A Full Service Global Management Consulting and Executive Training Firm
by Kent F. Moors, Ph.D.
Executive Managing Partner:
Risk Management Associates, International, LLP
Centralizing decisions on reputational risk issues is not always the best policy, especially when involved in foreign market activities. Consider Coca-Cola. In June of 1999, 230 school children in Belgium and 80 customers in France fell ill after drinking locally produced company products. The local office identified the source as a carbon dioxide defect in "off spec" product from its Antwerp plant and recalled the batch effected. The issue was picked up by a local Belgian TV station, resulting in additional claims from other localities. Many of these claims turned out to be false.
But Coca-Cola decided to centralize all responses from its headquarters in Atlanta. The public relations campaign released technical explanations of little help to the general public, denied that the event was anything other than a local isolated event, created the impersonal impression of a detached foreign corporation with little interest in a rising local problem thousands of miles way, and failed to provide any reassurance to, or empathy with, the consumer. Calls began coming in to local poison centers from concerned parents. Government ministries began demanding an explanation and the Coca-Cola top management responded by stopping all communication until they could get a handle on the situation.
Unfortunately, that simply made the matter worse. The governments in both Belgium and France moved unilaterally to pull product off the shelves throughout both countries. Not only were significant sales and market share lost from what had initially been a minor local matter, but the situation ultimately required that the Coca-Cola CEO and top management fly to Europe and conduct very public apologies. Years later the episode was still creating problems for corporate reputation, according to market surveys in Belgium, and consumer trust in the products had still not fully recovered.
Coca-Cola had a risk management plan, but it was outdated and provided only for decisions from the top. By not providing an integrated strategy which included local response teams, the company guaranteed delays and misunderstandings. The approach also did not provide for awareness of wider issues that would promote a crisis in specific foreign markets. Shortly before the Belgian incident the government in Brussels had suffered embarrassment by not dealing adequately and quickly with a dioxin scare. This meant that the next food poisoning case would produce an over-reaction, especially with elections taking place at the time. Coca-Cola needed a reputational risk management plan that provided guidance for rapid and accurate local responses, combined with sensitivity to the local political environment. What Coca-Cola offered instead was a centralized and impersonal response from an American corporate headquarters.