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WORLD: Has Coke become the new McDonald's?

· Drinks firm hit by a hunger strike and college boycotts
· Coca-Cola says it is a target because it is the top brand


by David TeatherThe Guardian (UK)
August 18th, 2006

The muffled phone line made the voice in Lagos sound small and distant but there was no mistaking the sense of determination. Ebun-Olu Adegboruwa, a Nigerian lawyer, was explaining how he intended to take on Coca-Cola, the world's largest soft drinks company.

He claims to be acting for some 4,000 people in the port area of Apapa, many of them poor and illiterate, who believe that a local bottling plant has stolen their livelihoods. A lawsuit is planned accusing the company of polluting a lagoon by pumping untreated waste into the water and killing fish. "Like many multinational companies operating in Africa, Coca-Cola is guilty of double standards," he said. "They do what they are unable to do in America and Europe. We feel cheated. People are roaming the streets with no means of making a living."

Welcome to the Coke side of life. The planned legal action is just the latest in a litany of alleged human rights and environmental abuses in developing markets that has made Coca-Cola a cause celebre. When self-described anarchists interrupted the carrier of the Olympic torch on route to Turin ahead of this year's winter games, it was not the athlete's running shoes they objected to, it was the presence of Coca-Cola, which had spent $66m (£35m) to become the main sponsor. Coke is the new Nike.

The latest issue to hobble the company is the renewed allegation that its flagship drink in India contains 27 times the maximum permitted amount of pesticides. A study published by an agency of the UK's Department for Environment, Food and Rural Affairs this week said it detected none of the toxins found by a New Delhi organisation. Nevertheless, a quarter of India's states have imposed partial or total bans so far. Coke's defenders claim the bans are politically driven.

Hunger strike

Long-simmering claims of ignoring labour abuses in Colombia are still the biggest piece of mud sticking to Coca-Cola, as well as environmental issues in India. A hunger strike was reported last month outside a Coca-Cola plant in Mehdiganj, Uttar Pradesh, which ended when the state government agreed to study charges of pollution and exhaustion of water supplies.

It faces further allegations of union-busting in Pakistan, Guatemala and Nicaragua, and exhausting water resources in El Salvador. In Turkey last year a suit was filed alleging that Coke ignored the intimidation and beating of union activists. Over the summer Coke has faced legal action of a different kind from a disgruntled former business partner in Uzbekistan, who accused the company of shady dealings with the country's authoritarian government. All allegations are denied.

At the very least, Coca-Cola has an image problem. Students in about 10 US universities have banned Coca-Cola drinks, many stirred up by the veteran labour activist Ray Rogers and his Killer Coke campaign. He has targeted universities in a strategy of whipping up anxiety about the firm's human rights and environmental record. An individual boycott "may pale in comparison to the revenues they still generate but students in particular are important," he said. "If a student gets hooked on a product, they've hooked a consumer for the next 40 or 50 years."

Postal workers

New York University is the most prominent to sever ties with Coke - its 40,000 students voted in December to remove vending machines and clear cafeteria shelves of all its products. "There's a segment of the student population who felt very strongly about it," said Josh Taylor, an NYU spokesman. "We've taken Coke out of all our dining halls." Protests have also reached Europe and Canada, although the UK's National Union of Students recently voted down a similar ban.

But the campaign against Coke has spread beyond students. Postal workers in the US have urged the removal of vending machines from post offices, and teachers' unions in New York and California have passed resolutions calling for Coke's removal from schools.

In Britain, Coke has been promoting the launch of its latest brand extension, Coke Zero, a sugar-free version for men apparently too manly to buy something with Diet in the name. The company will hope the brand will perform a little better than its last big launch in the US: C2, a low-carbohydrate version of Coke that came on to the market just as the low-carb trend was beginning to wane.

Coca-Cola has drifted in the past decade, suffering from under-investment, heavy job cuts and management upheaval. It has lost almost a third of its market value since 2000 and was, symbolically, overtaken by PepsiCo in terms of market capitalisation in December.

The company has been wrong-footed by consumer trends after years of being the world's best-selling soft drink. Fizzy drinks sales are stagnant in developed markets but while its arch-rival Pepsi was launching energy drinks, bottled water and fruit juices to appeal to a new health-conscious consumer, Coke fell behind. The firm still relies on carbonated drinks for 85% of its sales. Success in developing markets - Coke claims it is sold in more than 200 countries - is crucial for growth.

Coke's critics are largely a ragtag bunch but the company has been unable to drown out the background noise, despite an annual marketing budget of $2bn. It began a campaign to counter what it dismisses as rumour, slander and urban myth. But it probably does not help that Coca-Cola is a symbol of America just as the superpower's role in the world has come under increasing scrutiny.

Ed Potter, Coke's head of labour relations, said: "We are probably the best-known brand in the world and so therefore we become a target ... It has less to do with our practices than to make the point of an individual. If you ask why don't they do the same thing with Pepsi, it is because it has no cachet. The well-known examples of Colombia and Turkey fit into that category. There is no substance to the claims being made but the urban myth is more attractive than wanting to know what the facts are."

He said the company had "engaged more actively" with students, including a Washington DC summit last year, and was trying to respond more quickly to issues around the world when they do arise. It has put out its second social responsibility report.

In an effort to silence the drumbeat of criticism, Coke has engaged the International Labour Organisation to assess its practices in Colombia. It has also commissioned a study of its business in India, by a nonprofit organisation, the Energy and Resources Institute. It has taken out advertising in the US student press and signed up to the UN Global Compact in March - the world's largest voluntary corporate responsibility initiative. "The student campaign has stalled," said Potter. "There are not that many individuals involved - but they make a lot of noise."

Jeff Seabright, Coca-Cola's vice-president for environment and water resources, said he had been to Kerala twice this year, over a factory that notoriously closed two years ago after claims that it had depleted the local water table. "The high court in Kerala appointed a panel that found the cause was severe drought and that Coke had not been the cause," he said. "In fact, we have invested in rainwater harvesting." The issue, he insists, is one of perception.

He said Coca-Cola's volume had grown by 35% since 2000 but that more efficient processes had cut net water usage by 1%. He said it was unclear what had polluted the lagoon in Lagos but said the company would build a waste-water treatment plant as soon as the government allowed.

Fearful


Activists are critical of Coke's counter-PR campaign and unlikely to be silenced soon. War on Want's Joe Zacune has catalogued alleged abuses in Coca-Cola: The Alternative Report and went to India last year to examine the claims. Of Kaladera, Rajasthan, he said: "The people are very, very angry. Farmers took me to their wells to show me how water levels had fallen. They are so fearful of their livelihood and kept using the term 'dark zone' and said we'll end up abandoning this area."

Local people took him to see equipment that Coke installed to collect water and replenish aquifers. "There was one in the grounds of a college. They said Coke had set it up but there had been no maintenance and it had broken. The students had ripped it down and the metal girders were twisted. There is anger, resentment and complete frustration. This isn't stuff you can find out unless you visit these remote and inaccessible places," he said.

Jeremy Moon, a professor of corporate social responsibility at Nottingham University, suggested that Coke was perhaps going through the same growing pains as other multinationals. "Being a branded company clearly brings opprobrium," he said. "If you look at Nike or Reebok, probably they have better practices than anyone else in their supply chains but because they are branded, they are targeted.

"It's a paradox. In many cases these companies have become leaders in corporate social responsibility [CSR] ... they come under criticism and then work to demonstrate that they are doing the right thing. They come under further criticism and lift standards still further. Nike's latest CSR report is a revelation for the amount of information they give."

Whether all the negative publicity will really have any impact on Coca-Cola sales is another question. Rita Clifton, head of the consultancy Interbrand, is doubtful. She reckons Coke is still the world's most valuable brand, ahead of Microsoft.

"It depends on how much people love the brand and how serious the issue is," she says. "If people like a product and it's convenient then they will probably carry on buying it. People are radical in research questionnaires and reactionary at the checkout ... People like to carry on doing what they like doing."

Image problem


Nigeria

Allegations that Coca-Cola killed fish by pumping untreated waste into a lagoon near Lagos

Italy
Protesters disrupt relay of Olympic torch on route to Turin winter games

India
Charges that drinks contain 27 times the permitted levels of pesticides and water reserves have been depleted

Colombia, Guatemala, Nicaragua

Claims of ignoring anti-union abuses

United States

Universities, postal workers and teachers vote to remove products

Turkey
Allegations of ignoring intimidation and beatings of union activists

Uzbekistan
Linked to authoritarian government





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