1) How could the Belgium problem have damaged Coca Cola?
Since its foundation Coca Cola was creating a strong and successful brand image. People started to create a great sympathy for the brand. By 1999, Coca-Cola was already the world’s leading brand. But when the Belgian scandal arose, everybody doubted the credibility of the umbrella brand and all the different company products (Fanta,Sprite, Nestea, etc.).
Firstly, customers (especially those from Belgium and the European countries affected by the contamination) got really afraid about drinking Coca-Cola. Parents, for instance, did not want their children getting contaminated by a soft drink. Additionally, the directors of the brand were not giving any solid reason for why both incidents had occurred; they did not reactproactively and therefore were not convincing, so people doubted the quality of Coca-Cola. The Belgian government banned the sale of Coca-Cola products and started to impose several hygienic/quality conditions for the brand in order to recover the right to sell Coca Cola products. Governments of the European countries that were also affected by the problem also started to distrust their confidence with thebrand. However, it is important to remark the over-reaction of the Belgian authorities because of the chicken crisis that happened one month ago.
Secondly, suppliers and distributors in Europe were also impacted by the incident. On the one hand Coca-Cola, as a global brand, had to trust in its bottlers to maintain the quality values that the company’s mission is trying to transmit. But theBelgian scandal questioned the control that Coca-Cola had over their bottlers’ plants. On the other hand, suppliers got afraid about the problems that the crisis could cause to their companies due to the great popularity of the Coca-Cola Company. Consequently those suppliers became more suspicious with the company.
Thirdly, the financial performance of Coca-Cola suffered a major setback due to theBelgian crisis. The recall had a negative impact on the overall second-quarter net income in the fiscal year 1999, coming down by 21% to $942 Mio. Moreover, the entire operation of removing and destroying recalled products cost $103 million in 1999 dollars. Investors all over the world got really afraid about their money invested in the company, which was well demonstrated by the decrease of shareon Wall Street by June of 1999.
Fourthly, the competitors used the Belgian scandal as an opportunity to increase their promotion and tried to steal part of Coca Cola’s market. The Coca Cola image during those days was destroyed so it was the opportunity for Pepsi and other competitors to show their products to the public and claim its high quality and commitment to the costumers.
By early July,it was known that the Coca-Cola problem was partly due to an outbreak of mass hysteria, caused by the chicken crisis and further aggravated by the over-reaction of the Belgian authorities and the lack of information offered by Coca-Cola. By beginning of August, a research indicated that core users of Coca-Cola brand products reported the same intent-to-purchase levels than before the crisis. Wecan conclude, that, despite the hysteria and overreaction in the short term, the Belgium scandal did not affect the brand image of Coca-Cola in the long term.
2) Is the problem solely limited to Belgium? Solely to Europe? Or is it a global problem?
When the Belgium issue arose in 1999, Coca-Cola had never known such a crisis before. From time immemorial, Coca-Cola has been the most globalcompany and the most famous word after “OK” worldwide. That is the reason why a located problem affecting such a small country as Belgium can have huge repercussions in all Europe as well as in the year’s results of the Headquarter in Atlanta (cf. Appendix fig. 1).
The centre of Europe was the most exposed area during the scandal. Indeed, the cases of the sick children occurred in Belgium but cans...
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