COCA-COLA SHAKEN UP; ANALYSTS BELIEVE AMERICAN ICON WILL BOUNCE BACK.

Byline: Dan Sewell Associated Press 

Coca-Cola Co. may have had worse years. But not many.

Bad news has poured out of the Atlanta-based American business icon almost continuously since last July:

The economic crisis in Asia punctured the company's sales and earnings expectations.

Deals to buy the French soft drink Orangina and overseas rights to the Cadbury Schweppes brands bogged down after regulatory challenges.

Four current or past employees sued Coke, charging racial discrimination.

In a public relations nightmare striking at the company's very essence, Belgian schoolchildren became sick June 8 after drinking Coke, triggering a health scare throughout Europe. Authorities linked 249 cases of illness to contaminated Coke products before a 16-day ban on sales was lifted in three European countries.

To make matters worse, the company was, by its own admission, slow in responding to concerns about the safety of its products.

And on Tuesday, Coke announced it was removing glass bottles of its Bonaqua mineral water from stores in Poland after mold was found in one bottle. On Wednesday, it expanded the recall in Poland to include other Coke products.

The litany of bad news has taken a toll on profits, sales and Coke's stock price - down more than 30 percent from an all-time high of nearly $89 a share in July 1998. The company said Wednesday worldwide sales volume will fall 1 percent to 2 percent for the second quarter, with earnings also expected to be affected.

The long-term cost to Coke's image and to Chairman and Chief Executive Officer M. Douglas Ivester remains to be seen. But so far, securities analysts who follow the company and a prominent member of Coke's board are supportive and optimistic.

``They have had a rough patch here,'' said Martin Romm, a Credit Suisse First Boston analyst who's followed Coke for more than two decades. ``I think Coke has really acted as an extremely focused company intent on doing the things that in the long term are in the best interests of their business.''

``They've been remarkably stable in an otherwise unstable environment,'' said Romm, among many analysts who still give Coke a good long-term outlook.

James B. Williams, retired chairman and CEO of SunTrust Banks, said of Ivester last week, ``We think Doug is the right man at the right time in the right place.'' SunTrust holds 6 percent of Coke's shares.

Coke acknowledges that the last 18 months have been challenging. But, company spokesman Rob Baskin said, ``I don't know that it's been more challenging than other times in the past.''

He noted that the 113-year-old company has been through the Great Depression, recessions in the United States and abroad and world wars. ``It's a matter of taking the long view and weathering the storms,'' Baskin said.

On Wednesday, Ivester said Coke believes ``the worst is behind us.''

``We remain extremely confident in the fundamental strengths of our business systems throughout the world,'' Ivester said. He succeeded Roberto Goizueta, Coke's CEO for 16 highly successful years, in October 1997 following Goizueta's death from lung cancer.

Still, there are some questions about Ivester's future. ``While nobody is blaming Ivester for any of these circumstances, CEO's have been eased into premature retirement for less,'' an Atlanta Journal-Constitution story commented Sunday.

And after the slow response to the European contamination crisis, Ivester seems likely to face increased scrutiny in the months ahead.

Because of the company's strong civic reputation, most in the Atlanta area have had a wait-and-see response to the discrimination suit filed in April charging that Coke pays African-American employees less and gives them fewer opportunities. But subsequent disclosures that African-American executives at Coke gave Ivester, at his request, recommendations for increasing diversity in December 1995 and that the plaintiffs had made formal complaints to Coke before filing the suit raised some concerns.

But analysts expect aggressive marketing to mitigate long-term damage from Coke's crises.

And John Sicher, publisher and editor of Beverage Digest, said that in spite of everything that's happened, Coke remains a solid No. 1 in the soft-drink industry.

``If you're talking about the power of the brand and long-term growth and stability of the brand, there won't be any impact,'' Sicher said.

CAPTION(S):

Photo, Chart

PHOTO no caption (Classic Coke can)

CHART: Fizzling Out

Coca-Cola has had to grapple with a litany of bad news over the past year that has taken a toll on its stock price. Here is a look at Coke stock since the beginning of 1998.

June 30, 1999: $62.00

Source: Quote.com