Research Paper Sample: Legal Issues and Coca-Cola

Introduction

Obesity in recent times has incredibly risen to the frontline of health challenges within the American society and many other parts of the world (Ali, 2012). More and more efforts have been established by medical professionals to finding a solution to the fact that 54 percent of adults and 33 percent of children on a global scale within developed countries are obese or suffer from some form of unhealthy dietary or nutritional challenge brought about by what they consume (Ali, 2012). While it can be said that there are a broad range of factors that contribute to the above mentioned statistics, many studies and researches as well as leading medical personnel such as Barry Popkin and even former New York Mayor Bloomberg have pointed to the notion that soft drink consumption is a leading cause of obesity and some other forms of health challenges centered on nutrition around the world. The largest source contributor of sugary carbonated drinks in the world is Coca-Cola with over Two hundred brands of carbonated beverages sold globally (Farrel, Farrel & Fraedrich, 2011). Sugary beverages over time have been frequently attacked and labelled as a leading contributor to health issues, and the soft drink industry has faced intense criticism and scrutiny. With the world population moving towards a more health conscious paradigm within the context of what they consume, soft drink industry leaders, Coca-Cola was forced to join in the campaign in the fight against poor health, and obesity or risk being labeled as a contributor or propagator of ill health within society.

Coca-Cola in 2013 finally began its good health and anti-obesity campaign by launching its “Coming Together” communications campaign. The campaign though primarily focused on the challenges of addressing obesity was generally initiated to put Coca-Cola as a societal health conscious firm (Hellmich, 2013). The campaign called for the general public to come together in a bid to fight health challenges such as obesity. Another goal of the campaign was to inform the general public about the soft drink industry’s leading firm’s initiatives in its efforts towards social responsibility. The “Coming Together” campaign initiated by Coca-Cola could be summarized in the following phrases “Beating obesity and calorie related health challenges would require the action of all of society based on a simple common sense ideology; that all calories matter, regardless of where they came from, including through the consumption of Coca-Cola and every other thing else with calories.” The Coca-Cola health awareness campaign was immediately followed two days later with a “Be Ok” video which was bordered on the concept that a can of Coca-Cola provided “about 140 calories for consumers to expend on extra happy activities” (the Coca-Cola Company, 2013).

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A media campaign aimed at portraying a positive light on an issue that was detrimental to public health did not in any way go down well with numerous health agencies, professionals and the media. These bodies immediately spoke against such deceptive campaign, dismissing it as an insincere and scrupulous attempt for Coca-Cola to position itself as well as portray the brand as a solution to a societal problem it has played a significant role in creating and propagating. The Center for Science in Public Interest was in the forefront of the charge against the “Coming Together” campaign. The agency released several press releases and presented negative translations of Coca-Cola’s campaign via the use of legal processes and social media. They pointed to the fact that the campaign, was a foiled attempt Coca-Cola to address damage control within a society that was beginning to understand the benefits of healthy consumption. Many critics continue to point to the fact that the Coca-Cola campaign was a further move of the firm to recover from declining product sales across the world as health consciousness had begun to compel once loyal customers to adopt tea, or healthier beverages (Hellmich, 2013). However, Coca-Cola stood its ground by issuing a statement centered on the notion that there was no evidence whatsoever to prove that its products were associated or linked to poor health or problems of obesity. Several suits and countersuits were filed and some dropped.

This paper analyzes some of the legal issues Coca-Cola as a firm has had to face in recent times. The above illustration depicts one of such issues and how the firm was able to get past the challenge of legal outburst and utterances of groups within society as well as how such issues have affected the firm. In the preceding parts of this literature, we will evaluate more comprehensively legal issues linked to the Coca Cola Company and establish a critical analysis of the issue.

Brief Overview: Coca-Cola’s International Perspective

With the consistent sales of over four hundred brands cut across 200 or more countries, Coca-Cola is said to be one of the most successful firms in the world (Banutu-Gomez, 2012). The firm’s international success has propelled the Coca-Cola brand to be perceived as one of the most globally recognized brands. The last fifty years have witnessed significant expansions of the Coca-Cola brand, thus positioning itself as a market pioneer in the soda and beverage industry.

Via the use of increasing product mixes, the Coca-Cola brand’s core marketing strategy is its ability to respond to the beverage needs of local consumers all over the world. This initiative of identifying what every stipulated society desires in terms of soft drinks is significantly responsible for the brand’s unrivaled success. Coca Cola’s production and distribution processes take on an international dimension with the firm’s structured franchising operational mode. The brand trades it beverage bases, concentrates, and syrups to bottlers in possession of the Coca-Cola franchise across specific geographic regions all over the world. The final products are then produced using sweeteners and filtered water. Coca Cola’s bottling partners distribute these branded products to middlemen who finally distribute to end consumers. This channeling and distribution technique has been characterized as a strong globalization strategy that has yielded significant results for the firm. The Coca-Cola brand implements its international marketing schemes in two practical dimensions. Firstly it makes use of the horizontal international marketing approach via the establishment of six operating groups in different regions of the world: North America, Eurasia, the Pacific, Latin America, Africa, and Europe, with these regions employing a significantly large associate base (approximately 146,200 associates). The second implementation of the brands international marketing scheme is implemented on a vertical scale along its supply chain and in line with the relative importance of its franchising system.

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A key success attributed to the Coca-Cola brand is its understanding that strong international marketing can significantly enhance the total operational competency of any business (Banutu-Gomez, 2012). Due to the challenges international marketing exposes firms to, businesses have to brace up to these challenges and deliver quality across multiple geographical zones. The Coca-Cola brand, with the notion of conquering the various challenges posed by international marketing has structured its organizational culture to adapt to the underlying structures of its international marketing strategies. From the firm’s outsourcing policies, the way and manner in which it processes new resources such as raw materials and low cost labor, to the firm’s implementation of new management skills such as its tax aligned supply chain management approach which aid in the reduction of the firm’s incurred total landed cost, a majority of the firm’s viable culture and day to day running of business are based on the framework and structured on the organization’s international marketing strategies.

Notable Legal Controversies

Failure of the New Coke brand: An attempt to secure competitive edge over close and rising rivals within the soft drink industry PepsiCo, facilitated the need to create a new product. The New Coke brand was introduced into the market. Coca-Cola called it the newly improved smother, rounder, yet bolder drink. This particular brand of soft drink was tipped and intended to replace the traditional Coke brand. This was Coca Cola’s first content formula change in over ninety-nine years. However, in spite of the aggressive media campaigns and promotions embarked upon, as well as extensive taste test by the firm to get its new brand into the market, consumers refused to accept the new Coke brand and clamored that the old brand remained their preference. Certain consumers went as far as stocking the old brand before it was phased out of the market, others simply filed complaints. Coca-Cola received over a thousand more calls than usual on a daily basis as regards the matter. Protest groups were even formed in a tense effort to preserve the old brand and formula (Ogden et al. 2012).

Coca-Cola was swift to respond to growing consumer complaints and threats by returning the classic or traditional brand to the market within months of intense legal debates. What was remarkable was that though consumers had been outraged by what they perceived as the firm’s insensitivity to consumer choice, which many thought would bear a significant implication on the future success of the firm, Coca-Cola, with its more traditional brand saw gains soar in the preceding market year after the New Coke saga. The situation was a phenomenon that has led Coca-Cola to commit to meeting consumer demands and set organizational strategies to be centered on the consumers.

Coca-Cola’s Channel stuffing case: A lawsuit was filed against Coca-Cola in 2000 accusing the firm of coercing bottlers in outside regions of the USA into the purchase of hundreds of million dollars’ worth of surplus beverage concentrates in a bid to seemingly make sales seem higher than was true. Channel stuffing as this case is called presents artificially inflated sales deemed at deceiving investors to affirm that the company was doing better than it actually was. It gave investors a false understanding of the firm’s success (Ogden et al. 2012). Coca-Cola had earlier gotten off with a warning pertaining to a similar lawsuit. United States Security and Exchange Commission was quoted to have said the firm misled investors into putting funds into the firm using falsified figures to lure investors as the firm failed to disclose end of period practices that truly depicted operational results of the firm. Coca-Cola immediately initiated its Ethics and Compliance committee to discuss concerns focusing on compliance with the organization’s Code of Business Conduct. Investor trust was significantly diminished and in 2008 Coca-Cola settled a channel stuffing lawsuit for close to 135.5 million dollars (Reuters). The firm however issued a statement emphasizing that the settlement was not a confession of wrong doing or an act of guilt rather the firm said the settlement was a strategic move to avoid a full drawn out legal battle that would further put the firm in the more bad light.

Another legal issue that has been significantly linked with the Coca-Cola brand and one which this literature deems to analyze is the case that focuses on health and obesity. Many people have tagged this legal case against Coca-Cola as the “deceptive vitamin water marketing lawsuit of 2009” The Center for Science in Public Interest (CSPI), as well as a body of New York and California consumers, filed a lawsuit against the firm accusing the brands vitamin water product of deceptive and untrue labeling and marketing. The Center for Science in Public Interest investigated Coca Cola’s claims that their vitamin water product reduced the risk of eye diseases and boosted the immune system and asserted that the Coca Cola’s claims on the product were misleading and inaccurate. Coca Cola’s team of attorneys were quick to issue a statement pointing to the fact no consumer could be reasonably misled or deceived into thinking vitamin water was a healthy beverage.”

In 2010, Coca-Cola had its attempt to have the CSPI’s lawsuit against it dismissed, and in July of 2013, the lawsuit was voted to proceed as a class action. The case has not been resolved till date.

Prior to the Coca-Cola “Coming Together” campaign, CSPI lead the charge of criticism against organizations who were perceived as manufactures of products associated with ill health. So with the launch of the Coca-Cola campaign, the advocacy group immediately swung into action to condemn the campaign. On January 2013, CSPI released a translated version of the campaign slogan. Their version of the campaign uses clips from the original video coupled with photographs of obese individuals consuming the brand and their own version of the original statement “if you gain weight, remember it’s your fault and not ours.

The Center for Science in the Public Interest consistently tweeted its uttermost distaste for Coca Cola’s new campaign. Head of CSPI, Jacobson M, in a statement, acknowledged that the campaign was a mere damage control strategy by Coca-Cola to continue to deceive the public. He further emphasized that the entire soft drink industry was attempting to hold back a credible and sensible policymaker initiative for the public to reduce the intake of sugary beverages and help promote a healthier society. CSPI further noted that it had no bias against Coca-Cola and that all the advocacy group was trying to do, contrary to claims from Coca-Cola that the body was trying to eliminate them from the market, CSPI said, it was advocating that soft drinks should be consumed the way it was in the 50s where it was perceived as a special treat and consumed in smaller quantities with no risk to human health and wellbeing.

After a series of suits and countersuits and dismissals of lawsuits, the SCPI was able to get a lawsuit to stick when Coca-Cola launched its Vitamin water brand with what the SCPI claimed was bogus nutritional benefits. The firm’s marketing of the Vitamin water brand stresses that the drinks were fortified with vitamins. A careful analysis of the extensive literature on this subject matter points to the fact that this to some certain degree is true. Certain chemically synthesized vitamins were indeed added to the drink, however, the said vitamins within the drink in their capacity would be of no significant effect to the human body (Patterson, 2013). In light of the fact that the vitamins in the drinks held no health benefit, was free of color, did not have flavor and in no way did the vitamins alter the viscosity or consistency of the drink over time, it is believed that the sole purpose for adding them to the drink was so that Coca-Cola could erroneously market them to the public as a sort of delicious over the counter health supplement. The fact that the Vitamin water brand, of course, was not deemed poisonous, many health professionals stressed that it was just a bright looking soda just without the element of carbonation. Again, critical analysis of the literature on the subject matter virtually recognizes that Coca-Cola in its legal defense did not in any deny these findings.

Impact on Coca-Cola

Coca-Cola has always boasted of leading market shares, holding a 42 percent market share within the global carbonated drink industry (Banutu-Gomez, 2012). Its leading global brands such as Diet Coke, and the Classic Coke we all have come to know and enjoy are top-selling beverages all over the world. However, a combination of accusations and consumer skepticism over the dangers of carbonated sweetened soft drinks has resulted in a minute decline in industry sales. The industry saw a 3.4 percent decline in carbonated drink sales with diet focused soft drink sale further plunging in sales at a faster rate than all other soft drinks within the market (Hellmich, 2013).

A month after the launch of the “Coming Together” campaign, Coca-Cola posted a net revenue increase of 3 percent and a fourth-quarter 4 percent increase in total revenue. However, as soon as the criticisms and lawsuits commandeered by the Center for Science in the Public Interest began to come to light the firm reported its first-quarter revenue decline of 1 percent. Approximately two months later, Coca-Cola again a 3 percent second-quarter decline in revenue and in October the same year, Coca-Cola again reported a 3 percent decline in annual revenue. Coca-Cola issued a statement claiming that much of the fall in revenue was as a result of poor weather conditions in multiple markets, claiming that people consumed fewer drinks in the rainy season. Many however, point to increasing health awareness on the part of consumers while others point to all the negative publicity surrounding the firm and its involvement in negative health issues. Industry competitors such PepsiCo reported a revenue increase of about 2 percent within the same period Coca-Cola witnessed a decline in revenue. Dr. Pepper Snapple equally reported gains within the stipulated period (CBS).

Stock values of the firm remained inconsistent throughout the period of its faceoff with the Center for Science in the Public Interest. This inconsistency in stock value showed an indication that was becoming uncertain about the firm’s strategies and was worried about the media backlashing the firm was involved in due to the legal confrontations it was undergoing with the Center for Science in the Public Interest. Coca Cola’s slip form leading brand to a third-place position in the inter brand’s “best global brands” ranking reflects the effects of lawsuits and legal battles can have on a brand’s reputation (Hellmich, 2013)

Conclusion

Coca-Cola with the legal battles and consistent criticism from advocacy groups and skepticism from a society that is shifting to a more health conscious paradigm in what they consume, products sales and firm revenue has seen a steady decline in numbers. The lawsuits have not helped either as the negative media portrayal of the firm as an insensitive element towards public health isn’t healthy for the firm’s reputation.

Coca-Cola faces the challenge of finding a balance between supporting health awareness campaigns while selling products that many claim to contribute to the very issue they are taking efforts to eliminate. In light of the link many pro-health groups and the general media have established between Coca Cola’s products, obesity and other health associated issues, the public seemingly has begun to see the firm’s anti-obesity campaigns as a disingenuous effort at damage control with the hop of keeping the brand strong.

If Coca-Cola is to continue to maintain its strong leadership status in the soft drink industry, then it is recommended that the firm begin to initiate and engage in discussions that are centered on scientific studies on brand product nutrition. This initiative will be utterly essential in ensuring that consumers begin to see the firm as a transparent and genuinely concerned brand with the wellbeing of its consumer on the top of its priorities.

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References

Ali, N. (2012). The obesity reality. Lanham, Maryland: Rowan and Littlefield Publishers, Inc.55

Banutu-Gomez, M. (2012). COCA COLA: International Business Strategy for Globalization. International Trade and Academic Research Conference.

Coca-Cola Company. (Producer) (2013). Coming together [Video file]. Retrieved from http://www.youtube.com/watch?v=SKi2A76YJlc

CBS News. (2013, July 19). Vitamin water lawsuit over health claims to proceed as class action. CBS News.

Ferrell, O., Ferrell, L., & Fraedrich, J. (2011). Business ethics: Ethical decision making and cases. (9th ed., p. 461). Mason, OH: South-Western.

Hellmich, N. A. (2013, January 14). Critics attack coke’s anti-obesity ad. USA Today.

Patterson, N. (2013, July 11). Prof: Diet drinks are not the sweet solution to fight obesity, health problems. Purdue News.

Reuters. (2008, July 7). Coca-cola agrees to settlement in shareholder lawsuit. Reuters. Retrieved from