This report is based on the business culture and industrial practices of the Coca Cola Company; it is world's largest beverage company and was invented by John Stith Pemberton in 1886. The Coca Cola Company was incorporate by Asa Candler in 1892 who bought the brand. The company has franchising distribution method from 1889.The company has 400 brands to offer in more than 200 countries and sells 1.6 billion cold drink every day. The company has a world wild market of 25% approximately and in United States 44.6 %.
The company's headquarter is sited at Atlanta, Georgia. The company has its stock listed at New York Stock Exchange, Standard and Poor 500 Index, Russell 1000 Growth Stock Index. The revenue for 2008 was 31.9 billion and then it increased by 14 % in fourth quarter according to wiki invest. The company has sponsored many events like English Football League of 2004-2005 season, the Olympic Games, the FIFA World Cups and even American Idol.
The Lobbying Practices of the Coca Cola Company
Lobbying is a practice of influence the decision made by the government (in group or individual). Lobbyist is the people who work for the company to influence or convince the legislator or the law makers to make the decision in favor of the company. Currently 38 lobbyists at 7 different firms lobbying on behalf of Coca Cola
Coca Cola being one of the top brand in the beverage industry was not one of the ethical companies in the industry. Coca Cola and its products have been criticized for various reasons such as health effects , unfair labor practices , high levels of pesticides in its products , environmental destruction and monopolistic business practices .
There were many cases on Coca Cola for its unethical practices :-
1.The Bigio family
The Bigio family who were currently living in Canada filed a law suit against Coca Cola on April 27 ,1997 in the United States . They claimed that Coke had purchased Bigio family property in Egypt which was illegally seized by the Egyptian Government in 1960s because they were Jewish. The Case was filed in US federal Court under the Alien Tort Statute which gives non US citizens the right to sue in US courts for alleged violations of international law. In 1994 the Bigios had warned coke not to go ahead with the acquisition of the Bigios property without compensating them but Coca Cola didn't listen to their warnings and went ahead with the deal and purchased the property without compensating the Bigios .
Coke argued that the case should be dismissed as the court lacked jurisdiction and that the case had become old and that the claims made by the Bigios were baseless and that they had been removed from the property some 25years before. (Wikipedia ,2010)
2. Monopolistic Competition
Pepsi Co had filed a case in the US accusing Coca Cola of monopolizing the market of fountain dispensed soft drinks in the US. In June 2005 , Coca Cola agreed to end all its deals with shops and bars in Europe to stock only Coca Cola products after the EU interfered and found Coke business practices to be stifled competition. In Nov 2005 Coca Cola's Mexican unit and a number of cokes distributors and bottlers had been fined around $68 million for unfair commercial practices .
3. Trade Practices in Mexico
Coca Cola had its second largest market in Mexico where they had a 70% stake in the market. At the time only Pepsi was their biggest rival but then a new brand name Big Cola entered the market with a cheaper price than Coke. By 2004 Big cola had acquired a 5% share in the market and was still growing. Big Cola grew and became popular because half of the Mexicans were poor and they preferred the cheaper Big Cola than Coca Cola so Coke had to lower its prices and change its pricing strategies in Mexico . On July 04 , 2005 Coca Cola and its bottlers were charged of violating the monopoly and anti competitive business practices as they were accused of threatening the small business owners to stop selling Big Cola. (Knol,2010)
4. Philippine unfair competition case
Coca cola was accused of unfair competition and on Jan 21,2008 the Philippines National Bureau of Investigation raided three of cokes warehouses for illegally possessing imported bottles of a competitor RC cola . The makers of RC cola filed a complaint for unfair competition and Coca Cola released a statement saying that they respect competition and always have maintained a fair play policy .
(Absolute Astronomy ,2010)
5. Channel Stuffing settlement
On July 27,2008 , Coca cola had to pay $137.5 million to settle a shareholder lawsuit. Coca cola was accused of channel stuffing or artificial inflation of their results to give investors a false picture of the companies health in the market . They were forcing some bottlers to purchase unnecessary beverage concentrate to boost its sales and show higher sales to the investors.
6. Pesticide use in India
Coca Cola's products that were produced and distributed in the Indian market contained pesticides such as DDT , lindane ,malathion and chlorpyrifos which all contribute to cancer and a weaken the immune system of the human body. The centre of Science and Environment found that the drink produced in India by Coca cola contained 30 times the level of pesticide residues that were permitted by the EU. The Indian government formed a committee which was given the task of developing world's first pesticide standards for soft drinks. Both the soft drink giants Pepsi and Coca Cola opposed the move and stated that the lab tests weren't reliable enough to prove or detect traces of pesticide particles in the drinks. Coca cola responded to the acquisitions by stating that their plants filter water helps to remove all the contaminants and that all their products meet the minimum health standards before they are distributed in the market. During this period Coca Cola had a drop of 11% in their sales .
7. Water Use
Coke was accused of draining the underground water table in India and releasing industrial wastes . It was estimated that Coke used 15 million liters of ground water everyday for product and bottling operations and using 65 wells thus depleting the underground water levels. Studies found out that the contaminated water contained heavy metals such as lead and cadmium. When farmers refused to accept the wastes coke allegedly dumped the wastes in their farms in the middle of the night. Coca cola was also accused of consuming so many gallons of water that it created sever water shortages and destroying the soil of the neighboring farms . The Coca Cola plant used 9,00,000 liters of water last year and the water which was to be used by all users was being used up by Coca cola alone. (Knol,2010)
8. Columbia Controversy
In 2001 Coca colas bottling companies had been linked to many controversies. These included the murder of eight union leaders. Violence, abductions and torturing of the union members were a common practice in Colombia. It is said that these practices took place under the knowledge and directions of the bottling companies who had hired paramilitary forces. In order to remove the permanent union workers the union offices were burned down and the union workers and their family were threatened. This was done so that cheap contract workers could me brought in place of the permanent union workers. In 2004 a fact-finding delegation from New York was sent to Columbia to inquire about the above controversies. The delegation found that there were 179 major human rights violations. The company's managers did not take any interest in investigating the complaints of the workers that led to the conclusion that human rights were overlooked and that their labors were under threat by the company.
9. Guatemala Controversy
As the Columbia bottling franchises even in Guatemala there were controversies with the bottling plant. Union members were murdered which done under the knowledge of the bottling plant's managers. These murders led to the cancellation of the bottling plants license in 1981. Many complaints were lodged against the company. The court case against the company is still going on Guatemala.
10. Israel and the Middle East Controversy
Coca cola has had its bit of bad times in the Middle East. The company first came into news when the company tried to open up a franchise in Israel in 1949 but they were not given the permission to do so. Coca cola was tensed that it would not be allowed to sell its product in the Middle East so they decided not to sell its products in Israel. Coca cola was accused of doing business with Israel in 1961. An Egyptian civil servant made these accusations. He did so because he mistakenly took the Amharic writing as Hebrew, which was written, on the coca cola bottle. After the accusations the manager of the company said to the press that coca cola would never do business with Israel. According to coca cola Israel was a very small market for coca colas operation.
Five years later coca cola again came into the lime light for the wrong reasons. In 1966 a Tel Aviv businessman criticized the company of boycotting Israel from its operational market just to sell its products in the Arab market. The anti defamation league which is situated in the United States took up the matter. Coca cola was questioned for not operating in Israel. It was also said that if Israel was a small market to operate then why was coca cola operating in Cyprus, which was one-tenth the size of Israel. This created some serious pressure on coca cola to open a franchise in Israel or else facing a boycott of their products in the American market. These questions forced the company to open a bottling plant in Tel Aviv. This move hampered its growth in the Middle East as coca cola was boycotted from 1968 to 1991 due to the economic boycott of Israel.
In 2000 the coca cola label created controversies, which was created in 1886. According to reports the label contained hidden anti-Islamic phrases in the mirror image in Arabic. Worst hit by the rumors was Egypt. Sales in the Egypt market fell to 10 to 15 % since 2000. The rumor was so widespread that the grand mufti of Egypt said that the label does not show anything against the Muslim's or Islam and he also stated that he himself haves a coca cola drink almost daily.
In 2002 Mecca cola was launched in order to avoid the usage of American goods. Mecca cola was introduced by a French Tunisian as a substitute for coca cola.(Wikipedia,2010)
Boycotts and Other Allegations
In Support of the allegations against coca-cola, they faced numerous boycotts. From 2005 Over 23 American universities including NYU and University of Michigan banned the sale of coca cola products on their campus and this boycott still continues. Other universities in Canada and Britain are following the footsteps of the American universities by switching over to Pepsi in all their social functions. Not majorly for health reasons but in response to the bottling plant deaths. Coca cola still did not respond to these boycotts and continued refuse investigation into the bottling plant death case.
A few other major boycotts that coca-cola faced were such as its products being banned from the 2006 Winter Olympics. In 2004 Its products were also boycotted by various trade unions in the EU, such as UNISON (the largest), ECSOY (European young socialists) and so on.
From 1998 another major allegation faced by coca-cola was racial discrimination in America and Africa. Coca-cola was first accused of racial discrimination against the African-American in matters such unequal pay, representation in the company and even promotion within the company. To add to this in Africa Coca-cola was also charged of having a policy of “Whites only” management staff. To all this Coca-cola first denied all allegations but later on in 2000 they agreed to pay $192 million to settle their case in America. They also agreed to promote a fairness policy in all aspects of their business but in 2003, it was found that no such policy had been implemented. But later in 2004 they did and were forced to put up management practices and be one of the 10 most diverse companies.
As mentioned above In 2005 the EU found Coca-cola for carrying out monopolistic acts such as having exclusive deals with Bars and restaurants to exclusively sell only Coca-cola products for which these places got a fixed amount of money every year and fringe benefits such as fridges to store these products. Coca-cola was then fined and had to end all such deals and act in a competitive manner. A similar case in America in 2000 was dropped against coca-cola.
Coca Cola's Response
To address major allegations against Coca-cola which had yet to be solved such as the bottling plant deaths in Columbia or the Pesticide/Water use in India. Coca cola came up with a response by launching a website WWW.COKEFACTS.ORG .
On this website Coca-Cola claimed that all allegations against them in Columbia were false and that they did not engage in such activities. They urged a further investigation into the matter by the Columbian Attorney General, a respected independent third party investigation and their own internal investigation and the Columbian Vice President. None of the above found Coca-Cola guilty of any wrongdoing. They rather claimed the firm did more good for the country, its economy and its community by creating jobs, generating income and overall improving the standard of living.
In regards to India, Coca-cola claims that an official study showed that they did not deplete the water level. They also accused the investigators of having an unreliable report on pesticide use, They claim that all their raw materials are tested before the final product being produced.
Therefore to conclude this report on ethical business culture and trade practices of Coca Cola, some basic elements that can be adopted by Coca Cola are like Develop worldwide code of ethics, by these we mean that the statement given by the company's business culture is not true and the company should come up with a proper solution to this problems and should not tolerate any human rights infractions in any of its plants, or by any of its subsidiaries. Consider ethical issues in strategic development, while making the strategic the company should consider ethical issue and develop its strategy according to it. Develop periodical “ethical impact statements”, when they are promoting any of its product they should make an ethical statement with it as it will help them to improve the company's image in the minds of consumer.