“The Coca-Cola Company exists to benefit and refresh everyone it touches”
Coca-Cola’s mission statement

Can Coca-Cola, one of only a handful of truly global brands, really be in trouble? Amidst adverse media coverage and concerns about the sugar content of its core brands, Coca-Cola’s share price has taken a nose dive. The drinks giant has been hit by the explosion of the obesity time bomb! Worse still, industry experts are accusing the company of panic as it struggles to bolster market share with a host of new product launches. Diagnosing Coca-Cola’s malaise reveals rising public expectations about the behaviour and responsibilities of such corporates. The danger is that consumers angered by food companies’ role in the obesity crisis will use their spending power to enforce higher ethical standards.

“some consumers are becoming edgy”

The nation is suffering from a serious weight problem. With a 400 percent rise in obesity levels in just 25 years and weight problems set to overtake smoking as the main cause of premature death, the scale of the problem is huge. Faced with headlines dominated by scare stories about childhood obesity and ‘pester power’, some consumers are becoming edgy.

The problem for Coca-Cola is that these concerns are hitting sales of its core brands such as Coca-Cola, Sprite and Canada Dry. At a time when junk food and sugar-laden fizzy drinks are taking some of the blame for this weighty crisis, the government is getting tough on the food industry. Schools are switching off branded vending machines, campaigns to promote healthy lifestyles are in full flow and bans on junk food advertising may be just around the corner.

So are Coca-Cola and others in the food and beverages sector really responsible for the failing health of the nation? While health experts agree that inactive lifestyles and poor parenting are partly to blame, they are robustly critical of junk foods and carbonated drinks. The bad news for major brands is that public opinion against snack food manufacturers is growing along with suspicions that these corporates may not have consumers’ best interests at heart. With research showing a strong link between corporate social responsibility and profits, Coca-Cola cannot afford to be complacent.

Corporate social responsibility (CSR) has been described as a company’s obligation to maximise its positive impact and minimise its negative impact on society. Expert Archie Carroll writes about a pyramid of social responsibility, with four basic levels of responsibility:

1. Economic, the responsibility to be profitable;
2. Legal, the need to obey the law;
3. Ethical, an obligation to do what is right;
4. Philanthropic, making a contribution to the wider community.

At the heart of the obesity debate are the so-called Ethical responsibilities. These involve companies behaving in ways which are right, just and fair and - just as importantly in the current climate - not causing harm to a company’s stakeholders.

“The trouble is that behaving ethically just isn’t that easy”

Handling ethical issues can be tricky. Companies must quickly tune into changing consumer values and implement policies which reflect society’s desires. The trouble is that behaving ethically just isn’t that easy. Identifying consumer trends is tough enough for brands already striving to be noticed amongst the advertising noise in the marketplace.

There is a fine line between innovative marketing and unethical behaviour. Ethical concerns about the impact of unhealthy product lines are much clearer. Faced with such scrutiny, Coca-Cola has two options: make its existing products healthier or diversify. Beguiled by the promise of new brands, the company has decided to sharpen up its market offerings by extending into diet and health-related beverages.

This move into sports drinks, juices, energy drinks and waters it hopes will be the panacea to the company’s ills. Unfortunately, despite radical surgery to its brand portfolio, Coke’s prognosis remains uncertain. Less than three years after launch, the company has axed its much vaunted but unpopular Vanilla Coke and Vanilla Diet Coke. Now some retailers are refusing to stock the new lime and grapefruit-flavoured variants of the Powerade sports drink, accusing the company of spreading its brand too thinly. These are not the only problems. Few will forget the technical hiccup which caused bottled water brand Dasani to be contaminated, hastening the downfall of the company’s foray into bottled water.

Coca-Cola isn’t the only brand with problems. Falling foul of ethical principles is all too easy for food companies vying for consumer visibility. Cadbury thought it had backed a winner with its Get Active scheme, which swapped confectionary pack tokens for school sports equipment. The chocolate giant was swiftly chastised by educationalists for encouraging unhealthy eating practices in the young. Now some retailers are accusing Cadbury of misleading consumers with an ‘over-priced’ 99 calorie chocolate bar. Meanwhile Walker’s free books for schools scheme was criticised by the National Union of Teachers. Even family-favourite Heinz has been attacked for the high-salt content of its products.

Like businesses in all sectors, these companies know that they cannot afford to ignore consumers’ growing ethical demands. Failure to meet expectations for socially responsible behaviour is commercially dangerous, destroying consumer trust and hastening tough new regulations. The Food Standards Agency (FSA) is already naming and shaming the worst offending products for sugar, salt and fat content. With the government ready to reap legislative havoc should the food industry fail to comply, the FSA’s action may only be the start.

So what does the future hold for the world’s biggest drinks brand? Can Coca-Cola shake off its associations with tubby teenagers, bolster its brand and overcome poor performance in Europe? Success will depend on whether the drinks giant can persuade consumers and retailers that it has an answer to declining fortunes in its core markets. Regaining the confidence of consumers with a waist-line crisis will be critical. While no-one disputes the demise of the flavoured carbonated drinks sector, the question is whether Coca-Cola’s investment in healthier drinks and extending brand portfolio will be enough to rebuild its fortunes.

Article originally published 18th November 2005


Further Reading
Marketing: Concepts and Strategies (Fifth Edition)
S Dibb, L Simkin, W Pride & O C Ferrell, Boston: Houghton Mifflin

The Pyramid of Corporate Social Responsibility: Towards the Moral Management of Organizational Stakeholders
A Carroll, in
Business Horizons, July / August

Business Ethics
C Jones, R ten Bos & M Parker, London: Routledge

Weight Matters for Children
R Pryke, Oxford: Radcliffe Publishing

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