Cokes Water Bomb The Dasani Fiasco

NARRATOR: Coca Cola is the most successful soft drinks company in the world. But the UK launch of its bottled water, Dasani, turned into disaster when the source of the water was revealed.

MALE SPEAKER: And those last two words, tap water, just suddenly made me think well, can it really be tap water?

NARRATOR: As calamity followed calamity and Dasani had to be pulled off shelves completely, it seems as though Coca Cola had lost their golden touch.

SIMON MOWBRAY: Week by week you were just looking at this brand and going, my god, right. What's it going to be this week?

NARRATOR: Tonight the Money Programme goes behind the Dasani disaster and with exclusive access to Coca Cola tells how the launch blew up into a marketing fiasco.

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It was late afternoon on Thursday the 18th of March. Behind closed doors at Coca Cola's headquarters in London a crisis meeting was taking place. Coca Cola's new beverages director had just learned that new water brand Dasani has been contaminated with a carcinogenic chemical.

PATRICIA MACNAMARA: Literally 1 o'clock in the afternoon I was made aware of it. And we immediately put a freeze on production and letting any other product go.

NARRATOR: Coke's management gathered together to decide the fate of the brand they'd launched only five weeks before.

PATRICIA MACNAMARA: The people who are on these instant management teams know who they are, it's well rehearsed. We all have bleepers so that when the call comes we instantly attend.

NARRATOR: The team were facing a stark choice. Struggle on with Dasani and face even more damaging publicity or withdraw it. And that would mean derailing plans for Coca Cola to break into bottled water around the globe. The next day, the president of Coca Cola appeared on national TV to announce they were pulling out.

CHARLOTTE OADES: We are simply withdrawing this as a precautionary measure. There is no, and I reiterate, there is no immediate health or safety risk at all.

NARRATOR: The withdrawal of Dasani was estimated to have cost Coca Cola tens of millions of pounds. But the damage to the company's reputation was far worse.

SIMON MOWBRAY: Dasani had turned out to be one of the biggest failures in UK marketing history.

NARRATOR: So how could the company behind the world's most successful consumer product end up with a launch slated as the worst PR disaster of all time? Atlanta, Georgia has been the home of the Coca Cola Company since the first fizzy brown cola drink was served here in 1886. Coke was created by John Pemberton, an inventor of patent medicines on the lookout for a headache cure to sell to his customers. It was a hit from the start and before long the magic formula was selling across the globe.

1 CONSTANCE HAYS: The world seemed to love Coke. It's a distinctly American invention. There was no cola before Coca Cola, which a lot of people don't realize. Other countries had ginger ale or orange drinks, but cola is a distinctly American contribution to the world of beverages.

NARRATOR: Aggressive international expansion brought Coke profits in the billions and turned them into the world's number one drinks manufacturer. Success led Coca Cola to believe that there was just no limit to the world's thirst for Coke.

CONSTANCE HAYS: They coined this fairly awful phrase called share of stomach. And they figured out that their share of stomach was two out of the twenty or so drinks that people have per day. And then they thought well, let's double that. And then we'll double it after that.

NARRATOR: Coca Cola's best known rival was Pepsi Cola. Invented just a few years after Coke, it had never been able to match their sales. But tastes were changing and while cola was still a big seller, Coca Cola and Pepsi were increasingly developing other drinks to meet demand.

KEITH PARDY: I think if you go back to the late '70s and early '80s and everybody was into fitness and jogging and running and there was obviously a need there for people to find products that had less sugar in them.

NARRATOR: Coke and Pepsi continued their battle over new brands, competing to buy in the most successful drinks. Finally Pepsi got their chance to steal a march on Coke with one of the fastest growing markets, water. By the late 1990s as interest in healthy living increased, water was booming in popularity. Aquafina was launched by Pepsi in 1997 and quickly became the number one selling bottled water in America. But while Pepsi celebrated, Coke seemed to be holding back.

FEMALE SPEAKER: It just seemed that Coke has been a little slower perhaps than Pepsi in getting into these new areas. Why has that been?

KEITH PARDY: I don't believe that we've been slow in moving into any of the areas. We are the largest beverage company in the world, both in terms of the carbonated side of the business as well as the non- carbonated side of the business.

NARRATOR: But while the health kick had been boosting water sales, it was having the opposite effect on cola. After so many years of expansion Coke faced a defining moment. The growth in sales of Coca Cola was slowing down.

CONSTANCE HAYS: I think they did reach a certain point at which the world was saturated with Coke. And I think that was a huge rude reality check for them when they finally accepted that they could not continue to grow their volume at 8% to 10% a year and their profits at 15% to 20% a year.

NARRATOR: Coke couldn't afford to sit back any longer. They launched bottled water brand Dasani in the USA in 1999. By 2001 it was Americ's second biggest brand.

KEITH PARDY: When we launched Dasani it was a runaway freight train. It did exceptionally well and we're just thrilled with the business.

NARRATOR: Rather than selling a pure mineral water, Coca Cola, like Pepsi with Aquafina before them, used tap water from the local supply as the source for Dasani.

KEITH PARDY: We get a raw material source of water and it can come from various sources because we have plants all over the country. And then we run that through a five step filtration process. And then we

2 spend a great deal of time trying to add back just the correct blend of minerals to get the taste and flavor of that water exactly on the bulls eye for what consumer is after.

NARRATOR: The great American public always knew that Dasani was purified water. And it's sales just continue to grow, up 16% in the last year alone. Although spring waters had been big sellers before it was launched, Americans didn't seem to mind where Dasani started out.

FEMALE SPEAKER: Dasani is one of those brands that I can trust. So it really doesn't bother me.

MALE SPEAKER: No it really doesn't.

MALE SPEAKER: No, it's just water.

MALE SPEAKER: No, not at all. Water's water.

NARRATOR: With America guzzling Dasani by the crate load, it seemed nothing would stop the brand repeating its success worldwide. But the picture looks very different on this side of the Atlantic. Europe is home to some of the biggest mineral water brands. And 97% of bottled water drunk is mineral or spring water. In the UK, sales of bottled water had been growing 20% year on year, rising to a value of GBP 1.2 billion by 2003. Behind this growth are people like Josie Anderson and Olivia Biggs, friends since school and now young 20-something professionals. Both women are pretty health conscious. The message that drinking water is good for you has certainly got through to them.

OLIVIA BIGGS: You read so many articles about how it's bad for you to be drinking fizzy drinks and then you read at the same time that water's so good for you. And I think you have to actually try quite hard to be healthy and drink water and eat healthy. And drinking water's quite an easy, healthy thing to do.

JOSIE ANDERSON: I am quite lucky because I actually like water. Sounds quite crazy but I do like it and I would kind of choose it as, rather than a health thing, just a drink that I like.

NARRATOR: Coca Cola saw enormous potential for Dasani in the UK. And they had another incentive, Pepsi hadn't launched Aquafina in Britain. A clause in their contract with distributor Britvic prevented them launching water brands. The job of launching Dasani and shaking up the UK water market was given to Patricia MacNamara.

PATRICIA MACNAMARA: Well the UK's actually fairly underdeveloped water market right now. And that's why we were interested in bringing a new water and bringing new innovation to a water category which has frankly, up till now, been fairly uninteresting.

NARRATOR: Patricia's aim to liven up the boring water market was about to come true in spades. In August, 2003 Coca Cola revealed to industry insiders they were bringing a new product UK. What they called the purest water you could buy. Simon Mowbray, Marketing Editor of trade magazine The Grocer, was one of the first people to hear that Dasani was on its way.

SIMON MOWBRAY: This launch was a big, big deal for Coke. They were coming very early to the trade to say hey, we're bringing this brand. It's going to be big news. You really need to know about it. And you need to buy into it.

NARRATOR: Coca Cola impressed Simon with descriptions of the filtration system developed by American space agency NASA, which they'd been using. But when he pressed them for more basic information, they seem reluctant to spell it out.

3 SIMON MOWBRAY: When we asked a little bit more about exactly where the water was going to come from they were a little bit vague about it. But you know, they said it's purified water. It would come from water sources that they would tap into. Obviously that turned out to be the right word. And this did raise alarm bells.

NARRATOR: What Simon discovered was that Dasani would be starting out as tap water from the local supply. Six months before launch, Simon was already worried about the reaction when consumers found out.

SIMON MOWBRAY: We were concerned that clearly consumers would start asking themselves well, where does this water come from? Now obviously if consumers start asking themselves that, then that's a concern for the trade because the trade has to sell the water. And the last thing anybody wants is loads and loads of stock of a new brand that consumers are not buying into.

NARRATOR: But Coca Cola were brimming with confidence about Dasani. They knew they were tearing up the rule book when it came to European bottled water, but were convinced that consumers would lap it up.

PATRICIA MACNAMARA: Well our research told us when we talked to consumers that there's actually a very low level of interest in the source of the water. Most people aren't really interested in where it comes from. But what they want is the benefits. They want to be able to have great tasting water that's consistently high quality. And in packaging that makes them feel good about themselves to be seen drinking it.

NARRATOR: Not exactly true for Olivia and Josie. They say even Dasani's claims about purity miss the point.

JOSIE ANDERSON: I don't think I think about purity. I think I think about natural. It's kind of the same way of organic food. You know, your organic apple doesn't look as nice as your manufactured apple. But if you actually think beyond the green shiny surface kind of thing, it's the organic one that's better.

OLIVIA BIGGS: Yeah. I totally agree, actually. If it's purer because it's gone through a manufactured process and they're saying the purity will make it better, I would much rather not go through the manufactured process and just have something more natural.

JOSIE ANDERSON: Exactly the same. That's why you're picking water.

NARRATOR: Coke's strategy was beginning to look very high risk. All the biggest brands in the UK pride themselves on being both pure and natural. Ian Hall's devoted 16 years of his life to the mineral water business. At the time of Dasani's launch he was general manager of Spadel UK, owner of natural mineral water brand Brecon Carreg here in Wales. His company goes to great lengths to insure their water is absolutely untouched.

MALE SPEAKER: The bore hole is 80 meters deep. It's lined with stainless steel. The water is very gently pumped up the pipe, across the protection zone to the bottling hall on the other side of the river. Now this is done so that the bottling activity itself can't possibly contaminate the source.

NARRATOR: Ian feels passionately that the natural purity of his water is the main reason for its appeal.

MALE SPEAKER: I don't think you can just apply the rules of soft drink marketing to the water product. This is not an ingredient made product. It comes from nature. Some people like to think it's made by God. But it's certainly not made in a factory and made by man.

4 NARRATOR: The mineral water companies were well aware of Coke's clout in the market. They braced themselves for Dasani's arrival. On the 10th of February this year, Dasani launched in the UK with a GBP 7 million publicity campaign. The distinctive blue bottles took pride of place in shops across the country. Dasani seemed to be heading for triumph.

MALE SPEAKER: The arrival of Dasani meant that everybody lost share, in effect. All brands were squeezed as Dasani took shelf space. And this happened to a number of the small and medium sized companies. Their products were simply dropped in order to make the space for Dasani.

NARRATOR: But in one case, the apparent result of Coke's retail muscle caused outrage, especially as it took place on a rival brand's home turf. Phil Richards has owned and run Grove Movie Centre in Buxton Derbyshire for the last 15 years. Besides renting out the latest Tarantino or Spielberg, she likes to sell drinks and snacks to her customers. Not surprisingly, Coke is a big seller.

FEMALE SPEAKER: Well originally when we decided we were going to do some drinks I approached Coca Cola and they said yes, they would be quite happy to provide a Coca Cola chiller. And we actually got the chiller in, but we were asked to sign a contract to say that we would only stock their products or products distributed from Coca Cola.

NARRATOR: Besides selling Coke, Phil has always stocked plenty of Buxton's local water. The town is famous for its mineral water spring and the water is sold around the world as Buxton mineral water. Luckily the brand was distributed by Coke so Phil was free to stock Buxton in the fridge, until Dasani came along.

FEMALE SPEAKER: One of the reps came in and said oh, we are now manufacturing this Dasani water, you are not allowed to put Buxton water in the chiller anymore. So I was a bit disgruntled about that, really. Because it is Buxton when all's said and done.

NARRATOR: News spread that Coca Cola were restricting Buxton shopkeepers from selling their local brand because of Dasani. And Phil wasn't the only one protesting.

SIMON MOWBRAY: Our phones were hot with outraged retailers saying that they thought it was disgusting that Coke was using bullyboy tactics and so on and so forth. They were very, very put out by it.

NARRATOR: Coca Cola admit Phil's existing contract does prevent her stocking Buxton in the fridge.

PATRICIA MACNAMARA: We provide a cooler completely free of charge and as part of that particular agreement, we do ask that retailers do use that cooler to display our product.

NARRATOR: Coke now say Phil could have had a different contract allowing her to stock Buxton in the chiller. Too late, says Phil.

FEMALE SPEAKER: Since all this has come about I've actually stopped selling Coca Cola. I've bought my own little fridge and we're about putting our own brands in. Coca Cola, at the moment, is out of the question.

NARRATOR: Fair or not, the showdown in Buxton had succeeded in turning people against Dasani. But that was just the start. Ian Hall had just caught first sight of Dasani's distinctive blue bottle and he felt Coke weren't playing by the rules.

MALE SPEAKER: The specific point that we were all concerned about was that on the front of the Dasani label it said pure comma still water. On the back of the label it said purified water. And then there was the indication that mineral salts has been added to the product. And we felt this was extremely confusing.

5 NARRATOR: The Food Standards Agency guidelines say the word pure should only be applied to products to which nothing's been added. Ian felt that labeling Dasani that way was misleading.

MALE SPEAKER: I think the difficulties with the use of the word pure are that people believe that the product is not manufactured and processed in quite the way that Dasani had been produced.

NARRATOR: Ian wrote to Coca Cola saying he was concerned they'd breached the labeling guidelines and he'd be alerting Trading Standards to the issue.

PATRICIA MACNAMARA: We feel that we were completely compliant with the Food Standards Agency guidelines in the use of the words we put on our packs.

FEMALE SPEAKER: How would you define pure water?

PATRICIA MACNAMARA: Well in the context that we were writing it as a marketing descriptor, it was purified water and it was really providing consumers with a very clear message that it was pure still water. And that's what Dasani was.

NARRATOR: But before Trading Standards had a chance to look into the complaint, a storm blew up around Dasani. Far worse than anything Coke was dealing with so far. Graham Hiscott is the consumer affairs correspondent at the Press Association. On the first of March he was at his desk preparing for another week in the office. By chance, he picked up a copy of Simon Mowbray's magazine.

MALE SPEAKER: It was a Monday morning and I was just looking through a copy of the gross of the trade magazine. They often do features on particular types of product. In this case, in this week, it was about bottled water. And it was a long way into the feature, buried away in fact, there was the first mention about Dasani. And it described it as a mineral enhanced, treated tap water. And those last two words, tap water, just suddenly made me think well, can it really be tap water?

NARRATOR: Graham couldn't quite believe that what he was reading was true or, even if it was, that no one knew about it.

MALE SPEAKER: What I immediately did was actually ask a colleague of mine just over the desk, what would you say if I said that Coca Cola was selling tap water in a bottle, albeit treated. And he said, that seems pretty odd to me. So then I put the phone call in to Coca Cola after that to find out more. But the instant reaction was this sounds wrong.

NARRATOR: Coke confirmed that, in fact, Graham wasn't wrong The source of Dasani was no sparkling spring, it was tap water from their factory in Sidcup.

MALE SPEAKER: It was actually hard to know what the consumer reaction would be. It's easy to say in hindsight that it was obviously going to be a scandal. But at the time we didn't know.

NARRATOR: The next day, it was splashed over every paper.

MALE SPEAKER: If it had been a busier week perhaps I wouldn't have seen those few words skipped over them, moved on to the next story and well, who knows what would happen.

NARRATOR: Coca Cola were accused of trying to rip customers off by selling tap water as if it were mineral water.

SIMON MOWBRAY: It was really, to a certain extent, a bomb just waiting to go off.

6 MALE SPEAKER: You know, as the headlines were saying, come on Gov, it's tap water.

NARRATOR: Consumers weren't impressed.

JOSIE ANDERSON: It does kind of fell like you're being a bit cheated. That it's not something almost that you could get yourself for free.

FEMALE SPEAKER: I don't see how anyone could want to drink it.

FEMALE SPEAKER: I can get that at home.

MALE SPEAKER: The repercussions were huge really for Coca Cola because Coca Cola were launching a product here which they hoped was going to take over the world or certainly have a major impact on the worldwide water market.

NARRATOR: But Coca Cola stuck to their guns.

PATRICIA MACNAMARA: Dasani isn't tap water. We go through a very sophisticated process to create the purest drinking water you can get. And frankly, yes we were disappointed by the level of negative press we got around Dasani four weeks into launch.

NARRATOR: Coca Cola mounted a PR offensive to try and explain that Dasani wasn't as bad as everyone thought. But people were too busy reading the headlines to listen. All the negative publicity was alarming the trade and putting the future of Dasani in doubt.

SIMON MOWBRAY: One supermarket we spoke to, one very big chain, said that they were giving it two weeks after the bad publicity broke to see whether it could be a sales success. And they were basically threatening to withdraw it if, after that time, it hadn't started picking up.

NARRATOR: But then it got even worse. On the second of March the Food Standards Agency said they would be investigating Dasani's labelling. The Advertising Standards Authority announced an investigation into the use of the word pure in its advertising. And to add insult to injury eminent food critic Egon Ronay rated Dasani's flavor as exceptionally dull. The worst of the 13 waters he'd tested, including the Thames water, which was Dasani's original source. It seemed impossible for Coca Cola to get a good word said about the brand.

SIMON MOWBRAY: It was just week by week you were just looking at this brand and going, my god, right, what's it going to be this week? What are we going to be writing about it this week? It was just, like I say, a comedy of errors.

NARRATOR: The final twist of the knife came just a few weeks later. Coca Cola discovered that during the process of adding minerals to the water, an impure batch of calcium chloride had reacted badly, contaminating Dasani with the carcinogenic substance bromate. The company immediately flew into emergency mode.

PATRICIA MACNAMARA: When any organization has a quality issue, there is an immediate what we call an incident management team that will come together and make decision quickly.

NARRATOR: With the team in place they made the call to put Dasani out of its misery.

PATRICIA MACNAMARA: Well clearly it was incredibly painful because we'd spent so many months building the brand. But it was never a decision that we could decide not to do it. We had a quality issue and

7 we needed to withdraw. And it was simple as that. So despite the fact that it literally is heartbreaking, we chose to take the product off the market.

NARRATOR: Yet again, Dasani hit the headlines. Now labeled not just tap water, but potentially cancer causing tap water.

MALE SPEAKER: Coca cola is recalling its entire range of half a million bottles of Dasani bottled water from the British market.

NARRATOR: It was Coca Cola UK's darkest hour. The launch they'd planned for a year and invested so much in had gone spectacularly wrong.

MALE SPEAKER: It surprised me because I thought that a company the size of Coca Cola, with the amount of money they invested in this brand would have persevered with it.

NARRATOR: Looking back now, do Coca Cola accept they got it wrong?

PATRICIA MACNAMARA: I think ultimately we had a quality problem. And therefore, we must blame ourselves. Clearly things didn't get off to a great start. The media headlines in the early weeks weren't helpful. But ultimately, we don't regret the decision to launch Dasani at all.

FEMALE SPEAKER: Do you think you got the source issue wrong?

PATRICIA MACNAMARA: No, frankly, I don't think we got the source issue wrong. I think we did extensive work, we talked to consumers, they gave us the answer. What I think is unfortunate is we didn't have a chance to demonstrate that the brand would have continued to grow to be a very successful brand in the UK.

NARRATOR: The failure of Dasani's launch here sent shock waves as far as America. It's cast a dark shadow over Coca Cola's plans to grow Dasani into a global brand.

CONSTANCE HAYS: Dasani has taken Coke's place in terms of going from an American brand to a global brand. And I think it's very important for the company to have it in as many markets as possible.

NARRATOR: And the key to that remains making Dasani a success in Europe.

SIMON MOWBRAY: Coke needs and wants a slice of that market if it's to keep its position as being the number one soft drink manufacturer in the world.

NARRATOR: But Dasani is now a tarnished name over here.

MALE SPEAKER: I think it would be hard to bring Dasani back in the UK. I think Dasani has emerged as one of the biggest marketing blunders of recent times.

JOSIE ANDERSON: You don't want to trust someone, why should you trust someone, there's other brands out there that you can trust because it's been there for years.

NARRATOR: It looks like Coca Cola are in a bind. Despite the fiasco of its launch, the headlines, the jokes, the contamination, they need a successful water brand here. Coke may yet be forced to bring Dasani back.

8 PATRICIA MACNAMARA: To innovate is risky but we have to lead and bring the innovation to the market. And the role of Dasani, I think we would put it under evaluation and I'd like to consider it a definite maybe.

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