COKE AND THE PARAMILITARIES
Even as the Company struggled to regain market share in 2002 and 2003, however, accusations against the world’s dominant soft drink firm escalated. In April 2002, Coca-Cola held its annual shareholder meeting at Madison Square Garden to show its solidarity with New York City following the terrorist attacks. Inside, talk-show host Charlie Rose hosted celebrity appearances at the Coke event. Outside, the Teamsters union inflated a giant rat sporting a Coca-Cola logo, complaining that the Company ignored the intimidation, torture, and assassination of union workers in Coke bottling plants in Colombia.
But as the Miami judge dithered, the lawyers who brought the Colombian lawsuit feared that the case would wither without public agitation. “It was clear we would be stuck in legal limbo,” recalled Terry Collingsworth of International Right Advocates. “We needed to put heat on the company. Otherwise, it would be in their interest to delay.” In the fall of 2002, he found Ray Rogers in the ramshackle Manhattan offices of Corporate Campaign, Inc. Rogers had spent his career embarrassing corporate wrong-doers, starting in the 1970s with a campaign against the textile firm J. P. Stevens, which inspired the movie Norma Rae. As he read the stories of murdered union leaders in Colombia, Rogers felt that familiar tingle of the call to battle, and the image-conscious Coca-Cola Company would make the ideal target. When Rogers discovered that in the late 1970s Coke union members had been killed by death squads in Guatemala in nearly identical circumstances, his mind was made up. He prepared to take on Coca-Cola.
In March 2003, Jose Martinez, the district court judge in Miami, dismissed the Colombian claims against The Coca-Cola Company, accepting the argument that the Atlanta corporation was not responsible for what happened in Coke bottling plants without even looking at the bottler’s agreements or allowing any discovery process. The judge did permit the case to continue against the two Colombian bottlers, however. The frustrated lawyers appealed, but they urged Rogers to begin his campaign.*
Rogers scrambled to prepare for Coke’s annual shareholder meeting, held on April 16, 2003, in Houston, Texas, where he initiated the Campaign to Stop Killer Coke. Outside the meeting, along with fifty union supporters, he waved inflammatory protest signs featuring a “Colombian Coke Float,” a glass of Coke with bullet-riddled bodies floating in it. “Unthinkable! Undrinkable!” shouted the text below.
Inside the meeting, two Colombians, members of the plaintiff union Sinaltrainal, approached the microphone to tell their stories in Spanish through interpreters. ‘I’m one of 65 members who are threatened with death by the paramilitaries,” said William Mendoza. “Bodyguards are with me all day, and some nights they stay at my house for increased security. My family has been victimized.” The previous summer, Mendoza’s four-year-old daughter had nearly been kidnapped. The next day, the union leader said, an anonymous caller threatened to kill his daughter if he continued to interfere with “the alliance we have with Coca-Cola.”
A shareholder resolution submitted by an investment fund sought a human rights code of conduct that would apply to the Company’s bottlers. It was defeated, but Coke felt the pressure, as the fund manager expressed fear that the protests would hurt the Company’s reputation and drive down its stock price. A Coke spokesman categorically denied the allegations. “Labor groups are falsely trying to connect Coke with right-wing paramilitary groups.”
Yet no one could deny the carnage in Colombia. Since 1986, nearly 4,000 Colombian union leaders had been murdered, with 184 killed the previous year. The crucial question was whether managers at Coke bottling plants were in collusion with the paramilitary thugs. The most disturbing and damning stories, which Ray Rogers soon helped to spread, occurred in Carepa at the Bebidas plant owned by Miami businessman Richard Kirby.* In 1994, two union members at the Coke plant were killed, followed by a third in 1995, shot on his doorstep as his wife and children looked on. At that point, remaining union leaders fled, but the Coke workers continued to meet secretly, then came out into the open.
On December 6, 1996, union member Isidro Gil, the bottling plant gatekeeper, opened the iron gates to allow a delivery truck to leave. Two men on a motorbike slipped in and shot Gil through the middle of his forehead, followed by several more bullets to make sure, then sped off. That night, the Sinaltrainal union offices were fire-bombed. Two days later, paramilitaries entered the bottling plant and assembled the workers at gunpoint, explaining that they could either resign from the union or leave Carepa to avoid being killed. A plant manager allegedly distributed already-prepared resignation letters, which everyone signed. The Coke bottler then slashed wages.
The Sinaltrainal men called for a worldwide boycott of Coca-Cola, but Ray Rogers knew that unionized Coke workers elsewhere wouldn’t support a boycott, since it might threaten their jobs. Instead, he focused on university campuses that had signed lucrative exclusive agreements with Coke. “Young people, especially students, are Coke’s highest priority marketing target,” Rogers noted in his campaign literature. He figured that idealistic college students would make perfect activists, and he was right. In 2003, Bard College and Lake Forest booted Coke. Both were small schools, but then University College Dublin, with 20,000 students, voted to ban Coca-Cola. “This seems to have come out of nowhere,” said a dazed spokeswoman for Coca-Cola Ireland, though she noted that “the problem is thankfully minor at the moment.”
Coke was blindsided by the negative coverage. Ray Rogers’ website, www.killercoke.org, which conveyed the lurid details of the Colombian murders, was attracting thousands of visitors. The Company bought the www.killercoke.com domain, which clicked through to Coke’s denial of complicity, but it was an ineffective response.
The Company said that it had a policy to protect its own workers and expected its bottlers to do the same, but Deval Patrick, Coca-Cola’s African American general counsel, admitted, “No written code is enough; it’s just words on paper, we know that. But we have taken the first steps.” That wasn’t enough for Ray Rogers. In October 2003, when Equal Justice Works gave Patrick their annual Scales of Justice award as an “advocate for civil rights, equality, and fairness in the workplace,” Rogers handed out fliers labeling him the “Killer Coke counsel.” When a member of the audience raised the issue during the awards ceremony, Patrick impulsively promised that Coke would send an independent delegation to Colombia to investigate the charges.
In December 2003, Forbes, a conservative business magazine, published an article headlined “Coke’s Sinful World,” pointing out that “the biggest bottlers aren’t subsidiaries of Coke, nor are they completely independent. Coke effectively controls them by maintaining big equity stakes and a heavy presence on their boards. . . . Yet it keeps its stakes in the bottlers below 50%, thereby avoiding . . . any unpleasant liabilities.” The Company owned about a third of Femsa, which had just bought Panamerican Beverages, owner of one of the accused Colombian bottlers, and many top Coke executives served on the Femsa board. Yet The Coca-Cola Company denied responsibility for “unpleasant liabilities” such as murders of union employees.
WATER PROBLEMS IN INDIA
Meanwhile, Coca-Cola was having trouble halfway around the world in India, where it had returned in 1993 and now owned twenty-six bottling plants, with seventeen franchisee-owned bottlers and sixty distribution centers. But the Company had managed to achieve only 6 drinks per capita yearly consumption, despite sinking nearly $1 billion and hiring Bollywood heartthrob Aamir Khan to tout Coke in TV spots. In August 2002, after Coke and Pepsi defaced a Himalayan mountainside with competing ads, the Indian solicitor general threatened legal action against them. Up until then, the Company had owned all of Hindustan Coca-Cola Holdings, but a few days later it was forced to sell 49 percent to Indian business partners and employees.
Coke was under fire in the village of Plachimada in the state of Kerala in southwestern India, where a Coke bottling plant had gone into operation in March 2000. Within two years, many villagers were convinced that Coke’s s
ix bore wells and two open wells were depleting the water table, as nearby local wells ran dry except for a few feet of bitter-tasting liquid. Led by a little old woman named Mailamma, villagers set up a large thatched-roof shelter across from the Coca-Cola plant and began a twenty-four-hour protest vigil in 2002. Within a year, the protests were attracting national attention, with the village becoming an “activist carnival,” as one writer put it.
FLOW, a documentary about water, included footage of the Plachimada protestors chanting, “Coca-Cola, Go Away,” and holding signs saying, “Water Is Our Birth Right!” Various women complained on camera. “Before this company came, our lives were comfortable and beautiful. . . . After the company came, within six months the taste of the water changed.” Another said, “When we bathe, our heads swim. It pains, and we scratch all over.”
In April 2003, the Plachimada village council revoked the plant’s operating license, but the Kerala state government stayed the decision. The case went to the state’s high court for a decision in December. In the meantime, a BBC radio crew showed up in July. When local farmers told the crew that Coke had given them sludge from their water purification process to use as fertilizer, the BBC reporters took a sample. The University of Exeter tested it and found that it contained toxic lead and cadmium; a predictable uproar ensued. Hindustan Coke stopped giving away the “fertilizer.”
A month later, the Centre for Science and Environment (CSE) of New Delhi called a press conference to announce that it had found pesticide in Coke and Pepsi, including high levels of DDT, malathion, lindane, and chlorpyrifos. “Each sample had enough poison to cause—in the long term—cancer, damage to the nervous and reproductive systems, birth defects and severe disruption of the immune system,” warned the CSE report.
The Indian Parliament promptly banned the soft drinks from its building, as did authorities in West Bengal, Punjab, and Rajasthan. Protestors smashed Coke bottles, and sales plummeted. In desperation, Coke asked the Indian Supreme Court to put an injunction on the bans, since they threatened its right to do business, but the judges refused. The American Embassy lamely defended Coke and Pepsi, saying that it was “their top priority to provide the consumer with safe products.”
A week later, the Indian minister of health revealed that new tests in state-run labs found the soft drinks to be “well within the safety limits prescribed for packaged drinking water at present,” though it still found minuscule amounts of pesticide. Hindustan Coke promptly distributed fliers assuring consumers that “Coca-Cola refreshes you with world-class and safe products in India.” The CSE director said that she hoped the debate would at least raise awareness of India’s lack of water standards or pesticide policy.
For the time being, the pesticide scare subsided, but the protests over Coke bottling plants’ alleged depletion of the water table continued and spread. In May 2003, farmers in the village of Mehdiganj, near the Ganges River in Uttar Pradesh, staged their first rally near the local bottler. Protests also began at two other Coca-Cola bottling locations elsewhere in India.
MECCA COLA AND THE IRAQ INVASION
The United States invaded Iraq in March 2003, declaring victory a few weeks later, but the ill-conceived war was far from over, and it fanned anti-American sentiment throughout the world, with calls for boycotts of American products such as Coca-Cola. A leaked internal memo from the London office of McCann-Erickson, Coke’s major international advertising agency, observed, “The war risks tarnishing the reputation of American culture and the mythic ‘American dream.’” It advised American multinationals to stress their “strong local roots.” In India, radical groups attacked Coke distribution centers and bombed a plant in Andhra Pradesh. “We are primarily Indian, employing Indians,” said Sunil Gupta of Hindustan Coca-Cola Holdings, heeding McCann’s advice, but he wasn’t convincing.
In France, Tawfik Mathlouthi, a Tunisian, had launched Mecca Cola in November 2002 as an ideological alternative to Coke. Its red-and-white label imitated Coca-Cola, as did its flavor, but its slogan differentiated it clearly enough: “Don’t drink stupid. Drink committed.” Mecca Cola pledged to donate 10 percent of its profits to Palestinian children’s funds and another 10 percent to French charities.
Mecca sales in Europe and the Middle East took off after the Iraq invasion, with some shipments also going to areas of California and Michigan. Four competing drinks quickly jumped into the fray in the remainder of 2003—Arab-Cola and Muslim Up in France, Qibla Cola in England, and Cola Turka in Turkey. A Coke spokesman in London dismissed the impact of the new anti-American colas as “minimal” and emphasized that Coke was apolitical and unaffiliated with any religion or ethnic group, but such avowals meant nothing to Mecca Cola adherents.
LAYOFFS AND WHISTLEBLOWERS
On March 27, 2003, a week after the Iraq invasion, Doug Daft authorized another round of layoffs in which 1,000 workers would be fired.* “It’s D-Day for a bunch of departments,” said one grim Coke executive. Matthew Whitley, an accountant in the Coca-Cola fountain unit, was outraged but not surprised that he was among those who were axed. Two months prior to being fired, Whitley jumped the chain of command, complaining to Steve Heyer about a number of issues that had been bothering him. The most recent was a Planet Java frozen coffee drink in which metal residue had been found, yet it was still being promoted.
Heyer told the fountain unit managers about these allegations, and a week later, Whitley, 37, received a dismal performance review. “I was basically blacked out,” he recalled. “No more communication with me.” Six weeks later, he was fired, after working for Coca-Cola for 11 years. For 75 years, there had always been at least one person from his family working there. Whitley hired Marc Garber, a Georgia lawyer who specialized in whistleblower cases and whose motto was “It’s not the size of the dog in the fight, it’s the size of the fight in the dog.” In May, Whitley sued, alleging that the fountain division was run as “an illegal racketeering enterprise.” The Company released a statement describing Whitley as a “disgruntled former employee” who was trying to squeeze Coke for $44.4 million, but the story broke on CNN, and it soon became apparent that Whitley the whistleblower wasn’t just whistling Dixie.
Whitley revealed that in 2000 the Company had convinced Burger King to test-market a frozen Coke slushy in Richmond, Virginia, as part of its “value meal.” When the promotion wasn’t going well, Coke executives gave a man $10,000 to take hundreds of children to Burger King for value meals. As a result, Burger King invested $65 million to buy equipment to make the slushies and advertise them in a national promotion, which resulted in half the expected sales, and the hamburger chain abandoned the promotion. In June 2003, the Company admitted that the tests had indeed been rigged, and it subsequently paid Burger King $21 million in order to retain the account, while firing Tom Moore, the head of Coke’s fountain division.
The Whitley suit also alleged that Coke had used slush funds to hide losses from its iFountain program of computerized drink dispensers. The Company had used “phantom truck deliveries” to boost sales figures. Prior to the stroke of midnight on the last day of the fiscal quarter, trucks filled with Coke syrup drove a few feet away from the loading dock. To further boost sales figures, Coke had engaged in channel-stuffing, coercing distributors to take more syrup than they needed at the end of each quarter.* Finally, Whitley said that Coca-Cola had given $1 billion in “marketing allowances” to customers, though only a quarter of the funds were actually spent on advertising. The rest amounted to “payola,” the lawsuit asserted, to keep customers. In effect, Coke was inflating its net operating revenue by $750 million a year by mis-labeling the payments.
In October 2003, Coke settled with Matthew Whitley for a mere $540,000, with over half going to his attorney. General counsel Deval Patrick admitted that Whitley was “a diligent employee with a solid record” and expressed disappointment that “he felt he needed to file a lawsuit in order to be heard.” The damaging revelations continued to reverberate, howeve
r, as both the SEC and the FBI launched investigations of channel-stuffing and other improprieties.
A pattern was emerging. In its desperation to boost sales, Coca-Cola was willing to go to extraordinary lengths, sometimes pushing beyond legal limits. In Mexico in mid-2002, a new Peruvian soft drink called Big Cola commissioned anyone with a vehicle to pick up bottles and deliver them to small mom-and-pop stores, where most Mexicans bought their soft drinks. Half the price of Coca-Cola, Big Cola was making inroads into Coke sales. To counter it, Coca-Cola mounted its ABC (Anti–Big Cola) initiative, offering to swap two bottles of Coke for every bottle of Big Cola. And the Company threatened to remove Coke coolers if any of the Peruvian product was found in them.
In the village of Itzapalapa, small shop owner Raquel Chavez balked. “My shop is free,” she said. “Even if it is only one customer who wants Big Cola I have to offer him the best service.” The Coke salesman offered ten Coke bottles for each Big Cola. Chavez turned him down. Coca-Cola subsequently refused to fill her orders, and her business suffered dramatically. In the summer of 2003, she and five other stores complained to the Mexican Federal Competition Commission, which eventually fined the Coca-Cola system $13 million for monopolistic practices.
TRYING TO STEP WITH IT
As concern over the American obesity epidemic mounted, Coke faced more intense criticism. In August 2002, the Los Angeles school board voted to abrogate its contract with Coca-Cola, inspiring similar efforts in several other districts. Soon thereafter, a California bill was introduced that would ban all soda from public schools. Coke mounted an intense lobbying campaign, but a weakened bill that exempted high schools was passed into law. Coca-Cola Enterprises president John Alm produced a video for politicians declaring that the fight against obesity was “a war that’s been declared on our company.” In June 2003, CCE made a contribution of an undisclosed sum to the National Parent-Teacher Association, and CCE public relations director John Downs, Jr., joined the PTA board of directors.*
For God, Country, and Coca-Cola Page 71