Background Of The Coca Cola Company Business Essay


Doctor John Pemberton, who was a local pharmacist from Atlanta, developed Coca-Cola in May 1886 (Dana & Oldfield, 1999) with cocaine as "one of its main ingredients" (Linda, 2009).He created a new headache tonic and then he took his creations to the famous Jacob's Pharmacy, where the syrup was mixed with cold tap water. The syrup was sold to ailing customers for 5 cents but he accidentally mixed it with carbonated water rather than regular tap water. Thus, he loved the drink, and declaring it "Delicious and Refreshing!" (Dana & Oldfield, 1999).

Frank Robinson is Doctor John Pemberton's partner and bookkeeper. He suggested the name "Coca-Cola", as a part of the name from a key ingredient in the product and declared that the two C's would seem well in advertising (Dana & Oldfield, 1999).

Today, Coca-Cola is the "world's largest beverage company" (Ferrell, Fraedrich & Ferrell, 2010).It operates in nearly 200 countries around the world and its brand is written in roughly 80 languages. It is one of the most recognizable logos in the world ( Coca-Cola Company is selling 1.3 billion beverage every day and the company owns nearly 400 beverage products in more than 200 countries worldwide (Kacur, 2010).

2.1 Unethical Behavior of Coca-Cola Company

2.10 Contain Cocaine and Caffeine

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In 1886, the original ingredient of coca-cola was contained about 8.5 milligrams of cocaine per drink. In 1903, the cocaine was removed from the coca leaves that were used in to flavor Coca-cola to create an addicting force between the product and consumers (Linda, 2009).Furthermore, in 1909, there was a chemist from the Schaefer Alkaloid Works testified that Coca-Cola was made with Coca leaf (Funderburg, 2002).

In 1909, there was a case about the United States v. Forty Barrels and Twenty Kegs of Coca-cola. Furthermore, The Coca-Cola Company was accused by the government for selling an adulterated and misbranded product .The reason was because of caffeine was a harmful added intergradient even though did not contain the whole coca leaf .After Coca-Cola Company had removed cocaine as one of one of its main formula, it moved onto substituting caffeine for cocaine. The government was trying to prove that Caffeine was harmful but the public or customers were worried about the rumor that coca-cola contains cocaine. As the result, the company hired chemists to prove its products do not contains neither cocaine nor caffeine. (Funderburg, 2002).

In 1911, Dr. Harvey Wiley, the Bureau of Chemistry of United States Department Of agriculture also argued that the name of coca-cola was misleading because it contained cocaine, cola even caffeine (Wong & Tan, 2009). Chart below shows the intergradient of Coca-Cola Company (Dana & Oldfield, 1999) that contains Caffeine.

Source: Ingredients of Coca-Cola Company in different Countries ( Dana & Oldfield, 1999).

2.11 Crisis Management in Belgium.

June 1999, The Coca-Cola Company had lost more than $200 million in expenses and lost profits due to the report of more than 100 customers had became ill after perceiving an odor on the outside of canned soft drinks and received customers complaint about an irregular taste and smell in bottle of soft drink. The odor caused numbers of symptoms such as stomachache, headache and nausea even hospitalize after drinking the product (Johnson & Pepass, 2003). ). By the time, 249 cases of coke-related illness were reported throughout Europe, mainly in Belgium (Tuleja & O'Rourke, 2008).

In June 8, in Belgium, there were forty-two people hospitalized and schoolchildren experienced nausea and other sign after drinking coca-cola

June 10, another eight children were hospitalized in Belgium

June 11, German Health Ministry summons Cola-Cola concerning reported illness. Another thirteen Belgian were hospitalized.

June 12-14, The Belgian government received more than 200 complaint call regarding Coca-Cola product.

On June 14, Forth-Two children were hospitalized. As the result, all Coca-Cola products were withdrawn its trade-market as well as ordered Coca-Cola to stop production at bottling plant by The Belgium Health Ministry.

June 15-16, another eight children were reported ill in Belgium. Coca-cola Company explained the causes of the sickness and on 16 June, Coca-Cola Company's CEO, Ivester made the first written apology to European regarding to the incident (Tuleja & O'Rourke, 2008).

The recalled products were included Coca-Cola and Coca-Cola Light (European diet Coke). On 22 June 1999, Belgium health ministry banned Coca-Cola Company trade-mark product (Johnson & Pepass, 2003). Coca-Cola Enterprise had estimate $ 103 million dollars for recalled 15 million cases of coca-cola product. (Tuleja & O'Rourke, 2008).

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Followed by Europe countries such as France, Luxembourg and Netherlands also banned the sale of coca-cola in their market. The effects of this harmful product crisis were also felt by outside Europe countries like Japan and India (Johnson & Pepass, 2003).

Subsequently, Coca-Cola Company had identified two problems that would contribute to health issues. Which are production (off-quality, which result of an improperly process of carbon dioxide) and distribution (an offensive odor from outside of a number of canned drinks).In order to regain customer trust and confident Coca-Cola Company had launched an aggressive marketing campaign. However, this incident damaged the reputation, image of Coca-Cola Company as well as substantial financial cost (Johnson & Pepass, 2003).

2.2 Impact on Coca-Cola Company

2.21 Global Image and Reputation

The incident of irregular taste and smell in bottle of soft drink significant damaged its reputation. Thus, Coca-Cola was under instruction from health Ministry and had to withdraw and even banned cola-cola from the Belgium market. It happened in within Europe as well as in Japan and India (Johnson & Pepass, 2003). As Coca-Cola Company's reputation has damaged by the critics, sued and accused. Thus, in 2001 and 2007, Coca-Cola Company moved out from "100 Best Corporate Citizen" for Business Ethic magazine (Ferrell, Fraedrich & Ferrell, 2010).

2.22 Critics

Although Coca-Cola Company had convinced and proved that its coke was healthy drink but there was still critics from customer especially media mass such as The Jeffersonian, an Atlanta newspaper.

The Jeffersonian went on to warn "Any man, women, boy, or girl who tampers with Coca-cola will form the Coca-cola habit. Any man, women, boy or girl who has become a slave to the Coca-cola habit is on the road to ruin….It will injure the eyes, wreck the nerves, weaken the brain, and loosen the moral structure. It were better that your boy were drunkard than a coca-cola fiend" .George Stuart was the most vocal critic, who loves to critic against coca-cola (Funderburg, 2002).

2.23 Negative affected on Sales

Harmful product tends to give negative impact on company product as the image is affected (Siomkos, 1999).The company's financial performance was possible affected due to loss of reputation (Ferrell, Fraedrich & Ferrell, 2010).Furthermore, The Coca-Cola Company had lost more than $200 million in expenses and lost profits after Belgium and other countries restricted Coca-Cola products (Johnson & Pepass, 2003). Coca-Cola Enterprise had estimate $ 103 million dollars for recalled 15 million cases of coca-cola product (Tuleja & O'Rourke, 2008).

2.3 Steps taken by Coca-Cola company

2.31 Hired Chemists

Although Coca-cola company had removed the cocaine from coca-cola drink for years but citizen was too concerned about the rumors that coke contained cocaine, As the result, The company hired chemists to proved coca-cola did not contained neither cocaine nor caffeine. The chemists declared coke is safe to be drink. The case between The United States v. Forty Barrels and Twenty Kegs of Coca-cola was dragged for years and was settled out of court (Funderburg, 2002).

2.32 Aggressive advertising

Coca-Cola Company is aggressive on advertising or promoting about its product in Europe as well as in Belgium reestablished the trust and confident among public (Johnson & Pepass, 2003). Coca-Cola Company campaign was too aggressive until competitors claimed the campaign strategy was unlawful (Ferrell, Fraedrich & Ferrell, 2010).

2.33 Apologized and Confessed

The CEO and Chairman, Ivester made its first public statement by stated "The Cola-Cola Company's highest priority is the quality of our products for 113 years our success has been based on the trust that customers have in that quality. That trust is scared us. I want to reassure our consumers and government officials in Europe that The Coca-Cola Company is taking all necessary steps to ensure that all our products meet the highest quality standards. Nothing less is acceptable to us and we will not rest until we ensure that this job is complete. We deeply regret any problem encountered by our European consumers in the past few days" (Johnson & Pepass, 2003).

After a week of the report, Ivester apologized to the Belgium government to the public though newspaper and advertisement for discomfort and inconvenience. Moreover, Coca-Cola Company confessed that there had been manufacturing error and apology to consumers after the report of illness (Johnson & Pepass, 2003).

2.34 Resigned

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In 1990, CEO, Roberto Goizueta had resigned after he failed to handle the ethical disaster that coke faced. In addition, in 2004, Neville Isdell was called out for retirement to improve Coca-Cola's reputation (Ferrell, Fraedrich & Ferrell, 2010). CEO and Chairman, Ivester is also resigned to defend the reputation.

2.4 Criticism on Coca-Cola Company

2.41 Unethical

It was unethical for using cocaine or caffeine as one of its intergradient (Linda, 2009). As it will make customer addictive as well as harm life if consume it regularly. In addition, Caffeine and Cocaine have effect to the human body and mind (Brogan & West 2008).


2.411. Caffeine effects on memory and learning

In essence, caffeine consumption increases mental performance related to focus thought while it may decrease broad-range thinking abilities (Boyle, 2004). Cocaine effects on brain. Cocaine can constrict blood vessels in the brain, causing strokes. This can happen even in young people without other risk factors for strokes. Cocaine causes seizures and can lead to bizarre or violent behavior (Cardoso, Sabbatini, & Malavazzi,n.d.)

2.412. Caffeine effects on the heart

Research suggests that drinking caffeinated beverage can cause a temporary increase in the stiffening of arterial walls (Coon, 2009). Cocaine effects on heart. Cocaine is bad for the heart. Cocaine increases heart rate and blood pressure while constricting the arteries supplying blood to the heart. The result can be a heart attack, even in young people without heart disease. Cocaine can also trigger a deadly abnormal heart rhythm called arrhythmia, killing instantly (Bennett & Goldfinger, 1987).

2.413. Caffeine effects on children

Intake of caffeine results in stunted growth within children, particularly younger children and teenagers. Recently, scientific studies have disproved the notion. However, subsidiary beverages that contain caffeine, such as Coca-Cola, most of which contain high amounts of caffeine, have been banned in many schools throughout the world, especially in primary school. In one study, caffeinated cola has been linked to hyperactivity in children (Tarter, Ammerman, & Ott, 1998).

2.414. Caffeine intake during pregnancy

In 2008, a study suggested that pregnant women who consume 200 milligrams or more of caffeine per day will be in risk for miscarriage risk compare to women who do not consume. The UK Food Standards Agency has recommended that pregnant women should limit their caffeine intake to less than 200 mg of caffeine a day-the equivalent of two cups of instant coffee, or one half to two cups of fresh coffee(Tarter, Ammerman, & Ott, 1998).

2.415 Affects on Sexual Function

Cocaine affects on sexual function. Although cocaine has a reputation as an aphrodisiac, it actually may make you less able to finish what you start. Chronic cocaine use can impair sexual function in men and women. In men, cocaine can cause delayed or impaired ejaculation (Lewis & Bendersky, 1995).

2.42. Responsible

Coca-Cola Company should have take action once the outbreak began not waited for a week to apology. The Company muted approach to the crisis when first made evident in May 12 1999 incident which affected customers with similar symptoms (Tuleja & O'Rourke, 2008).Lack of management has caused 100 customers had became ill (Johnson & Pepass, 2003) and should have take action early (Tuleja & O'Rourke, 2008).

2.43. Honesty

Coca-Cola Company is act toward its own benefit or "self-interest" (Ferrell, Fraedrich & Ferrell, 2010).As Coca-Cola is bad for health as its can caused obesity, increase osteoporosis risk for older women and impact on other health threat due to chemicals like Malathion and Chlorpyrifos (Fernando, 2009).Coca-Cola Company have targeted inappropriate audience such as children. As the result, Children are addictive to it as drink or consume frequently can effect stunted growth. Ethical businesspeople especially Coco-Cola Company should be grounded on integrity. In addition, Coca-Cola Company should disclose its product ingredient honestly as well as let somebody know the consequences of consume it too often so that customers will be more rational or "make educated beverage choices" (Ferrell, Fraedrich & Ferrell, 2010).