Coca-Cola and the Issue of Water Shortages in Communities Across India - Assignment Example

Coca-Cola Water Shortages in Communities across India Number: ___________ MSc Strategic Marketing Module BST 247 Marketing & Society Lecturer: Dr. Sue Peattie Date: Thursday 22nd April 2010 Table of Contents 1.Introduction 1 2.Description of criticism 2 3.Company response 4 4.Evaluation of the organisations strategy to deal with the issue 7 5.Conclusion 8 6.Bibliography 9 1. Introduction A good organization is one which cares about its customers, its stakeholders, employees, the environment in which it operates and society in general. It works within the diameter of ethics and acts in a socially responsible manner. Being unethical and socially irresponsible does not only hurt the society, but the company itself. We have a number of examples from the past, including that of Exxon. In order to sustain better and longer, it is extremely necessary that a company maintain a positive image, through implementing various CSR activities as well as controlling any crisis situation right from its starting. In this report, we will analyse the crisis that was faced by the giant multi-national company Coca-Cola, where it was accused of the shortage of water in various Indian communities by excessive extraction of underground water. The report describes the criticism that was faced by the company, while it also critically talks about the strategies that was used by Coca-Cola to combat this crisis situation. This case offers a great opportunity to look inside a crisis with one of the giant company of the world. It focuses on issues such as brand reputation and Corporate Social Responsiblity. Coca-Cola was established by John Pemberton in 1886 in Atlanta, Georgia. It is ranked #1 brand in the world by the Interbrand’s Global Brand Scorecard for 2003, which estimated its brand value at $70.45 bilion. Coca-Cola is the world’s most valuable brand and that value is largely driven by the image of the company and its products. In India, Coca-Cola was the leading soft drink brand untill 1977 when it left, facing issue with the government. It returned in India in 1993 after 16 years. It invested more than US$1 billion in India from 1993 to 2003, making it one of the country’s top interntianal investors. It employees more than 7,000 locals, has 27 bottling operations, 17 franchisee-owned bottling operations and 29 contract-packers for manufacturing a number of products and about 700,000 retail outlets sells Coca-Cola(About Us, n.d.). 2. Description of criticism In Kaladera city of India, during 2003, villagers living near one of the largest Coca-Cola plant complained that their water supplies are drying up because of the massive quantities of water required by Coca-Cola plant(Coca-Colas toxic India fertiliser, 2003). The plant, according to an estimate, was using 1m litres of water a day from the underground aquifer, for keeping the wells topped up (Coca-Cola in India accused of leaving farms parched and land poisoned, 2003). The village council, which earlier willingly granted the license to the company, demanded the closure of the plant due to its deteriorating affect to the community. Not only Coca-Cola was accused of the shortage of water due to massive pulling out, it was also blamed to indiscriminately discharging waste water in the fields around its plant and rivers (Campaign to Hold Coca-Cola Accountable, n.d.). The company was distributing solid waste to farmers as fertilizers. However, a test conducted by the BBC proved that it contains toxic chemicals. It also said that high level of carcinogen cadmium has been found in the sludge produced from the plant (Coca-Colas toxic India fertiliser, 2003). Face the Facts a program of BBC Radio 4, which traced the chemicals, also sent sludge samples to the University of Exeter for examination which found that the material was useless as a fertilizer and it was full of toxic metals. Prof. John Henry, a senior poisons expert in London said that the level of toxins in the samples would cause serious problems; therefore, immediate actions should be taken by the government of India to ban the practice. Coca-Cola claimed that its bottling plant is not responsible for water shortage problem. However, contrary to this claim, the depletion of water was confirmed by the Central Ground Water Board in India. CGWBI said that the factory is exploiting the ground water reserves from deeper aquifers (Coca-Cola Responsible for Decline in Groundwater Table in Rajasthan , 2004). Similar were the case with other Indian communities including Plachimada, Karela and Mehdiganj, Utar Pradesh. The company faced criticism for water shortages, pollution of groundwater and soil. The farmers accused the company saying that it has destroyed the farming industry and deprived many people from their jobs. The local people demanded the closure of the plant, for which, they started march against the company (Marchers against Coca-Cola court arrest , 2004). Public meetings were organized with social activists, civil rights workers and villagers. Thousands of people who were working in these communities decreased to just few hundred after the establishment of various Coca-Cola plants. In short, the live of people living near Coca-Cola plants were made miserable. 3. Company response Initially, the company denied that the shortage of underground level of water was caused by its usage of water. The company also denied that the so called fertilizer posed any risk. Sunil Gupta, the Vice-President of Coca-Cola India said, "We have scientific evidence to prove it is absolutely safe and we have never had any complaints,"(Coca-Colas toxic India fertiliser, 2003). Such response created a strong wave of anger among the people of those communities. There resentment against the company raised even more and they started more intense actions against Coca-Cola. Actually, the denial of the responsibility was a bad step taken by the company, which strongly back fired. They should have listened to the angers of the people, even if the company was not responsible (Srivastava, 2003). Initially the company tried to solve the problem based on Public Relation strategies. It hired a public relations firm, Perfect Relations, to develop a new image for them in India. However, it was not merely a PR problem (Coca-Cola Responsible for Decline in Groundwater Table in Rajasthan , 2004). Eventually, the company realized that CSR should be an important part of its agenda. Now that was the time to convert its tarnished image into unblemished, for which, it took the help of various CSR activities and gaining the support of public where possible. The company started a campaign, naming it eKO Management System, in which, they translated environmental policy into action in their daily operations. The strategy ensured that the environmental stewardship is incorporated into operations. It included management system standards and environmental performance standards. The strategy especially emphasized on water resource management, wastewater discharge, energy management, ozone protection, fleet management, waste management, hazardous materials management, due diligence and measure and reporting environmental performance (Environmental Management System, n.d.). Due to these initiatives, the ground water usage ratio improved by up to 42 percent between 1998 and 2008, where as the company annually revise the policy regarding water use to improve it. In another step to build relationship with affected people, the company supplied water through tankers to all the affected communities. The company provided drinking water to 30,000 school children in various schools in Chennai while the company is planning to expand its community service by providing drinking water to 1,000 more schools across the country by 2010. The company offered sponsorship of sports events and cultural festivals. It established Jagriti Learning Centres near Coca-Cola plants in Pune for providing education to underprivileged. It assisted many NGOs by providing them capital to buy computers and train teachers. During the summer of 2003, the company established Health Education Camps for the purpose of educating people about issues such as HIV/AIDS, communicable diseases, immunization, hygiene and sanitation, reproductive and child health(Coca-Cola India: Social Responsibility Initiatives, n.d.). Coca-Cola also planned for water harvesting and recycling as a part of its strategy to replenish groundwater usage by its plants and plans to be completely water neutral by 2010. The India Director of the company at CII summit said that, “Our target is to neutralize all ground water usage by the company in India by the end of the current calendar year and become water neutral for all products and processes by 2012,”(Coca Cola targets to be water neutral by 2012, 2009). Being water neutral means that every drop of water used by the company will be replenished (Worlds Most Admired Companies, 2010). Talking about the past success, Mehta said that the company has achieved a replenishment level of 82 % on its annual ground water usage in India. While talking about the future steps, he said that the company is planning to commission a study of five watershed projects in the country. He said that there plan to have watershed in all the 56 plants within five years (Coca Cola targets to be water neutral by 2012, 2009). By conducting all these initiatives, Coca-Cola once again proved that it is a a socially responsible company which takes care of people and takes cares of the communities in which it operates. The company again gained the trust of the Indian consumer, which felt down to an extreme extent. In order to avoid such future crisis, Coca-Cola established an India advisory board to guide the company on issue including corporate citizenship, future strategies, social responsibility and coporate governance(India: Coca-Cola ordered to stop extracting water in Kerala, 2003). 4. Evaluation of the organisations strategy to deal with the issue Coca Cola is a company that have been critisized for many time. Therefore, the starting of this new crisis situation should not have been a big problem for the company. The company, having various past experiences, should have been proactive in dealing with this crisis. However, initially Coca-Cola did not put much attetnion to this case, due to which, the matter went big and eventually affected the company in shape of declined sale and temporary closure of some plants. The initial rejection of the claim only resulted in the creation of more intense reaction from the communities. It depicted that the company does not care about the people, which resulted in more anger. Coca-Cola should have communicated openly, right from the begining, with the key constituents, including the public, the media, state and national government and should have showed them the willingness to resolve the issue in a way that benefited the Indian consumer. Though, Coca Cola initially seemed to be indolent in taking appropriate steps, later it realized the intensity of the matter and started building relationship with the affected communities through various CSR initiatives. Coca Cola is a brand that is mostly selling because of a strong brand preference. Such issues may completely destroy the image of the brand whereas India has been one of the growing and profitable market for the company. Therefore, it was extremely neccessary that the company should have agreed with all the demands that the NGO and the affected communities were asking. Eventually, the company effectively dealt with the crisis and managed to regain the lost customer trust. Over all, its strategies for combating the crisis proved to be fruitful. 5. Conclusion The company has successfully corrected it tarnished image by initiating various campaigns and CSR activities. It is still working hard and launching further initiatives for building a stronger relationship with its customers. After all, Coca Cola is a brand that majorly sells because of its strong brand relationship. Also, the company knows the importance of Inda, which is one of the emerging economy of the world. 6. Bibliography About Us, [Online], Available: HYPERLINK "http://www.coca-colaindia.com/aboutus/aboutus.aspx" http://www.coca-colaindia.com/aboutus/aboutus.aspx [10 April 2010]. Campaign to Hold Coca-Cola Accountable, [Online], Available: HYPERLINK "http://www.indiaresource.org/campaigns/coke/" http://www.indiaresource.org/campaigns/coke/ [15 April 2010]. Coca Cola targets to be water neutral by 2012 (2009), 17 March, [Online], Available: HYPERLINK "http://www.financialexpress.com/news/coca-cola-targets-to-be-water-neutral-by-2012/435700/" http://www.financialexpress.com/news/coca-cola-targets-to-be-water-neutral-by-2012/435700/ [13 April 2010]. Coca-Cola in India accused of leaving farms parched and land poisoned (2003), 25 July, [Online], Available: HYPERLINK "http://www.guardian.co.uk/environment/2003/jul/25/water.india" http://www.guardian.co.uk/environment/2003/jul/25/water.india [2010 April 15]. Coca-Cola India: Social Responsibility Initiatives, [Online], Available: HYPERLINK "http://www.sharetermpapers.com/miscellaneous/case-study-coca-cola-india-social-responsibility-initiatives/?PHPSESSID=784b8fb9b363cb2ade312c20f2fe251f;wap2" http://www.sharetermpapers.com/miscellaneous/case-study-coca-cola-india-social-responsibility-initiatives/?PHPSESSID=784b8fb9b363cb2ade312c20f2fe251f;wap2 . Coca-Colas toxic India fertiliser (2003), 25 July, [Online], Available: HYPERLINK "http://news.bbc.co.uk/2/hi/south_asia/3096893.stm" http://news.bbc.co.uk/2/hi/south_asia/3096893.stm [15 April 2010]. Environmental Management System, [Online], Available: HYPERLINK "http://www.thecoca-colacompany.com/citizenship/environmental_management_system.html" http://www.thecoca-colacompany.com/citizenship/environmental_management_system.html [14 April 2010]. India Resource Centre (2004), 17 June, [Online], Available: HYPERLINK "http://www.indiaresource.org/news/2004/1020.html" http://www.indiaresource.org/news/2004/1020.html [10 April 2010]. India: Coca-Cola ordered to stop extracting water in Kerala (2003), 19 December, [Online], Available: HYPERLINK "http://www.mallenbaker.net/csr/page.php?Story_ID=1167" http://www.mallenbaker.net/csr/page.php?Story_ID=1167 [16 April 2010]. Marchers against Coca-Cola court arrest (2004), 29 September, [Online], Available: HYPERLINK "http://www.hindu.com/2004/09/29/stories/2004092902220500.htm" http://www.hindu.com/2004/09/29/stories/2004092902220500.htm [14 April 2010]. Srivastava, A. (2003) Communities Reject Coca-Cola in India, 10 July, [Online], Available: HYPERLINK "http://www.corpwatch.org/article.php?id=7508" http://www.corpwatch.org/article.php?id=7508 [14 April 2010]. Worlds Most Admired Companies ( 2010), 22 March, [Online], Available: HYPERLINK "http://money.cnn.com/magazines/fortune/mostadmired/2010/snapshots/100.html" http://money.cnn.com/magazines/fortune/mostadmired/2010/snapshots/100.html [15 April 2010]. Read More