Coke - Ethical Issues (Page 2)

Abstract

The case discusses the crisis faced by Coke in Europe when people fell ill after consuming its products. The case also brings out the ethical dimensions involved in Coke’s exclusive school contracts, which was done to promote soft drink sales among school children.

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As part of a damage control exercise, Coke sent a team of scientists to Europe. During its visit to Europe after a week of these incidents, Coke's chairman and CEO Michael Douglas Ivester said, "We deeply regret any problems encountered by our European consumers in the past few days." Coke Belgium even announced that it would reimburse the medical costs for people who had become ill after consuming its products.

The recall had a significant negative impact on Coke's financial performance with its second-quarter net income coming down by 21% to $942 million. Moreover, the entire operation cost Coke $103m (£66m) while its European bottling venture showed a 5% fall in revenues.

Analysts felt that the Belgium recall was one of the worst public relations problems in Coke's history. One analyst alleged that the company had information about people who had become ill weeks prior to the above incidents. Coke had an opportunity to disclose this information but it did not do so. He blamed Coke for being unethical in not disclosing the information, "The instinct is to pull information in, and that is almost always wrong.

The right move is to focus on the health of the customer. Even though you don't think this information is relevant, you should get it out - because that allows people who might think it is relevant to go through whatever process they want to go through. Coke might have done a lot more than it did in the opening days of the crisis." Another issue, which worried analysts, was the illness caused to the innocent school children. They blamed Coke's promotion strategy to sell soft drinks to school children which had raised lot of controversies in the US....

        Case Code   BECG014
   Case Length    12 Pages
              Period    1999 - 2001
 Organization     Coke, Belgian Health Ministry,
        Pub Date     2002
Teaching Note    Available
     Countries    Belgium
      Industry    Food & Beverages

Issues    Unethical Practices in Companies

Coke, Europe, consuming, products, school contracts, soft drink, sales, children, case Study, Business ethics

Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.