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SPEAKING
FREELY
Coca-Cola going flat in
India
By Elizabeth Mills
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their say.
Please click here if you are
interested in contributing.
US drink
manufacturer Coca-Cola is facing renewed problems in
India after Kerala's state government recently imposed a
temporary ban on water extraction at its Plachimada
bottling plant. The ban, which lasts until June 15,
follows a recent parliamentary inquiry that found that
soft drinks manufactured by Coca-Cola and Pepsi
contained pesticide residues. These are the latest in a
string of problems that Coca-Cola has faced and signals
continued difficulties for the company, despite its move
last December to create an advisory board tasked with
navigating its affairs through the complex local
political landscape.
Coca-Cola has chalked up a
turbulent history in India, only choosing to return to
the country in 1993 after a somewhat unceremonious exit
in 1977. That said, 2003 was a particularly difficult
year for the Indian arm of Coca-Cola, with 2004 shaping
up to be similarly onerous. Coca-Cola faced negative
press over issues as diverse as contamination;
anti-Iraq-war protests; alleged environmental
degradation; and, as 2003 came to a close, an alleged
sexual-harassment case involving a senior company
executive and a former Miss Universe with whom the
company had previously had a product-endorsement
contract.
The Plachimada issue has now returned
to haunt the company and follows a barrage of bad press
over the bottling plant. The ban has come in response to
acute water shortages the district is facing, but is
part of a much wider debate over water exploitation. In
December, a High Court ruling saw the Indian arm of US
drinks manufacturer Coca-Cola, Hindustan Coca-Cola
Beverages Ltd, ordered to stop extracting groundwater at
its southern Indian production facility in Plachimada,
Kerala. Unsurprisingly, the company appealed the
decision. The ruling also failed to satisfy local groups
who have been campaigning for years for the closure of
the bottling plant, demanding compensation for the
environmental damage that they argue it has caused. The
Plachimada bottling factory opened in 1999, since when
locals have complained that water resources have fallen
dramatically - impacting adversely on farming yields -
and that the remaining supplies have been contaminated,
rendering them unfit for human usage.
Contamination issues of a similar kind also
continue to dog the company. The recent parliamentary
inquiry came in response to findings that the Center for
Science and Environment (CSE), a Delhi-based
non-governmental organization (NGO), released last July.
In a report on 12 leading soft-drink brands, the NGO
argued that that all contained higher levels of toxins
than would be permitted under European Union
regulations. In a move calculated to capture public
attention, the CSE argued that repeat exposure to the
likes of pesticide residues could result in cancer and
the immune system's failure. Coke and Pepsi account for
more than 80 percent of the market and own all 12 drink
brands. As such, the two companies were the focus of the
resultant public protests. The Indian government
attempted to quash the issue in August, releasing a
report suggesting that any pesticide residues found in
the drinks were within given guidelines. This failed to
satisfy the opposition, which called for a more thorough
report, the findings of which were published in early
February and have subsequently renewed the debate.
Complex issues surround multinationals operating
in a country such as India. In light of this, Coca-Cola
has evidently contemplated a phoenix-styled resurrection
of its reputation and product sales with the creation of
an advisory board. The board, formed in December,
comprises some of the country's leading professionals in
the fields of economics, law and industry, operating
under the chairmanship of former cabinet secretary
Naresh Chandra. The group held its first meeting on
December 16 and is expected to convene three to four
times a year, both to review the company's performance
in India and guide it on a range of issues, including
policy formulation, operational and environmental
matters, corporate citizenship, social responsibility
and corporate governance. The first meeting arrived at
the decision to form an Indian environmental council,
which will be headed by former chief justice B N Kirpal.
It is worth noting that some of the problems
Coca-Cola has faced and continues to be troubled by form
part of a wider debate, for which the drink giant cannot
alone be held accountable. Environment and health issues
feature highly in the Indian psyche, particularly with
the continued publicity regarding the Bhopal disaster in
1984, caused when 27 tons of poison gases escaped from a
Union Carbide pesticide factory, killing thousands
within hours and injuring more than 500,000 other
people. As such, a significant challenge that foreign
companies face is the simple fact that many of the
groups who campaign over environmental issues and the
like have powerful political ties. Their opposition is
based not just on environmental and health concerns, but
often also on nationalistic sentiment - targeting these
huge multinationals for what is often regarded as their
adverse impact on the local culture. Furthermore, any
health scare, particularly one related to contamination,
vividly captures the public imagination, often to the
multinational's disadvantage.
A factor that has
emerged from the toxin debate is the need for government
to address lacking standards governing the quality of
water that is used for soft drinks. Coca-Cola and Pepsi
claim that they are operating to local standards, but -
as CSE illustrated - these may not meet those set by the
EU. As such, it is not just large multinationals that
need to pay more attention to issues such as social
responsibility, but also the government.
In
light of these issues, Coca-Cola's decision to create an
advisory board was an interesting move. From a cynic's
standpoint, it could be argued that the company's
decision to create an advisory council and then populate
it with high-profile figures immediately affords it some
protection from criticism, and gives it easy access to
the country's decision-makers - a useful asset in the
face of social or legal action. Furthermore, it provides
Coca-Cola with the opportunity to create a more easily
identifiable Indian brand, not unlike Hindustan Lever,
and as such reduce the propensity for its market to
regard it as "foreign". Less cynically, the creation of
an advisory council is something of a precedent. This is
the first such move by a multinational operating in
India, and may demonstrate a realization that foreign
multinationals need to be more attentive to local
concerns and show greater awareness of social
responsibility if they are ultimately to succeed in the
local marketplace.
Elizabeth Mills
(elizabeth.mills@wmrc.com)
is a research analyst (Asia) with World Markets
Research Center, London.
(Copyright
Elizabeth Mills)
Speaking Freely is an
Asia Times Online feature that allows guest writers to
have their say. Please click here if you are
interested in contributing.
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