The Global Reporting Initiative (GRI) is a framework of internationally accepted guidelines and principles for companies and organizations to report on corporate responsibility and sustainability performance. This year, in 2011, The Coca-Cola Company has set out to report against the Key Performance Indicators (KPIs) that measure economic, environmental and social performance. We have done so within the scope of our Company's wholly owned operations. Where we have reported information on behalf of the Coca-Cola system (The Coca-Cola Company and our bottling partners), we have flagged this information within the body of the text.
Coca Cola Initiative
Coca Cola's Recent and Ongoing Integration Initiative: Legal Implications and Recommendations
No company continue to prosper without continuing to grow and adapt -- markets and operating environments are in a constant state of evolution, and companies must respond in kind in order to maintain efficiency and profitability, and to ensure that their products and distribution methods are in keeping with market demand. Many company adaptations are achieved through subtle and simple changes, however at times more significant change initiatives are implemented in order to bring about more profound and widespread organizational changes. These initiatives can have significant legal implications and consequences if they are not undertaken with proper planning and care, and the larger an organization is the more complex these implications can become. The following pages discuss the potential implications of an ongoing initiative at the Coca Cola Company.
Company and Initiative Overview
Coca Cola is a well-known company and brand with a global product distribution network and incredibly strong sales performance and profitability (Coca Cola, 2011; Yahoo Finance, 2012; Hoovers, 2012). Despite this profitability, the company continues to seek further means of increasing efficiency and its profit margins through many initiatives (Coca Cola, 2011). The company has also faced legal issues in the past from some of its operations, on a variety of fronts, and needs to move carefully in current plans and programs (Hoovers, 2012).
One initiative that Coca Cola began in 2008 and that it continues to expand in international as well as domestic markets is what the company terms its "integration initiative" (Coca Cola, 2011). The business model employed by the company includes a largely detached and independently owned distribution network the components of which are nonetheless often solely dependent on the company, leading to a complex relationship often seen as imbalanced (Hoovers, 2012; Coca Cola, 2011). Part of the company's current and future efforts is to fully acquire distribution companies and networks in certain regions, taking over operations in order to reduce costs and increase profitability with direct-to-consumer (or direct-to-retailer) sales (Coca Cola, 2011). This has several legal implications in a variety of areas, all of which must be carefully considered by the company.
Administrative Law
One of the most relevant areas of administrative law in regards to the proposed integration initiative are anti-trust laws, which exist in many countries in which Coca-Cola operates and which limit the degree to which a company can control a given product/market/industry through integration and ownership. In Germany, where Coca Cola hopes to engage in especially strong efforts to obtain ownership and integration of the distribution network, relatively recent laws making it more difficult to keep or obtain market control have been put into place (Rudo, 2012). The European Commission has already accused the company of violating fair competition laws, and thus the company should be especially careful (WRBM, 2004).
The impact that such laws could have on Coca Cola's integration efforts are quite significant. Though it is of course legal for the company to sell its own products to retailers and even directly to consumers rather than relying on a disconnected supply chain of "middle-men" distributors, the distribution network was a way to ensure fair competition for Coca Cola's products -- many distributors means retailers can try to get better deals, meaning better deals for consumers -- as well as between products of the same class, which direct-to-retailer sales puts Coca Cola in a better position to manipulate (WRBM, 2004). Even suspicion of such activity could be enough cause for an investigation and even a halting of certain acquisitions, which would hurt the company both operationally and in terms of its brand image and customer relations (Rudo, 2012; Coca Cola, 2011).
Sales Laws
As described above, there are aspects of sales law that are addressed in anti-trust laws, limiting the actions that Coca Cola can take in terms of price or rebate agreements with retailers, advertising, and in certain other areas of commerce (WRBM, 2004; Rudo, 2012). The company will have to provide competitive prices for its products that are not formed in collusion with other similar companies or, as might be more likely in Coca Cola's case, that require retailers to maintain certain price differences or other advantages for Coca Cola (Rudo, 2012). In other words, the company will not be able to use consumer demand for its products and the tighter control integration achieves to develop greater market control.
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