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MKTG 432 Coca-Cola India Case Analysis

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Grant Mackenzie

on 10 May 2011

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Transcript of MKTG 432 Coca-Cola India Case Analysis

Coca-Cola India Case Study Analysis Overview With local operations in over 200 countries, Coca-Cola generates more than 70% of its income outside of the United States. However, stringent regulations imposed by the 1973 Indian Foreign Exchange Regulation Act (FERA) on foreign companies’ operations exacerbated tensions between the company and the Indian government. "Worldwide volume grew a strong 6% in the quarter, with growth in all five geographic operating groups. Excluding new cross-licensed brands, primarily Dr Pepper brands, worldwide volume growth was 5% in the quarter. International volume growth was 6%." The Coca-Cola Company Reports First Quarter 2011 Results Corporate, April 26, 2011 What went wrong? After the CSE's announcement, Indian sales plummeted by 40%. In defense, Coca-Cola called the allegations baseless and conducted their own tests which showed no signs of pesticides. A public opinion poll taken shortly after the press release showed that the vast majority of Indian Coca-Cola consumers believed the CSE claims to be accurate. Strategies Data Analysis Coca-Cola’s 16-year absence as a result of the FERA... While its 1993 reentry via FDI, partnerships and acquisitions was good for sales... ... left a feeling of distrust and apathy in the eyes of the public. Of 1.42 million villages in India, 196,813 villages are affected by chemical water contamination today. Evading Responsibility Shift attention to the Indian government and its pitiful efforts in improving and regulating the quality of India’s water. But whose side would the Indian consumer take? If the government were to fail to acknowledge its shortcomings, could Coca-Cola dissuade other American corporations from investing in India because the political atmosphere has become "too inhospitable"? Good Intentions Pointing out that Coca-Cola's existence has been greatly beneficial for the country and environment. 7,000 local employees were hired (in just the 27 wholly owned bottling operations) Coke's attempt to sell “an American way of life,” and its acquisitions of local brands, added to Indians' suspicion of the company pushing an American agenda in the form of so-called “cultural imperialism.” The CSE released “Pure Water or Pure Peril” ten years after the company's market reentry, stating they had found 17 drinking water brands (including Coca-Cola’s “Kinley”) to contain dangerously high concentrations of pesticide residues. Yet Indian consumers doubted the sincerity of the Coca-Cola Promise: “The Coca-Cola Company exists to benefit and refresh everyone who is touched by our business.” Coca-Cola and Pepsi denied the NGO's findings. Transcendence? Although Coca-Cola has strived to create a higher standard of living for India, the country’s inadequate water quality regulations resulted in this inevitability. Why the doubt? The CSE’s accusations of irresponsible behavior appear to be in line with a raft of hostile public sentiment in the country. And since beverage makers couldn’t even define “clean water,” how could Indian consumers believe Coca-Cola? 17 franchisee owned bottling companies 29 contract packers Coca-Cola has created approximately 125,000 jobs in India. Corrective Action Coca-Cola takes the initiative in helping to set new Indian/international water standards The norms that exist to regulate the quality of cold drinks are a maze of meaningless definitions. Coke could position itself as “the people’s champion” by proclaiming this to be unacceptable. But would Coca-Cola have to accept responsibility? And if so, should the company accept full or only partial responsibility? Implementation Short-term Coca-Cola uses its vast resources to host events to raise public awareness on the ground It is questionable how effective Coca-Cola’s website efforts have been in India when under 2% of the population have access to the Internet. Long-term Push for regulatory reform But only after having rebuilt trust with Indian consumers via short-to-mid-term publicity campaigns. On August 5th, 2003, the Center of Science and Environment, a non government organization, released a press release with the following statement: “12 major cold drink brands sold in and around Delhi contain a deadly cocktail of pesticide residue.” After a 16-year absence, Coca-Cola reentered the Indian market in 1993. Should it issue an apology?
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