Coke - Ethical Issues

Exclusive School Contracts Contd...

By mid-2001, 240 district schools in 31 states had entered into an exclusive contracts with Coke. According to the National Soft Drinks Association (NSDA), sixty percent of all public and private middle schools and high schools sold soda in the US. The NSDA challenged the information presented by health advocates, calling it "an insult to consumer intelligence." They said that any attempt to link soft drinks to health problems was not supported by facts. According to the association, no direct connection had been established between increased soda consumption and obesity.

The plant in Dunkirk had some cans which had been contaminated with a wood preservative during shipping. In the last week of June 1999, the Belgium government lifted the ban on all Coke products, with the exception of Coke and Sprite. France allowed one of the two Coke plants to reopen, but the ban remained on all Coke products imported from Belgium. In late June 1999, after inconclusive tests and review of procedures by Coke and European health inspectors, Belgium and France lifted the ban on Coke completely. By the end of June 1999, the second French plant was back in business.

In a letter to shareholders dated July 12, 1999, almost a month after the incidents, Ivester said that there was never a problem with the actual Coke products. The letter said, "In the space of a few days, our system experienced two very limited quality problems at bottling/canning plants in Belgium and France. At no point was any health hazard present in our products.

However, these problems resulted in an off taste and off smell of products and packages, and some consumers reported feeling ill after drinking our beverages. Any quality issue, of course, is unacceptable. Nothing is more important to us than the integrity of our products, and I have apologized to our consumers for any discomfort or inconvenience. Many outstanding Coke people responded quickly to the situation, working diligently to recall the products, determine the causes and share our findings."

Analysts said that Coke had not handled the situation well and its media message was confusing, inconsistent and muddled. Coke alternately claimed that pesticide residue on the can or bottle, or a bad batch of carbon dioxide, was to be blamed for the "off" taste. On the other hand, the company also insisted that there was never any health threat. A company spokesman assured consumers, "It may make you feel sick, but it is not harmful."

In August 1999, the European Commission reprimanded Coke, asserting that the company had not cooperated adequately and its explanations were "not entirely satisfactory." It also suggested that while Coke blamed suppliers outside its sphere of influence, "One cannot exclude that errors were committed in the selection of plants or the dosage of extracts in Coke's own concentrate." While no deaths were linked to the Coke problems, it had a significant negative impact on the public confidence in Europe.

Exhibits

Exhibit I: Seven Categories of Schoolhouse Commercialism
Exhibit II: Health Impact of Soft Drinks
Exhibit III: Rising Consumption of Soft Drinks