In the Spotlight: Neville Isdell, CEO, The Coca-Cola Company

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If Coca-Cola Company CEO Neville Isdell thought the impending end of his tenure would allow him to bow out of his last AGM as CEO peacefully, he would have been sorely disappointed.

Isdell, who steps down from the CEO position for Muhtar Kent in July, unveiled this week a double-digit increase in profits and revenue for the most recent quarter.

First-quarter profit rose 19% boosted by acquisitions and overseas growth, offsetting lacklustre results in North America that were dragged down by factors largely outside the group’s control, such as rising fuel prices and the slowing US economy.

Isdell could well have expected a warm welcome from shareholders, after all the results beat Wall Street expectations.

Most impressively, perhaps, worldwide unit case volume was up 6% for the first quarter, helped by acquisitions, and international unit case volume was up 7%. For a company that has been accused in the past of being too focussed on CSD sales in the US, the strong international growth should be applauded.

The company saw strong unit case volume growth in China, India, Brazil, Turkey, Russia, Eastern Europe and the Philippines. Meanwhile, volume was flat in its key North America unit.

But instead of plaudits, the press this week has been dominated by stories of Isdell having to field two hours of critical questions from the floor of the AGM. And, in a telling sign of the times, it was not questions of Coke’s economics that filled the time, but demands that the Coke boss explain the company’s track record as a corporate citizen.

Worryingly for Coke, this is no one-issue problem either. In one week alone, Coke has had to face criticism for its marketing of Dasani – the pressure group Corporate Accountability International says the brand is no better than tap water but sold at thousands of times the price – continued calls to investigate human right abuses in Colombia and environmental criticism over water shortages in some second and third world countries. These are hardly new issues for Coke and the company has always defended itself against all these claims.

The company has worked hard, in particular, to rid itself of claims it is contributing to water shortages in some local communities around the globe, most notably India.

As Isdell - a self-professed environmentalist - explained, Coke has set a goal to become water neutral and formed a partnership with the World Wildlife Fund to protect major watersheds around the world.

And yet still these attacks on the company’s reputation continue.

Now, to add to all this, the drinks company has become embroiled in the turmoil surrounding China’s human rights record in light of the upcoming Olympics in Beijing.

The thought only a few years ago that a company selling fizzy drinks could somehow be held accountable for the domestic policy of the world’s second-largest superpower would have been farcical.

But Coke now finds itself playing a very sensitive game.

As one of the main sponsors of the Beijing Olympics, Western and Tibetan pressure groups are calling for the company to take action over China’s human rights record, particularly in Tibet. Some are calling on Coke to push for a change to the route of the Olympic torch so that it doesn’t pass through Tibet.

Students for a Free Tibet claims that if the torch passes through Tibet it will cause more violence. "Coke will be underwriting bloodshed in Tibet," its spokesperson said. "This is not the time for the torch to go through Tibet."

Reporters Without Borders, meanwhile, has asked Coke to sign a "declaration of responsibility" as a sponsor of the 2008 Beijing Olympic Games.

"China is a big market to them," said its spokesperson. "We want them to be aware that there are some problems."

Coke has even come under fire for China’s position on Dafur. Pressure groups are criticising Coke and other Olympic sponsors for not speaking out over China’s support through the trade of arms to the government in Sudan.

Coke, as you would expect has so far played this all with a dead bat.

Coke stands by its belief that the Olympics are a force for good, Isdell said this week.

"We still believe it is a torch which is a light of hope and we trust that is what it will be as it goes to every single place in the world," Isdell said.

For Isdell this poses quite some dilemma. If he continues to remain quiet on China’s track record and the momentum behind the anti-China campaign builds significantly, he runs the risk of Coke increasing its reputation as a corporation failing its moral duties, adding further fuel to the anti-Coke campaign.

But if he speaks out, Isdell faces a different set of opponents altogether.

Few brands with global reach can afford to upset the Chinese these days and Coke is no different, pouring millions of dollars in investment into the country. As the French retail group Carrefour is finding out, the potential for a Chinese boycott of your products is a real one. Carrefour is looking at the prospect of a boycott of its stores in China merely because the French president has said he may skip the opening ceremony in Beijing over China’s human rights record.

Coke cannot afford any similar threat. Bill Pecoriello, the research analyst at Morgan Stanley, estimates that 5% to 6% of Coke’s total revenue comes from China, with an estimated 1.2 billion cases sold in China in 2007, a figure set to grow.

As one Hong Kong-based media relations expert quoted by the New York Times said this week: “Things can change quite quickly, and from their [the Olympic sponsors] point of view, they realise that Beijing has got a long memory.”

Sectors: Soft drinks, Water

Companies: Coke

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