The fortunes of any company can turn on a dime. Changes in market forces, a drop in sales, evolving trends, these can all spell doom for companies if the shifts don’t go their way. Such is the cost of doing business. Increasingly, however, a new danger has emerged for companies in Brazil’s soft drink industry. This danger has come in the form of unfair competitive practices aimed at invoking legal jeopardy, according to the founder of Dolly, Laerte Codonho. The businessman, who has been locked in struggle for years over a litany of legal headaches, has repeatedly singled out a multinational competitor as the cause. Keep reading for an overview of the intriguing case.
To understand the charges involved in this story it will first be helpful to have a brief overview of Dolly, the soft drink company founded by the businessman in 1987. Initially conceived as a regional operator, the company came to national prominence in the 1990s due to increased popularity of its products and widespread marketing recognition. As the company’s fortunes grew, so too did its share of Brazil’s soft drink market. This not only led to success for the company, but also diminished profits for competitors.
This success came from many different aspects of the company’s efforts but one move that contributed was its pioneering attitude towards introducing diet sodas in Brazil. At the time of the company’s founding, such drinks were banned due to health concerns over the artificial sweeteners they contained. In order to allay these fears, the businessman set up a laboratory to test the sweeteners for health effects and demonstrate to the government that they were safe for use. As a result of these actions, Dolly was able to bring Brazil’s first diet sodas to market shortly after its founding, which helped contribute to what would become a nationwide legacy.
According to the businessman, as Dolly’s popularity grew, more and more of its competitors became wary of the threat it posed to their sales. Sodas and other sweetened beverages are big business in the large country and any company who can capture a significant share of the market is set to also find financial success. Indeed, it’s not hard to imagine that as the Dolly brand grew, other companies in the industry began to see their balance sheets dip closer to the red than they would have liked.
This trend would continue into the late 1990s and early 2000s as Dolly continued to find popularity on a national stage. During this time it did especially well in the guarana soda market, a beverage that is popular in Brazil. Though the guarana fruit is often used internationally in its more astringent form for energy drinks, in Brazil it is enjoyed as a sweetened beverage of choice for many consumers. Again, it’s not hard to imagine the displeasure of competing brands as this popular portion of Brazil’s soft drink market was being increasingly captured by the emerging Dolly brand.
Action by competitors
In the early 2000s, in the midst of Dolly’s growth in popularity, the company’s fortunes began to take a turn. At that time, Laerte Codonho increasingly saw himself come under scrutiny by legal officials who suspected him of wrongdoing. In the businessman’s estimation, this scrutiny came about as a direct result of actions by his competitor, Coca Cola. To underscore this point, he claims to have evidence of the transgressions hidden on his cellphone which he says points the finger squarely at the international leader in soft drinks. He says part of this evidence stems from interviews given by former executives where they singled out Dolly for elimination from the market. The interviews are accompanied by videos and other documents that could go far in proving his point
One example of the legal troubles about which he speaks centers on taxes paid by the businessman. When scrutiny here seemed to turn up a case for tax evasion, the businessman pointed to the fact that he had paid the required taxes to his accountant, who had then failed to pass them along to the government. The story’s intrigue deepened when it came to light that the accountant in question may have had ties to the multinational beverage corporation that the businessman has called out for using disreputable tactics against him.
Fallout from competition
As cases related to the above claims wind their way through courts, the Dolly brand has already been struck several blows that have derailed it from its rise on the national stage. As a result of legal actions, the company has been forced to close a factory in the city of São Paulo. While this occurrence has been felt throughout the company it has, of course, hit hardest for the workers at the factory who were forced to be laid off. The ongoing legal disputes had derailed what had seemed to be a reliable job only a short time prior.
Despite the setbacks, the founder of Dolly is working to spread the word about actions by his competitors and hopes to bring to light some of the unfair practices that plague his industry. He has used marketing materials such as billboards and impromptu press materials to help tell his side of the story. He has also been called upon by numerous media outlets to sit for interviews and features that have helped to alert the public to ongoing actions in the soft drink sector. Time will tell how long the need for such actions will persist.
While ups and downs are all a part of doing business, there is a certain expectation in the general public that companies will act within the bounds of the law and ethical guidelines when engaging in competition. Unfortunately, that is not always the way things play out in the real world. Looking to the case of Laerte Codonho and Dolly soft drinks shows just one example of how legal troubles can serve to hinder a company’s success. While this case is still being played out in courts and in the public eye, it is clear that there is much to be learned here concerning how large companies seek to gain an advantage.