Coke, Pepsi Face Troubles in India Over Pesticide Allegations
Rajesh Mahapatra
Associated Press
August 30, 2006

When it comes to managing brands, Coca Cola Co. and PepsiCo Inc. are rated among the best in the world. But three weeks after allegations erupted in India that their drinks contain pesticide residues, the companies have done little to address the issue, apparently hoping it will blow over.

The companies have taken a beating since a New Delhi-based private research group, the Center for Science and Environment, made the allegations Aug. 3.

Seven of India's 28 states have since imposed partial or complete bans on Coke, Pepsi, Sprite and other drinks from the companies. More than 10,000 schools have banned the beverages.

So far, there have been scattered, small demonstrations, but environmentalist groups are threatening larger protests to blockade the companies' 90 plants in India for five days in November. They're calling the campaign, "Coke, Pepsi, Quit India."

In response, Coca Cola India and PepsiCo India have taken out newspaper advertisements saying their products adhere to uniform, international standards, and released brief statements to the media making the same claims.

Three of Coca Cola's bottling agents have held press conferences for local reporters in the cities of Jaipur, Lucknow and Calcutta, and officials from a British laboratory that tested Coke samples -- and said they contained no unsafe pesticides -- spoke to journalists in New Delhi last week.

But the companies' executives haven't held any news conference since the allegations surfaced. They have generally kept a low profile and also haven't released sales figures since the allegations were made.

"So far we haven't seen a swift response," said Atul Phadnis, chief analyst at Media e2e, a Bombay-based company that tracks media campaigns.

For nearly three weeks, officials from Indian units of Coke and Pepsi failed to respond to telephone messages left by The Associated Press seeking additional comment.

On Saturday, however, Coca Cola officials responded saying the issue is very complex from a technical point of view and requires extensive briefing by scientific experts, and that the company has been holding meetings with major Indian media organizations to do this.

The company is also reaching out to other stake holders such as government departments, business groups and nongovernmental groups, including the Center for Science and Environment, the group that made the allegations, said Kenth Kaerhoeg, Coca Cola's Asia Pacific spokesman.

In his e-mail, Kaerhoeg said the company has also organized visits by consumer groups to some of its plants. But he won't disclose sales figures, which many believe have declined in recent weeks.

"As things stand today, it is difficult to predict the impact of the pesticide controversy on sale of soft drinks," Kaerhoeg said.

Indians -- commoners and experts alike -- have urged the companies to take a more public stance.

"It looks as if they are hiding something from us. They need to communicate more to come clean on the issue," said Anirban Sarkar, a senior manager at New Delhi's upmarket Olive Bar and Kitchen.

Phadnis, the media analyst, said the cola companies' crisis is more serious this time than three years ago, when the same group, the Center for Science and Environment, first brought allegations of pesticide contamination in Coke, Pepsi and other soft drinks. No state banned the beverages then and there were mild street protests.

Although state government officials insist that health concerns, not ideology, were guiding their decisions, business leaders warn the festering controversy could jeopardize foreign investment into India.

Some experts say it underscores how quickly foreign companies can get hurt by nationalism in a developing country like India whose economy for decades was largely closed to the outside world.

"We have had a history of taking potshots at multinational corporations," said Suhel Seth, a top Indian marketing executive who is on the board of Coca-Cola India. "It is not that we love American companies less, but we love fake nationalism more."

Although many food products in India contain harmful pesticides, the Center for Science and Environment said it focused on Coca Cola and PepsiCo because they account for nearly 80 percent of India's $2 billion soda market.

Officials from the seven states that enacted bans insist their only concern is health.

"Public health is our priority," said R. Ashok, the health minister for the southern state of Karnataka, which is suing the cola companies in court for alleged food adulteration.

Karnataka was the only one of the seven states that did its own tests before announcing a ban. None of the other states followed proper legal procedures, such as seeking explanations from the companies before banning their products.

Karnataka and five other states have prohibited the sale or consumption of the drinks in state-run state schools and hospitals as well as in government offices. One state, Kerala in the south, has completely banned the manufacture or sale of the drinks, a prohibition temporarily upheld by the state's High Court on Friday.

None of the states has reversed its decisions even after India's federal Health Minister Anbumani Ramadoss told parliament on Tuesday that the CSE's data was flawed.

Complicating matters further is the lack of national standards for many consumer products in India, which yet to institute a regulatory framework that would help address consumer, corporate and investor concerns.

The lack of standards also raises suspicions, and the CSE alleges Coke and Pepsi have pressured the government to delay regulations so that the companies can avoid stricter filtering of pesticides and other chemicals in the polluted groundwater used to make their drinks.

The companies counter that they are helping Indian government agencies come up with standards, but say the process takes time. Ramadoss has promised regulations by next year.

Media analyst Phadnis said he believes both Coca Cola and PepsiCo will realize the stakes in India are too high and adopt a more public approach to the issue.

"We have not heard the last word yet," he said.

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