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Coca-Cola facing storm on human rights

By Chris Mercer , 16-Jan-2006

Coca-Cola faces a challenging 2006 as the firm experiences rising levels of bad publicity on alleged human rights abuse and, of course, obesity. In the first of two parts, BeverageDaily.com takes a closer look, starting with human rights.

"The Coca-Cola Company exists to benefit and refresh everyone it touches." So reads the first line of Coca-Cola's corporate reason for being.

Yet, behind the slinky catch phrases, Coca-Cola's feel-good image is under pressure as human rights campaigners increasingly grab the public spotlight.

There have been more demands for the soft drinks giant to set up a new, third party inquiry into the alleged intimidation and murder of union workers from its bottling plants in Colombia.

And, in India, Coca-Cola is still accused of putting locals at risk by polluting groundwater and soil, causing water shortages and having high levels of pesticide in its soft drinks.

The firm has vigorously denied the allegations, emphasising in particular that a Miami District Court dismissed the group itself from a lawsuit on Colombia.

But, the University of Michigan two weeks ago became the latest US education institution to suspend sales of Coca-Cola products on its campus because of the firm's unsatisfactory progress on filling in the blanks.

The University's chief financial officer, Timothy Slottow, said Coke agreed in principle on 30 September last year to set up an independent investigation of events in India and Colombia. A third party auditor and protocols for the review should have been in place by 31 December, but these conditions were not met, he said.

The Michigan boycott follows others taken by big universities in the last few months, including the University of Rutgers and the University of New York.

Ray Rogers, director of the Killer Coke campaign, said in an in interview with BeverageDaily.com that 21 colleges and universities across North America have now banned Coca-Cola from their campuses, and there were "a growing number of high schools getting involved".

Around another 130 universities and colleges are in play, according both Rogers and the Center for Informed Food Choices.

Rogers, known in the US for his vigorous attacks on corporate abuse, has also played a significant role in taking the campaign against Coke international.

In the UK, the National Union of Students (NUS) is mid-way through its own investigation of Coca-Cola's practices in Colombia and India. The findings will be presented at the NUS' annual national meeting this spring.

If things look bad, the NUS could vote to use its 25 per cent stake in supply firm NUS Services to try and kick Coca-Cola out of more than 750 student unions across most UK universities and colleges.

The potential financial impact on Coke is less certain, yet Rogers estimated the firm was losing tens of millions of dollars from the ban at Rutgers University alone. Rutgers holds around 60,000 students, who consumed around 75m to 110m servings of Coca-Cola's Minute Maid juice every year.

Plus, as he put it, "every student that gets hooked on Coke is a potential customer for the next 50-60 years".

Competitors have already swooped in some places. Cadbury Schweppes is reportedly set to put more products in New York University, after it too banned Coca-Cola for its lack of action on human rights.

And, unfortunately for Coca-Cola, the campaigning spotlight has found it just as analysts predict ethical shopping will become big business.

Britain's Fairtrade Foundation said the UK market for certified fairtrade products has grown by around 40 per cent every year for the last five years. Market value reached £140m in 2004.

Rogers said he had met Coca-Cola representatives a number of times and the "company has made it clear that they would like to see it [our campaign] end".

But, for this to happen, he insisted Coke must allow a new, independent investigation in Colombia and "has to take a series of actions to ensure that the safety and rights of the workers at its bottling plants are protected".

Rogers would also like to see compensation for the families of the eight murdered union leaders.

One former Coke worker said in an interview in the latest edition of BusinessWeek magazine that he had been forced to quit his job at Coke's bottling plant, and leave the town he lived in, due to death threats. He claimed Coca-Cola only offered to pay his bus fare out of town.

A list of questions is also still hanging over Coke in India. There, the firm has just got a three-month licence to re-open its bottling plant in Plachimada. The factory has been shut since March 2004 due to concerns over water shortages and pollution in the area.

The new licence is controversial and the Plachimada plant has been the centre of several local protests. An action in India's Supreme Court is also pending over Coca-Cola's right to extract water near another bottling plant in Kerala.

Coke has repeatedly said it is committed to corporate social responsibility in these and all areas in which it works, and last April blamed water shortages in Kerala on a lack of rain.

The firm, nevertheless, last week acknowledged it was in a battle for its image by unveiling PR veteran Tom Mattia as its new global director of communications. Chief executive Neville Isdell said he would nominate Mattia to be elected senior vice-president of Coca-Cola in February.

"Effectively communicating about who we are as a company and what we stand for is essential to our ability to connect with the many audiences who care about the Coca-Cola Company," said Isdell.

Goldman Sachs warned in the last few days that Coca-Cola would face a tough 2006, and degraded the firm's rating from 'outperform' to 'in-line'.

Next week, BeverageDaily.com will examine the prospect of obesity litigation looming over Coca-Cola and other soft drinks firms in 2006.

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