis in the media” (Cobb, 1999).

The changing face of doing business in Europe began, for Coke, in Belgium and spread

to France, Luxembourg, Spain, the Netherlands, and beyond. Two days after the problems in a

Belgian school, 200 people reported to a Lille, France hospital complaining of nausea after

consuming Coke products. Marylise Lebranchu, French consumer affairs minister “complained it

took Coke 48 hours to provide information on how to identify which soft drink cans might pose

further risks….’Forty –eight hours is just too long’” (Haggerty). This led to the incongruous

situation where the minister claims that Coke products are safe but still orders all canned Coke

products off the shelf.

The local crisis in northern Belgium became an international event as a result of EU

interconnectedness and telecommunication speed. Regarding the Coca Cola product crisis,

“every issue becomes very public and there are a lot of people out there commenting, whether its

on the internet or in newspapers and on TV stations all over the world…. Its hard to say how

people in the early 1990’s would have reacted to the same crisis. (Measuring the Future 2).

Although locally bottled, the message of tainted product spread to where a health minister in the

Central African Republic advised its citizens to not drink Coke “until further notice” (Haggerty).

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Unable to control the government responses “the company appears to have badly underestimated

how much explanation governments would demand before letting it [Coca Cola] go back to

business as usual.” (Haggerty).

In 1986 then CEO Roberto Goizueta proclaimed, during Coke’s 100th anniversary

celebration, “Business will be the institution of the future. It’s the only global institution”

(Greising, p 145). For global corporations, business may be global in scope and brand influence

but it is still spatially and temporally situated. The changing culture of the European Union; the

Brussels government need to save face and an opportunity to flex its authority;

deterritorialization of national borders; an apprehensive public nervous on recent scares, and the

information spillovers of a wired world created a milieu for Coke unlike any it had known

before.

Coca Cola Culture

As an icon of American entrepreneurial activity, Coca Cola has been able to maneuver

through the business cycles, competitor’s challenges and changing global situation to expand its

business remarkably since its 1886 inception. Surely the blue chip company has created a culture

that is built, not only to last - but to grow. Just as the European Union is not the same as it was

20 years ago, neither is the Coca Cola Company. The significant changes and strategies that

developed under Roberto Goizueta set the stage for the cultural clash precipitated by the Belgian

crisis. This corporate culture, joined with the personal characteristics of Goizueta’s successor,

Douglas Ivester, created a confluence of forces where the parties involved were following their

scripts for crisis communication exchange but missing the connection.

“An organizational culture is a way of life in a particular organization…. Not only do

organizations have their own cultures, organizations are cultures – systems of values, beliefs,

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artifacts – that are constituted through the process of communication” (Witherspoon, 1997, p 74).

For Coca Cola the culture begins over 100 years ago and is celebrated in its own company

sponsored Coke Museum in Atlanta. We have seen where brand management has been the

primary focus of the corporation, selling a lifestyle and worldview as much as a soft drink. To

maintain its image Coca Cola has entered into thousands of lawsuits over brand name protection

and imitation products (Pendergrast, p 103). It has used these same lawsuits as a tactic fighting

the competition of Pepsi in the U.S. and abroad (Pendergrast, p 194). It could be argued that

protection of the image and the name is the number one job of the corporation from the CEO to

the deliverer.

While Coke came to own the American market, its forays overseas were spotty and

erratic. The strongest showing was in Germany (Greisling, p 174). During Goizueta’s tenure as

CEO, expansion to overseas markets would evolve into the major strategic focus. Along with

Douglas Ivester, emphasis on world market share and in individual countries along with the goal

of selling one billion gallons of syrup a year dominated the strategic thinking and quarterly

planning of the CEO and upper level management. The success was unparalleled. During the

sixteen years of his leadership revenues went from $4 billion to $18 billion and stock market

value jumped from $4.3 billion to $180 billion: a 3500% increase (Greisling, p xvii).

This unprecedented increase was achieved on a number of different fronts. Greisling

catalogues the methods utilized. First Goizueta, “changed the formula by which chief executives

will be measured from this point forward. More than anything he did it by taking lip service

about serving shareholders and turning it into a life’s creed” (p xvii). Secondly, he refocused the

company away from diversification into other industries [like Sony/Columbia entertainment] to

do what Coca Cola Company did best - sell soft drinks. At least, Goizueta reasoned, they were

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predictable (p 167). The next three profit increasing strategies were directly attributed to his

Chief Financial Officer, Douglas Ivester. Thirdly, Coca Cola learned to make money by selling

their newly created foreign proceeds for a profit on the foreign currency exchange markets (p

147 ), Fourthly Ivester designed the “49% solution,” to spin off bottling (see below) and other

assets, significantly reducing corporate debt and substantially increasing investment income

( pp147-154). Lastly the securitization of future profits, particularly in relation to syndicated

television and movie rights and later to other tangible assets added to the bottom line (p 150).

Foreign expansion centered around the untapped Asian market and the Iron Curtain

coming down. While Pepsi had a 10 year exclusive right to sell its product in the Soviet

Union/Russia, by 1996, Coke had gained a 60% market share. Along with the aforementioned

profit enhancement/debt reduction strategies, these activities enabled the Coca Cola Company to

post 16 years of consecutive quarterly profits, and growth of 7-8% in syrup volumes and 15 –

20% in per share earnings (McKay, 2000). But, by late 1999, Doug Daft was named CEO,

succeeding Douglas Ivester. Ivester had resigned, an ignominious steward of seven consecutive

quarters of declines. He had communicated a rosier picture to investors than was achievable.

Analysts were noting, “Companies can’t put out goals and routinely miss them and not lose

credibility. There may not be an investor on this planet who believes Coke can grow at 15-20%

over the long term” (McKay, 2000).

The culture of Coke, driven by expansion and profits at every turn, did not allow for

retreat. The storied past includes the story where Coca Cola bought back most of its stock

because its CEO, Robert Woodruff, foresaw the crash of ’29. The company not only held its

stock value but increased its value throughout the Great Depression (Pendergrast, pp 174-178).

Taking significant market share wherever it found itself, by 1998, profits for the Coca Cola

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Company were now divided 27 % in the United States and 73% from the rest of the world

(Schmidt, 1999). Overseas success brought with it a concomitant set of vulnerabilities at a level

unknown before within the corporation. When Goizueta died from lung cancer in October 1997,

Ivester took over just at the time Russia devalued the ruble and the Asian economic crisis would

hit the world markets. Ironically the expansion and success against Pepsi, contributed to a drop

of profits for 1998 by 14% (McKay, Deogun, 1999).

The structure of the Coca Cola Company is described as “centralized decentralization,”

known derisively as “Coca-Colonization” (Greising p 173). This concept is clearly seen in

Ivester’s 49% solution and the relationship between Coca Cola and its bottlers. This relationship

has a significant impact on the communication processes and public confusion during the

Belgian crisis. Coca Cola produces and provides the syrup. It then contracts with independent

and company owned bottlers. Like a franchiser, Coke gives bottlers territories and sales

strategies providing syrup for their fountain, bottle and can sales. These relationships have been a

roller coaster throughout the company’s history (Pendergrast 1992: 137-149). Allowing local

ownership and sales and reaping profits that stay within the area, provides a community stake in

the operation and success of the larger corporation. The 49% solution was the sale, through Coca

Cola Enterprises, of at least 51% of the Coca Cola Corporation owned bottlers to outside

investors. This allowed the company to write off much of the bottlers debt, count the income as

investment profits and still “shape” (read, control) the quality and operation of the bottling

enterprise (Greising, 151).

“… An important part of organizational culture is the rhetorical environment in which

individuals work… (Witherspoon, 39). The Coca Cola Company is the proverbial 800 pound

gorilla in the room. It is good, knows it, proclaims it and uses this knowledge to its advantage at

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every turn. Unrealistic profit expectations, exposures to heretofore unknown vagaries of the

world marketplace, success of profit making strategies that followed the law of diminishing

returns, and a culture of expansion and unparalleled success sustained a fiscally and socially

conservative culture that would and could not recognize or respond quickly to the changing

environment of business in Europe are part of the corporate M. O. Now we add to this mix, a

CEO, who’s personal characteristics and professional outlook, amplified many of the already

stultified aspects of the corporate culture.

The Chief Executive Officer

Corporate culture is defined, to some extent, by the CEO. He/she embodies the ideals and

goals of the corporation. This aspect increases exponentially in a crisis where the CEO becomes,

in Karl Weick’s terminology, the sense maker for the corporation

(Ogrizek, Guillery 1997, p 31). “…Those exhibiting leadership behavior must understand the

importance of communication as a process that creates, sustains, and sometimes saves,

organizational cultures” (Witherspoon, p 84). Who the CEO is, their worldview, their

congruence or difference with the corporate culture, their communicative patterns and abilities

will all play a part in their role in the midst of a crisis. Consideration of Douglas Ivester and the

expectations of the CEO as the 1900’s come to a close will help define the culture clash between

Coca Cola Corporation and the European Union/Belgium government. It will also illuminate part

of the culture clash within Coca Cola.

An accountant by training, Ivester was a 20 year Coke man before he ascended to the

position of CEO. He served as CFO under Goizueta and undertook many of the accounting

maneuverings to elevate stock prices and increase the bottom line (Pendergrast, pp 149-150). He

was a “numbers man” who wore “financial blinders” (McKay, Deogun). “Analytical and data

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driven, Ivester spent heavily on technology for the quick effective delivery of vast amounts of

information. His goal was to make Coke the ultimate Learning Organization.” His big emphasis

was substance over style (Morris, p 116).

The Coca Cola culture is to seek predictable, measurable results. Ivester fits into this

culture well. Ian Lennie, in Beyond Management, speaks of the measurable world, the Cartesian

understanding of knowledge as something outside the body. “The more secure knowledge

becomes, the more it is both everybody’s and nobody’s. Emotion contaminates objectivity by

embodying world under scrutiny. Emotion then, in this Cartesian framework, should have no part

in the quality of knowledge itself” (1999, p 18). It is this objectivity, sought by Coke that seems

to have been and accepted, yea the lifeblood of Ivester’s professional career.

The 800 pound gorilla syndrome was exhibited even as Douglas Ivester was being

groomed for the CEO position.

Back in October 1994, Ivester, then newly names president and COO, took center stage at a big industry trade show and delivered a speech that was unforgettable for its surliness. It was called ‘Be Different or Be Damned,’ and it was some debut. Ivester seemed almost to be trying to differentiate himself from the larger than life Goizueta. He described himself as wolf – highly independent, nomadic, territorial. ‘I want your customers,’ he told a stunned audience. ‘I want your space on the shelves….I want every single bit of growth potential that exists out there.’ Make no mistake, he told them, he was their competitor. He would not pretend to be their statesman (Morris, p 117).

His very successful time as a COO and CFO allowed him to know the intricacies of the

financial aspects of Coca Cola. He once said, “I know how all the levers work, and I could

generate so much cash I could make everybody’s head spin” (Morris, p 114). This master of his

own destiny and engineer of the train attitude, combined with the wolf metaphor, Ivester’s

penchant for details and intricate data machinations, exhibited itself as the singular head of the

corporation. He failed to appoint a second in command despite the urging of the Board of

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Directors. (Morris) (McKay, Deogun) (Dearlove, Cranier, 2002 p). In fact, it was his failure to

heed the advice of Board members in a number of areas that led to their lack of confidence in

him and his resignation after 26 months at the helm. University of Southern California President,

Steven Sample states, “A primary challenge for any leader is to surround himself with people

whose skills make up for his [sic] own shortcomings” (2002, p 125). He echoes others who decry

the attempt to lead as an individual without the support of a solid management team and a

cramped management style (Measuring the Future 2000 2) (McKay, Deogun) (Morris).

The difficulty of corporate leadership is not unique to Douglas Ivester. Managing the

complexities of the global corporations requires a great variety of skills and competencies. A

CEO is required to be able to handle multiple, concurrent crises, and multiple constituencies

(Lublin,1999), manage the Board of Directors, (Lublin, 1999) (Dearlove) and deal with

performance problems (How to Tell 2002). Questions concerning the wisdom of a second in

command succeeding a leader are raised in light of a number of CEO resignations after a short

time in the position. The skills for being second do not readily translate into the abilities needed

for being number one (Lublin).

Perhaps the clearest shortcoming of Ivester’s abbreviated tenure at the top is his lack of

multi-cultural sensitivity. Whether it blossomed from the biggest, baddest corporation on the

block attitude or a lack of concern for others as long as the numbers were right, it cannot be

determined. But two major events highlight this. Concerning the challenges of expanding the

French market, a traditionally, culturally sensitive market, Geisling writes, “The rest of the move

on France was vintage Ivester, brash, aggressive, and not particularly concerned with fine details

such as cultural sensitivity… he pushed for accepting the importation of William Hoffman,

Coke’s Atlanta bottler who had never before visited France and did not speak the language.”

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Hoffman promptly created an uproar by placing a Coke vending machine at the base of the Eiffel

Tower (p184-185).

The second circumstance revolves around Carl Ware, an African American with the

highest position in the Coca Cola Company. In the midst of a highly public racial discrimination

suit with Johnny Cochran as one of the plaintiff’s lawyers, Ivester demoted Ware. This lead to

Ware’s much publicized and lamented resignation and a meeting with two Board members

resulting in Ivester’s stepping down. The Board of Directors were already blaming part of the

racial discrimination suit on Ivester’s lack of cultural sensitivity and communication deficits

(Hamilton, 2000). This was the last straw.

While it is clear that leaders create and manage culture (Witherspoon, p 89), it is also

clear that leaders are influenced by the corporate culture they help create. Following the

legendary Goizueta was an invitation to disappoint, for few can live up to legends. Poor timing

surrounding external events were beyond his control. The “automatic” second in command,

taking over for the unquestioned legendary boss who’s star rose even higher in corporate lore

when he died while in office may have set Ivester up for a fall. His personal proclivities seem to

exacerbate the corporate hubris and unachievable expectations measured not in brand value but

in bottom line numbers.

Clashing Cultures

The news of school children becoming ill because of Coke products immediately throws

management into the murky waters of crisis management. In a world where information,

especially solid information, is hard to come by, rumors abound and the safe repetitions and

rituals of the past are of little value. Flying by the seat of your pants means maneuvering through

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a variety of stakeholders with competing and often antagonistic needs and agendas all done

before the cameras and media seeking a story du jour.

Describing crisis as a successive series of waves that build up and break, Ogrizek and

Guillery describe P. Lagadec’s five states of a crisis. 1. Outbreak/overflow

2. Disorder 3. Loss of credibility 4. Divergence of many kinds 5. Destabilization (p xiv). When

the word gets out that a Coca Cola product is perceived to have caused a crisis the crisis

management team and a series of responses are set into action. An attempt to determine the

extent of the crisis, gather the facts of the situation, assess the damage and begin responding as

quickly as possible are the goals. In the case of a product crisis, one key determination for the

company is whether this is a result of product tampering, ala the Tylenol scare of 1972, a

production problem, ala Perrier water and benzene contamination of 1990 or not related to the

product at all. While the answer to these and a myriad of other questions may not be readily

ascertained, certain actions are recommended.

Coca Cola immediately offered to pay for any needed medical treatment, to reimburse the

victims and pulled 100,000 units of product off the shelves in order to test and determine the

safety of the product (Haggerty). Following the precedents of Tylenol and Perrier, Coca Cola

assured the public it would do all it could to insure the safety of its valued customers. Even while

the students, who were in the middle of exams, returned to school, four significant events took

place that would magnify this situation into a crisis. 1. As previously mentioned, the Belgian

Health ministry requested that Coca Colas not mange the crisis in the media. Coke agreed to this

creating a vacuum in the media for soft drink consumers. 2. Confusion in the public and the

media arose over who was speaking for Coke. Was it the bottler, a part of Coca Cola Enterprises,

the major 49% solution company spun off a few years before with assets that rivals Cokes? Or

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was it the head of the European operations for the Coca Cola Company? Perhaps it was Coke’s

world headquarters in Atlanta? 3. The media, in its varied forms, picked up the story and began

running a lot of different “takes” on the crisis. 4. Investigators for Coke were unable to find a

clear link between the illness and the children’s ingestion of what they described as funny

smelling Coke. Their lack of definitive information made them reticent to say anything.

When Coke did make a statement it centered on speculation that the tainting of the

product may have been due to a fungicide that was on pallets used to transport the product. It

was external, on the can, not internal, so the product was safe. The bottler complained loudly in

their own press conference that this was not their fault. The lack of control of the message made

what seemed to the public of a schizophrenic Coca Cola Corporation and Coca Cola Enterprises

slinging accusations back and forth, confusing and upsetting all parties. It gave the beleaguered

Health Ministry in Belgium and later France and the EU, a target and a cause. In the interim

Ivester said from Atlanta, “There is no evidence linking the illness to the product.” Going on to

explain that the nauseous children had all recovered hinting that it wasn’t a significant event

(Bell,1999, p 15). The Corporation and the bottler got into the mix again by speculating that a

bad batch of carbon dioxide provided by a Swiss company may be the culprit. A spokesperson

the Swiss carbon dioxide supplier denied the charge. This international spill over of a supplier

now accusing Coke and the bottler of scapegoating them, played prominently in the media.

Two days after the initial school problem, people started reporting to a French hospital on

the Belgium border saying drinking Coke had made them sick. It would mushroom to 200 within

ten days. The largest recall in Coca Cola history ensued with 2.5 million units pulled off the

shelves. All Coke products ( Fanta, Sprite, etc) were questioned concerning their safety. The

Health Ministries of France and Belgium, under the guidance of the EU, expanded its

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investigation, accusing Coke of stonewalling tactics creating more tension. A preliminary

investigation by the hospital in France indicates the symptoms were not product related but viral

in nature. As noted, the French minister said she believes the products are safe but calls for their

removal from store shelves. Spain and Luxembourg join the call.

Ten days after the initial incident Douglas Ivester travels to Belgium and France for

damage control, to apologize and work with the governments to get Coca Cola products back on

the shelves. It takes until the end of June before all products are allowed back.

Crisis management is about perception, symbolic actions and communication (Ogrizek

xiv, 12, 56). Management in general, and crisis management intensifies this, “is about keeping

disorder at bay” (Lennie, p 96). Given the culture of the corporation, after its initial foray into the

situation, Coca Cola lost sight of the admonition that in a crisis “it is modesty that is needed

more than anything else” (Ogrizek, p 53)

Lessons Learned

In this cultural crisis it becomes clear that the clash of cultures helped blow a minor

incident into a major crisis event for the Coca Cola Company and its auxiliary corporations and

suppliers. The communication strategies and practices of the corporation contributed to this

escalation. At the proverbial wrong place at the wrong time due to recent events in Belgium and

the “need” for the Health Ministry and government to redeem itself, created a volatile situation

that was hidden from view for Coke. From a leadership and communication perspective there are

a number of lessons that can be gained from this situation.

The Golden Rule of Crisis management is that a product crisis must be handled by the

CEO. “It is the whole corporation that is being targeted and questioned through the product”

(Ogrizek, p 21). This could not be managed from Atlanta. Leadership had to be on the ground in

More Fizz Than They Bargained For 19

Belgium as a symbolic action of unity and concern. While Atlanta utilized the restoration

strategies of denial, shifting the blame, scapegoating, minimization and comparison to other

more egregious product difficulties (Benoit, 1995, p 95), the citizenry of Belgium heard no one

speak to their fears. While the silence grew to an overwhelming crescendo of accusation and

blame it was broken only by the shrill finger pointing of bottlers and suppliers that exponentially

increased fears. The other break in the din, unfortunately, was the offensive attempt to say it

wasn’t all that bad by a corporate leader safely ensconced in storied halls 5000 miles away. No

one ever feels better when told to, “Relax. Cheer up! It could be worse.” This paternalistic

pabulum moved fear into anger for the citizens of the EU.

If Coca Cola is all about brand, then the entire corporation, but particularly the CEO, lost

sight of that (Brummer, 1999). Dennis Perkins book Leading at the Edge focuses on the story of

Ernest Shackelton and his expedition gone awry in the Antarctic ice. Their remarkable survival

was achieved by concentrating on the key elements. “Optimism is an important leadership

quality, but denial is deadly” (2000, p 54). Despite all the technology and the voracious appetite

and need for information, Ivester created a culture where the data was more important than the

interpretation. This Cartesian world view minimized or ignored the messy emotional responses

given in crisis. “Ivester had all the data but he missed their larger meaning” (Morris, p 116). A

former Coke executive observed, “ ‘The folks [Coke employees and Board] didn’t think there

was someone who was keeper of the flame. There was enormous criticism as to whether Doug

understood the flame or not’”(McKay, Deogun).

Crisis management is all about victim management. Identifying the victims, anticipating

the needs and concerns of physical victims and those suffering fears from the incident is a

cornerstone of corporate crisis management. “The key principle underlying communication with

More Fizz Than They Bargained For 20

and about victims is proactivity” (Ogrizek, pp 60-62). Starting off on the right foot for the

physical victims, Coke failed in their follow through to the larger society and government. While

the symbolic action of pulling products off the shelf before you know where the problem lies can

be a double-edged sword from a bottom line perspective, it did get the point across. However,

communication via press release, appearances by subordinates and memos, overwhelmed the

initial symbolic concern with the symbolism of aloof detachment and lack of concern (Bell, p

15). Transparency (Ogrizek, p 9) provides the perception of forthrightness that breeds trust in an

uncertain situation. Perception in a crisis is the reality, particularly for the victims. More than

anything else it is the “perceived arrogance” of Douglas Ivester that garnered the greatest

criticism, bringing the weight of the governments on Coke (McKay, Deogun)

Patricia Witherspoon notes that decision making is linear only in theory (p 115) and that

leadership is the integral melding of authority and persuasion (p 4). Intensified during crisis, the

symbols of authority and one’s communicative capabilities become paramount when the crisis is

a cultural clash. Cultural clashes are played out via communication in the media, often requiring

extensive reframing. The one who can gain the greatest market share of the message gains the

upper hand. Decision making and communication are the keys with communication taking

precedence. Even poor decisions communicated effectively can lessen the tension and emotions

of the situation but good decisions that are not communicated well are akin to silence and poor

communication.

Dénouement

The great irony of the Belgian Crisis for Coca Cola Corporation is that it may never have

happened. No conclusive evidence has been presented for linking the illness of the Belgian

schoolchildren or the French hospital patients to consumption of Coke or Coke products.

More Fizz Than They Bargained For 21

Bernard Rime, a psychology professor at the Universite Catholique de Louvain in Belgium, said, ‘there is an obvious psychological explanation for at least part of the situation.’ He said conditions were ripe in Belgium for panic among students: Schools were holding exams, and the country is in the midst of a scandal over poultry and other foods contaminated with dioxin” (Haggerty).

In a world where phantom product problems can lead to the greatest recall in a storied

company’s history and the loss of $250 million, perception and communicative abilities in

uncertain situations may be as important as the goods and services provided.

Summary

The crisis of Belgian school children attributing their sudden illness to consuming Coke

has been considered from the perspective of a clash of cultures. The unique circumstances within

Belgium at the time, as well as the increasing influence and self understanding and identification

of the citizenry with the European Union was highlighted. The historical unevenness of

relationships tilted toward the corporation and the role of Coke’s unparalleled success created

comfortable blind spots in their interaction with the Belgian people and the government. The

success of Roberto Goizueta set the stage for unrealistic expectations from stockholders and

management as Douglas Ivester took the reins of power. Ivester’s personal outlook and personal

penchants heightened the weaknesses of the corporate culture. A Cartesian worldview

communicated ineffectively in an emotional situation created a flammable mix.

While considering the clash of cultures in this paper it seems one of its weaknesses is a

lack of the understanding of the interaction going on within the corporation. What was the role of

the crisis management team? Was their coordination of strategies and communication between

the company and the bottlers? While some image restoration strategies were offered in this

analysis, are there others that may have been more effective if employed under these conditions.

And finally, consideration of the difference between the actions of crisis management and the

More Fizz Than They Bargained For 22

spirit of crisis management could be pursued. Was the crisis more a communication failure, a

failure of process, an inevitable growing pain or a lack of vision? For it seems that many of the

recommended actions were there, they simply do not work, failing to convince the stakeholders

of this situation of their sincerity or efficacy.

More Fizz Than They Bargained For 23

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