Coca-Cola Co., one of the world's most powerful corporations, discovered last week what it feels like to be on the losing end of globalization.
The soft-drink giant was rocked by a health scare in Europe that spread faster than a computer virus. Regulators in Belgium, France, Luxembourg and the Netherlands pulled the company's soft drinks from shelves after reports of contaminated Coke. And Coca-Cola spokesmen, after curtly insisting there wasn't any danger, began scrambling to offer assurances and apologies.
The Coca-Cola flap shows that just as capital and technology move instantaneously in the global economy, so does bad news. Consumer problems that start in Belgium can race around the globe -- tarnishing the world's most powerful brand name and even affecting its stock price on Wall Street.
For America's hard-charging corporate executives, this is the flip side of globalization. For even as the technology revolution is empowering corporations, it also is giving new leverage to regulators and consumer groups. There's no such thing as a "local problem" anymore, as Coca-Cola's experience shows.
"Global brand-name recognition has an Achilles' heel of vulnerability," argues consumer advocate Ralph Nader. "The better known a brand name is, the more vulnerable it is." Nader says the consumer movement is just beginning to use Internet technology to exchange information around the world -- about everything from product recalls to safety complaints.
Coke's problems began June 8, when 31 students in northern Belgium complained that they had become sick after drinking Cokes that had been bottled in Antwerp. A few days later, other Belgians complained of nausea after drinking bad-smelling cans of Cokes they had bought at vending machines. Those cans had been produced in Dunkirk, France.
After more than 100 complaints, the Belgian government announced last Monday that it was banning the sale of Coca-Cola products. The French government followed suit Tuesday, banning sales of some canned Coke products, and Luxembourg and the Netherlands also restricted sales.
Coca-Cola officials, meanwhile, were issuing statements that were meant to reassure consumers but may have made the situation worse.
Coke spokesmen said the school kids in northern Belgium had consumed sodas with "defective" carbon dioxide that might smell bad, but wasn't harmful. As for the canned Cokes made in France, the spokesmen said, they smelled bad because they had been shipped on pallets treated with a mold-killing wood preservative. There was a "package-integrity issue," conceded a Coke spokesman, which might have allowed the fungicide to contaminate the bottom of some cans, but he insisted that "the product is safe."
By midweek, confusion was growing across Europe. Why were people getting sick if nothing was wrong with Coke's products? For health-conscious Europeans, worries about contaminated food may have combined with a subtle anti-Americanism. Whatever the reason, Coca-Cola's famous brand name was beginning to look like a "Kick Me!" sign.
"I have the strong feeling that nobody [at Coca-Cola] is really informed," the spokesman for a Belgian consumer organization told the New York Times. "We couldn't get any information from the company until we had made scores of calls," complained a scientist from a government-backed consumer group in Germany.
Wall Street began to take notice too. The faraway consumer problems had the potential to affect Coca-Cola's most valuable asset -- the reputation for quality conveyed by its brand name. Coca-Cola stock dipped last week, and there was a steeper decline in shares of Coca-Cola Enterprises, the bottler that controls production in Belgium and some other European countries.
Realizing at last that he had a serious problem, Coca-Cola's CEO Douglas Ivester issued a statement Wednesday reassuring everyone that quality was Coke's "highest priority" and that executives "deeply regret any problems encountered by our European consumers in the past few days." That was CEO-speak for: "Oops!" Ivester traveled to Brussels Friday to try to repair the damage.
The classic example of how to cope with such crises was Johnson & Johnson's handing of the 1982 Tylenol scare. Former CEO James Burke is widely credited for having preserved the value of that company's brand name by responding decisively after reports of product tampering. He ordered Tylenol off the shelves and set in motion new systems for tamper-proof packaging.
"We are in a global marketplace, and if you have a world brand, that's a wonderful discipline," Burke says. "The collective power of the consumer is real, and the public responds to what's right."
Last week's events show that "Always Coca-Cola" isn't just a slogan. Quite literally, the sun never sets on this company and its operations. When trouble hits, there's no place to hide. The value of the company's brand, built up over more than a century, can be shaken as suddenly and capriciously as the Thai baht or the Indonesian ringgit.
That's what globalization means. Companies, like currencies, are vulnerable to instantaneous flows of rumor. U.S. multinationals are often in the driver's seat in this global marketplace, but they can occasionally get crushed under the wheels too.