PepsiCo has agreed to end its practice of using labels containing lead-based ink on soft drink bottles sold in Mexico.

The US soft drinks giant has settled out of court after the bottles had begun turning up in California, breaking the state's strict labelling laws, dubbed "Proposition 65".

Under a settlement reached in Los Angeles, PepsiCo will have to pay a US$1m fine and another US$4.25m if it doesn't meet its target of phasing out the use of lead-based ink in seven years.

PepsiCo said it would eliminate 95% of lead-painted bottles in Mexico within seven years and phase them out entirely in 10 years. State legal officials in Los Angeles were said to have found that labels printed in Mexico could contain up to 45% lead, which could rub off and be easily ingested.

Pepsi will pay another US$500,000 toward keeping the leaded bottles out of California and discouraging lead exposure, and US$750,000 to cover the legal costs involved.

"This issue is about labelling, not safety," the company told just-drinks today (24 April). "The products involved are absolutely safe to drink and comply with all US and Mexican safety standards.  California has not asked that any product be recalled."

PepsiCo added that both Coca-Cola Co. and Cadbury Schweppes had also received notices to end the use of metals on bottle labels in California.

"While our differences with the state of California are unfortunate, we are the first soft drink company to resolve this matter, and we are proud to continue to provide safe, top-quality beverages to consumers in California and throughout the world."