<Pepsi and Coke are grappling with a consumer backlash in India following the publication of results suggesting their drinks contained dangerous levels of pesticides. While the results of independent tests are awaited, the companies not for the first time have had to go on the PR offensive. Ben Cooper reports.
It is ironic to the point of paradox that the strongest and most iconic consumer brands can at times be the most vulnerable, but when it comes to the extreme negative publicity created by such an event as a contamination scare, this is most certainly the case.
In fact, it is their iconic megabrand status which makes the likes of Coca-Cola and Pepsi so vulnerable to a consumer backlash such as has been seen in India over the last two weeks. Not that either company is short of practice at dealing with such problems. Whether it is protests against the US war in Iraq, politically motivated opposition to their activities in emerging markets, accusations or even lawsuits brought by disgruntled former employees, these companies are well aware that they are easy targets.
Not surprisingly, they have put up a determined defence – in the form of a PR offensive – in India following the publication of findings by the New Delhi-based Center for Science and Environment (CSE). The CSE stated that its tests revealed that overall pesticide residues in 12 drinks bottled by Coke and Pepsi were, on average, at least 30 times higher than acceptable limits in Europe.
Sales of both companies’ brands are thought to have been seriously affected by the controversy, one consequence of which was that the Indian Parliament stopped serving the brands. Indeed, highly vocal protests from politicians have to a degree led the backlash. Politicians from the ruling BJP Hindu nationalist party were seen publicly smashing Pepsi bottles and jumping on posters. Some reports suggested sales have fallen by a third since the publication of the CSE’s findings.
Coke and Pepsi have strongly refuted the suggestion that their products are contaminated, saying that the CSE did not have government accreditation, had used questionable methods which deviated from accepted protocols and had misinterpreted existing European guidelines.
Soon after the publication of the CSE report, Pepsi said: “Pepsi has reiterated with utmost confidence that all its products meet all international standards and deliver only safe and world-class quality to consumers. Specifically, with regard to any kind of pollutants, pesticides included, all Pepsi products meet and indeed better the most stringent testing standards.
“The suspect data that the CSE has put forth has been bench marked by them against EU norms, which are yet to be implemented even in Europe. These have then been presented as some kind of poison index with highly exaggerated claims of the damage that can be caused by such trace presence.”
Subsequently, the company was granted the right by a New Delhi court to have its products independently tested. The judge, Justice BD Ahmed, ordered fresh tests should be carried out on Pepsi products from across the country over the next three weeks. Results of the tests will be published and both Coca-Cola and Pepsi could be vindicated by the results.
Meanwhile, Sanjiv Gupta, president of Coca-Cola India was quoted as saying that the row was “a very nonscientific debate done in a completely sensational manner. The debate has to be what is safe for the Indian consumer,” Gupta said. “Are we safe for the Indian consumer? Yes. Are we following an international quality standard? Yes.”
What was perhaps most striking about the response to the controversy was that Coke and Pepsi called a joint press conference to respond to the allegations. More than simply illustrating how rivals can be united by a common enemy, this also serves to confirm just how seriously both companies view the situation.
In comparison with their global sales, India does not represent huge business for either company but the current growth being achieved and the potential for further sustained growth for many years is clearly huge. Coke said its sales in India rose by 24% last year to almost US$1 billion while Pepsi said that its soft drinks sales in the country had also grown by 20%. The total soft drinks market in India is currently worth US$2.3 billion and itself has great potential for growth.
So the matter now rests with independent tests and the courts. And it could well be that further legal action will follow if the independent tests go against the CSE findings. If exonerated, Coke and Pepsi should be able to regain any lost ground relatively quickly but the issue of their exposure to such a consumer backlash, whatever the motivation behind it, is likely to trouble the companies for longer.
It is in developing markets where the companies appear particularly vulnerable. However, Annie Cyriac, spokesperson for Pepsi’s Indian operation, believes that while Western companies are open to such attacks, it is part and parcel of moving into such markets.
Such vulnerability has dogged the two companies in India on previous occasions. Indeed, in 1977, India’s then socialist government threw Coca-Cola out of the country altogether. More recently, both companies were heavily censured for environmental damage caused by their advertising on rockfaces in the Himalayas. While this controversy was self-inflicted the response, both of consumers and political groups, once again showed how quickly the companies can fall foul of public opinion.
“There is an inherent mistrust of the West that manifests itself when this kind of situation arises,” Annie Cyriac told Just-drinks, “and people know this and take advantage of the situation. We have that kind of profile. It’s just the way it is. I don’t think it’s any different from any big powerful company. I don’t think we’ve been singled out in anyway. It is going to take a while to win back consumer confidence but I think we’ll get over this.”
Rather than believing the inherent suspicion of global companies stems from the fear that they have come to exploit rather than develop new markets, Cyriac believes the strong backlash owes more to the high standards expected of multinationals. “I think expectations are higher from global corporations and if they think that trust is breached then I guess the (consumer) reaction can be pretty strong. I think it’s a matter of time for getting across that our products are safe.”
Interestingly, it would appear that the CSE is not an organisation with a reputation for bashing multinationals. In fact, an earlier CSE report on the bottled water market had given Coca-Cola’s and Pepsi’s brands higher ratings than local products. But where the CSE does appear to have very strong feelings is regarding the lack of government regulations for ground water in India.
It has been suggested that part of the CSE’s tactics is to focus on well-known brands to highlight what it perceives as a neglected problem. If that is the case then some would say that Coca-Cola and Pepsi have merely been caught in the crossfire. However, that is certainly not the way the two multinationals see things and if the results of the independent tests put them in the clear, the CSE may well find itself under examination from Coca-Cola’s and PepsiCo’s attorneys.