Coca-Cola's crisis in the Indian market is a lesson learned for foreign multinational companies. It reflected how the consistent denial of allegations and incapability of addressing the pressing issues on time can elevate a crisis. Despite significant CSR investments in the rural areas of India at the beginning of 2003, Coca-Cola faced a list of allegations from local farmers, activists, and NGOs. The company was accused of causing water shortages, polluting the environment, releasing toxic waste into the water, and selling pesticide-contaminated products, which ultimately dragged it into huge trouble in the country.
Even though the Centre for Science and the Environment, an independent environmental group, confirmed that the company’s soft drinks contained more than 24 times of the allowed amount of pesticide residue, Coca-Cola disputed all allegations. It contested the report, called for an immediate press meeting and questioned the very method of the groups testing, despite the fact that it was conducted following Environmental Protection Agency standard procedures. Replying to the groundwater extracting and drought allegations, Coca-Cola blamed the decreased rainfall that year, which was supposed to have caused the drought, not its bottling plant. Also, the company's untimely marketing strategy that promoted their products’ safety and quality, triggered an angry response from activists and local politicians.
Therefore, a national movement demanding to ban Coca-Cola products started to gain momentum. It created huge pressure on the company to shut down its bottling operations in India's various water-stressed areas. Also, the government put a partial ban on the company, while various states stopped selling the soft drinks in schools and government offices. As a direct consequence, Coca-Cola witnessed a 30-40 percent reduction in sales. Even in western countries, the company started to feel the consequences of its unethical behavior in India. Students in several US and UK universities removed Coca-Cola products from student cafeterias and other shops.
Coca-Cola took the wrong approach by not admitting its mistake in the first place and correcting it immediately. The company wasted a good amount of time before it even acknowledged the crisis. Therefore, the company allowed the crisis to spread, which ultimately resulted in unnecessarily great mistrust and criticism from their customers.
By Priyanka Banerjee