Coca-Cola Nixes Expansion Plan after Water Scandal

The United States-based beverage company Coca-Cola is postponing the launch of its Dasani brand of bottled water in Germany and France in the wake of a major scandal in Britain over the its quality. The company had planned to introduce Dasani in German and France later this spring, but the product has been pulled from British shelves and plans for its reintroduction have been shelved -- at least for now.

Last week, Coca-Cola was forced to admit that the water it sold in Britain -- marketed with the slogan "pure as bottled water gets" -- was, in fact, treated tap water from the company's production facility in the city of Sidcup. Coca Cola recalled more than 500,000 bottles of Dasani after tests revealed that the water contained unacceptably high levels of bromate. Long-term exposure to the non-metallic salt has been linked to a higher cancer risk.

"We remain confident in Dasani as a brand proposition," said company spokesman Jon Chandler. "Dasani is a proven success story in other parts of the world and we see no reason why it could not be so in Europe. But now is not the right time to bring it back to the market."

Water wars

While Dasani, as Chandler said, has been a success story in the US, where it has risen to become the second hottest selling brand since it was launched in 1999, observers believe the current scandal poses a serious threat to Coca-Cola's ability to make headway in the highly competitive European bottled water market.

Coca-Cola invested €10 million to establish Dasani as a leading brand in the United Kingdom, partly in the hope of displacing market leaders Nestle and Danone. The company had similarly ambitious plans for the launch in Germany and France -- both countries have highly lucrative growing markets for bottled water. The world-wide bottled water market volume is €38 billion, while the German market grew 13 percent in 2003. But following the events in Britain, the brand may now suffer from a credibility problem.

"I think what happened to Dasani jeopardized the brand's viability in the British market, putting credibility at risk on its two most important pillars -- origin and purity," Cedric Boehm, a beverage industry analyst at Morgan Stanley, told Reuters. Concerns that this credibility problem may spill over into continental Europe likely affected the decision to delay the launch.

A fiasco in Britain

The scandal broke in mid-March, when tests conducted by the British Food Standards Agency revealed that the water contained high levels of bromate. According to a statement issued by the company, the bromate was accidentally introduced during production due to a problem with the purification process. The results prompted Coca-Cola to recall more than 500,000 bottles of the recently-launched brand.

But the real public relations disaster came later. After the recall, it came to light that the water was simply treated and purified tap water from the factory, a practice which many point out is common in the bottled water industry.

Ironically, the water, which was marketed as "pure as bottled water gets" due to a "highly sophisticated purification process," became contaminated with the bromate during the advanced method it was advertising. This information did not go over well with a bottled-water-buying public, which was being asked to spend €1.43 per half liter on water that, having not gone through the purification process, costs just a few cents at the source.