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COCA COLA PR STRATEGY FOR PESTICIDE ISSUE

Coca cola in India After a 16-years absence, Coca-Cola returned to India in 1993. The Company's presence in India was cemented in November that year in a deal that gave Coca-Cola ownership of the nation's top soft-drink brands and bottling network. Coca-Cola India has made significant investments to build and continually improve its business in India, including new production facilities, wastewater treatment plants, and distribution systems and marketing equipment.

During the past decade, the Coca-Cola system has invested more than US$ 1 billion in India. Coca-Cola is one of the country's top international investors. In 2003, Coca-Cola India pledged to invest a further US$100 million in its operations. Coca-Cola business system directly employs approximately 6,000 local people in India.

In India, they indirectly create employment for more than 125,000 people in related industries through our vast procurement, supply and distribution system. Virtually all the goods and services required to produce and market Coca-Cola locally are made in India.

The Coca-Cola system in India comprises 27 wholly-owned company-owned bottling operations and another 17 franchisee-owned bottling operations. A network of 29 contract-packers also manufactures a range of products for the Company.

Controversy It all began when Sunita Narain, director of the Center for Science and Environment (CSE), called a press conference in New Delhi and declared that twelve major cold drink brands manufactured by Coca-Cola and Pepsi and sold in and around Delhi contain a deadly cocktail of pesticide residues. These pesticides include potent chemicals which can cause cancers, damage the nervous and reproductive systems and reduce bone mineral density

The short press conference would soon put the two cola bottlers in the spotlight, lead to an outcry from the floor of the Indian parliament and ignite protests all across the country. The cola bottlers are being inexorably drawn into a nation-wide controversy that shows no sign of

abating. Assembly elections are to be held in three important states, with general elections six months away. Multinational-bashing, a favorite political pastime, appears inevitable.

Indeed, the Bharatiya Janata Yuva Morcha (BJYM), the ruling BJP's youth wing, said on Wednesday that it would seek to teach the two bottlers a lesson, threatening to launch a batlitodo [bottle breaking] agitation all over the country if the government did not withdraw supplies of Coca-Cola and Pepsi.

The non-government organization's findings were immediately denounced by Sanjiv Gupta, president and CEO of Coca-Cola India and Rajiv Bakshi, chairman of Pepsi India, who said that the CSE report was "baseless" and that they were open to the idea of testing by an internationally-accredited independent laboratory. They said, "Our products are tested by topgrade laboratories like the Wimta laboratory in Hyderabad [south India] and the T&O laboratory in the Netherlands. They are of world class and the same as what we sell in Europe and the US,"

Nonetheless, the charges are not that easy to dismiss. Both Coke and Pepsi have been hit with other charges of environmental degradation over the past few months. And CSE, perhaps India's most reputable NGO, declared that its tests had been conducted at its pollution monitoring laboratory and had discovered residues of four extremely toxic pesticides and insecticides - lndane, DDT, malathion and chlorpyrifos - in Pepsi, Mountain Dew, Diet Pepsi, Mirinda Orange, Mirinda Lemon, Blue Pepsi, 7-Up, Coca-Cola, Fanta, Limca, Sprite and Thums Up. The samples had been purchased from different parts of the capital city between the months of April and August, she said.

In all the samples, the levels of pesticide residues far exceeded the maximum residue limit for pesticides in water used as "food", set down by the European Economic Commission (EEC). The Coca-Cola brands contained levels 30 times higher. "Our findings cannot be ignored," said Narain. "The demand for these soft drinks is on the rise. On an average, an Indian consumes six bottles and every Delhite 50 bottles in a year."

As in many other parts of the world, controversy is nothing new to the Indian operations of Coca-Cola and Pepsi. Had it been any other organization leveling the charges, they could have dismissed it as yet another case of MNC-bashing. But CSE was founded two decades

ago by the late Anil Agarwal, a crusading environmentalist. Its chairman is Dr M S Swaminathan, one of India's foremost agricultural scientists and winner of international accolades like the Ramon Magsaysay Award, the World Food Prize and the Tyler Environment Award.

Narain's press conference was beamed live on all major TV channels and carried on the front page of afternoon papers. Alarmed at the potential damage all the bad publicity could bring to their Indian businesses, the two MNCs decided to fight back by giving their own versions. The arch rivals also did something unique burying their differences, the executives of the two companies thus called a joint press conference.

That did little to stem the tide of protest. Reacting to the CSE report, the government dropped the sodas from parliament's canteen. The ban was announced by E Ahmed, chairman of the committee on food management, while participating in an impromptu debate in the Lok Sabha (the lower house of parliament) on the CSE's findings. Simultaneously, the government announced that it would work on revised quality norms for carbonated beverages. One of the proposals being mooted: only bottled water be used to manufacture soft drinks.

The contaminated soft drinks controversy could not have come at a worse time for the two majors. The Indian public which revels at the sight of MNCs squirming has still not forgotten the two being hauled up the Supreme Court for causing environmental damage to the Rohtang Pass area in the Upper Himalayas by painting their advertisements on rocks. The court imposed a penalty of Rs 200,000 (US$4,300) each on Coca-Cola.

Coca-Cola, in particular, has been receiving a lot of bad press. Its celebrity icon, actor Salman Khan, is now facing trial after being involved in a hit and run case, accused of killing a Mumbai citizen with his Toyota SUV six months ago. More recently, the Greenpeace Environment Trust, the Indian arm of the international NGO, urged the Kerala State Pollution Control Board (KSPCB) to serve a closure notice on Coca-Cola India's bottling plant at Plachimada in Palakkad district in the south Indian state of Kerala. The accusation: the sludge produced at the facility and supplied to farmers as fertilizer contained dangerous levels of cadmium and lead.

The Coca-Cola senior management is refusing to be drawn into reacting to the KSPCB verdict, saying it has still not read the judgment in full. But it is more than willing to speak out against Narain and the CSE findings. "All this talk of pesticides in our soft drinks is humbug. My children drink the same products at home," says Gupta. "There seems to be a hidden agenda among all this backlash," adds Bakshi, without elaborating. Both the MNC chiefs added they were contemplating legal action against the CSE.

Coke sales after controversy Coca-Cola said sales in India declined 11 per cent due to "false" allegations that its soft drinks contained a high level of pesticides. This is the first time that the world's largest soft drink company has declared the extent of losses incurred by it due to the allegations by the Delhi-based Centre for Science and Environment, which said the top 12 soft drink brands of PepsiCo and Coca-Cola contained pesticides and insecticides in excess of the limits set by the European Economic Commission.

Coca-Cola said: "The unit case volume in India declined 11 per cent. This is because the beverage industry was impacted by false accusations that soft drinks contained high levels of pesticides." It added that the decline followed several consecutive quarters of strong volume growth.

The company added that following the accusation the company took proactive steps to reassure the government and consumers about the safety of its products. How Coke used PR to maintain brand image The Centre for Science and Environment has reported pesticides in soft drinks for the second time in three years and states like Karnataka and Kerala have banned cola drinks in educational institutions and government offices.

Kerala has even called for a ban on soft drink output. The Centre for Science and Environment has opened an old issue, with the same old allegations it made three years ago. It says that Coke and Pepsi contain 24 times more than the permissible amounts of pesticide in them.

This time the Indian Soft Drink Manufacturers Association, ISDMA, is the mouthpiece for

Coke and Pepsi and it responded to the Kerala ban saying, "Our products manufactured in India are absolutely safe and meet every safety standard set by food, health and regulatory bodies in India and all over the world."

Almost a week after the ban, Coke ran advertisements to educate consumers on these issues. Coke has even asked customers to contact them, while Pepsi claims that soft drinks are safer than many essential food items like eggs, rice and even apples.

Industry watchers expect the companies to use this as the plank to their counter attack. In addition to assuring their trade partners, both players are looking for third party endorsements as well and doctors might be roped in. And last time's experience has also taught them that public and media memory is short, so it pays to keep quiet.

Consultant, MarketGate, Sharda Agarwal said, "The first time they were caught off guard, this time I guess, they were expecting it due to the third anniversary of the controversy. I think, companies should instead wait and watch and then take the issue head on."