Brief IBtegratire Oase 2.
Coca-Cola in India
Cm a-Cola is n brarrd narrre known throughout the endre
world. tt cnvers 60 percent of the $1.6 billion soft drink
market tn 2O06—2O07, Cocn-Coln faced soine difficult
ch dlenges in the region of Kerala, tndia. The company
was accused of using water that contained pesticides in
ita b o ttlmg plnnts in Kemln. An environmental group, the
Center for Science and Environment (CSE), found S7
b ottles of Coke arrd Pepsi products from 12 tndiarr stntes
that contrived unsnfe levels of pesticides.‘
The Kerda minister of health, Karnataka R. Ashok,
irrrposed n ban on the rrrnnufncture and sale of Cm a-Coln
products in the region. Cocn-Coln then arranged to h ave
ita drinks tested in n British lnb, rind the report found taint
the rim ount of pesticides found in Pepsi and Cm a-Coln
drinks wns harrrrless to the b ody. :2 Coca-Cola then run
numerous ads to regnm consurrrers’ confidence in its prcd-
ucta rind brand. H owever, these efforts did not satisfy the
environmental groups or the m master of henlth.
Ourmg the 1960a and 1970a, Indin ‘s economy faced m any
ch dlenges, growing only nn nvernge of 3—3.S percent per
year. Numerous obstacles hindered foreign cnmpnnies
frnm investing in tndia, and marry restrictions on ec o-
nomic ncdvity en used huge difficuldes for tndian finn s
and n lack of interest among foreign investors. For many
years the government hnd problems with nnplemendng
reform arrd overcoming bureaucrndc rind political divi-
sions. Business activity h as traditionally been undervdued
in tndin; leisure is typic dly giverr rrrore vdue tharr work.
Stemrrrmg from Indin ‘s colonid legacy, Indians are highly
suspicious of foreign investors. tndeed, there leave been n
few well-publicized disputes between the Indian govern-
ment and foreign investors.'
More recently, however, innny Western coinpanies are
finding an easier tirrre doing busines s in Indin.‘ In 1991,
polidcal conditions hnd changed, many restricdons were
ensed, and economic reforrrrs came into force. With m ore
tharr 1 billion consuinera, tndia laas become arr increns-
ally nttrncdve market’ From 2003—2oo6, foreign invest-
ment doubled to $6 billion. Imported goods hnve beeoine
n status sym b o1 for the burgeoning muddle clues.’
in 2008/09 PDt m tndin steed nt $ 27.31 billion.’ tn
2009, tndin was the third highest recipient of FOI and was
likely to continue to rernnm among the top five attractive
destinations for international invesmra during the followmg
two years, according to n United Nations Confererrce on
Trade and Development ( UNCTAD) report." The 2m9 sur-
vey of the I apnn Bank for International Copemtion con-
ducted among Japanese investors continued to rank tndin
us the second rrrost proNusing country for nversens business
operations, after Chr According to the Moister of Coi-
merce rind Industry, Mr. Anand Shnnna, FOI equity inflows
us n percentage of GDP hnve grown frnm 0.7S percent m
2£D5—2£D6 to nearly 2.49 percent in 2OB—2m 9.9
Indin ‘s GDP hue grown nt the impressive average
nnnual rnte of 8.5 percent during the six yenrs spanning
2£D3/04—2008/09. Even the glo bal financial crisis, which
began in September 2008, h as cut the rate of growth by
only 2—3 percentage pomta, and the ec onom y contmued
to grow nt the nnnual rate of 6 percent during the three
quarters following the crisis.‘° But the country needs more
mvestrrrent in manufacturing if it hopes to nnprove the
lives of the 350 million people living in poverty.‘'
Cocn-Coln hnd experienced previous confrontations with
the tndian government. In 1977, Coke h ad pulled out of
Indin when the government derrrnnded ita secret formula.*
Circumstances hnve dmmaticdly nnprnved over the years
for soft drink providers of India. Coke and Pepsi hnve
invested nenrly $2 billion in Indin over the years. They
employ rib out 12,5£D people directly and support 2£D,000
indirectly through their purchases of sugar, pnck- ngmg
rrrntennl, and shipping services. Coke is tndia‘s nurrrher
one consumer of mango pulp for its locnl soft drink
offerings." Cocn-Cola in tndia is nlso the largest domestic
buyer of sugnr rind green coffee beans.'^ Frnm 1994- to
2£D3, Cm a-Cola snles in India m ore than doubled.
In 2B08—2B09 Cm a-Cola announced its plans to invest
m ore tharr S250 million in India over the next three years.
The m oney would be used for everytlnng from expanding
bottling cnpncity to buying delivery trucks and refrigera-
tors for srnnll retailers. The new m oney will mean amund
n 2£t percent increase in the totnl Coca-Cola hue mves ted
in Indin.“ Cocn-Coln ‘s snles in Indin climbed 31 percent
in the three months ended March 31, 2B09, compared to
n yenr earlier. TO at’s the highest volume growth of any of
Coke’s markets.*
Roynl Crown Coln (RC Coln) is the world‘s third larg-
est brnnd of soft drys. Thebrand was purchased in 2£O£t
by Cadbury Schweppes rind entered the Indian market in
2£D3. For pmduction in tndia, the company hired three
licensing and franchising bottlers. In order to ensure that
at its bottling plnnt in the southern Indian stile of Kemln.
it was not associated with the pesticide nccusntions against
A stnte government panel snid Coc n- Coln ‘s subsidiary,
Pepsi and Coke, RC Cola nnmedintely load its groundwa-
Hindustan Coca-Cola Bevemges Pvt Ltd (HCBPL), was
ter tested by the testing institute SGS tndia Rvt Lid."
responsible for depledng groundwater and dumping toxic
wnste around its Pnlakknd plnnt between 1999 and 2B04.
Protests by farriers, complaining about the alleged pollu-
The pesticide issue began in 2002, in Plachirrrnda, Indin.
tion, forced Cocn-Coln to close down the plant in 20£t5.
Villagers th ought that water levels load such and the drink-
Cocn-Cola responded that HC BRL wns not responsible
ing water was contzuninated by Coke‘s plant. They
for pollution in Palakknd, but the finnl decision on the
launched a vigil nt the plant, and two years lnter, Coke‘s
compensation will be taken by the state government.“
license wns canceled. Cocn-Coln’s rrrost recent pesticide
issue began at a bottling plant in Mehdignnj. The plant wns
accused of exploiting the gmundwater and polluting it
PepsiCo has And an equally noticenble presence in indin; and
with toxic rrretals." Karnatnkn R. Ashok, the hedth rrrm-
it is not surprising taint the company laas wentliered the same
ister of Kemln, tndia, banned the sde of d1 Coca-Coln and
storrrrs as its rivd Coca-Col tn addition m claims of exces-
PepsiCo products, clnirrrmg that the drinks contained
sive water use, n CSE pesticide study, performed m August
unsafe levels of pesticides.
2t i6, accused Pepsi of hnvmg 30 times the ’Wofficid" pes-
The alleged contnminntion of the water launched n
ticide limit in its bevemges (Coke was clairrred to be 27 times
debate on everything from pesticide-polluted writer to the
the lirrnt in tftis study).‘ These findings, coupled with the
Indian middle-clnss’s addiction to unhedth y, processed
original 2£D3 CSE study that firat furnished the cola compa-
foods. ” tt’s wonderful," snid Sunitn Narin, director of
nies‘ unage, have pmmpted nurrremus consurrrers to smp
CSE. Pepsi and Coke are doing our work for us. Now the
their cola consumption. Some lanve even taken to the streets,
wla ole nntion knows thus there is a pesticide problem.""
burrrmg pictures of Pepsi bottles in protest.
Cocn-Coln fought back against the accusations. ”No
tndm Nooyi, C EO of PepsiCo Inc. and n native of
Indian soft drink makers hnve been tested for sirrnlar vio-
Indin, is d1 too familiar with the issues of water con-
lndons everr th ough pesdcides could be in their products
tnminntion and writer sh ortages. Yet, in light of the recent
such as milk and b ottled tens. tf pesticides are in the
clnims made ngnmst Pepsi, she laas expressed frustration
groundwater, why ion’t anyone else being tested? We are
with the exaggerated CSE findings (locnl tea rind coffee hnve
continuously being challenged b ecnuse of who we nre,"
th ousands of times the alleged pesdcide level found in
said Atu1 Singh, C BO of Cocn-Cola Indin.‘
Pepsi products ) and the dispmpord on rite reaction to Pepsi’s
Some believe that Cocn-Coln wns targeted to bring the
water-use prncdces (pointing out thnt soft drinks and b
subject of pesticides in consumer products to light ”If you
ottled writer account fur less than 0.04 percent of
tnrget rrrultinational corporations, you get m ore publicity,"
industrial writer usnge in tndia).:29
ndds Arvind Kumar, a researcher nt the watchdog gmup
tn order to renffirrrr the snfety and popularity of its
Toxic links. ”Pesticides are in everything in Indin.’“'
products, Pepsi hue taken on a celebrity-studded nd cam-
paign across tndia, us well us contmued its legacy of cor-
porate socinl responsibility (CSR). Some of Pepsi’s CSR
After CSE’s discovery of the unsnfe levels of pesticides,‘
efforts h ave involved digging village wells, harvesting"
some suggesmd the his;h levels of pesticides carrre frnm
rnmwnter, rind teaching better techniques for growing rice
sugnr, which is 10 percent of the soft drink content. However
and tomnto•s.“ Pepsi h as nlso initiated efforts to reduce
laboratories found the sugnr samples to be pesticide fa‘
writer waste at its tndian facilities.
Keraln is run b y n coinmunist government and a chief
Alth ough Pepsi sales are back on the use, Nooyi real- izes
minister wla o still clnirrrs to hnve n revolutionary
that she should have ncted sooner to counteract CSE‘s clnims
objection to the evils of capitalism." Oefenders of Cocn-C
about Pepsi products. From here on out, the coin- puny must
oln clnirrr that this is a large reason for the pesticide
be rrrore attentive to its water-use pmctices; but Nooyi nlso
findings in Cocn-Coln products. After the bun was plnced
notes, We hnve to invest, too, in educating comrrrunities in
on d1 Cocn-Coln arrd PepsiC o products in the region of
how to fnrrrr better, collect water, and then work with
Kernla, Cocn-Coln took in c ase to th e stae• court to
industry to retrofit planta arrd recyc Ie.“''
defend its produc la and name. The court said that the state
govern- ment load no jurisdiction to impose n bun on the
manu- facture and snle of produc la." Kernla then lifted the
stole- wide ban on Coke pmduc la."
Coca-Cola has recently employed The Energy and Resources
In March 2010, nfter seveml yenrs of tense battles, the
Institute (TERI) to nssess its operations in tndin. The inves-
Indian unit of Coca-Cola Coinpany wns asked to pny $47
tigations hnve been conducted because of claims that Cocn-
1D1b1Of1 1f1 CO1Tt]3 H 8 d k Ofl FOI' Cd12fl1It @ XVII'0IUDSfi hue
Cola lfas engaged in unethicd production pmctices in Indin.
 la z42 The Role of Culture

These d practices include causing severe water short-

ciency through the use of h ydrofluorocar bon-free insula-
ages, locating water-eitractmg plans in ”drought prorre“
tion for 98 percent of new refngernter sales and rrrarket-
areas, funher limiting writer access by conmminating the
mg equipment. Specific dly, in tndia, Coke h us stnted,
surrounding land and groundwater, and irresponubly dis-
”More than one-tlnrd of the totnl water that is used in
posing of toxic waste. Colleges rind universities throughout
operations is renewed and returned to gmundwnter sys-
the United States, U.iC, and C annda hnve jomed in holding
tems."°' Among its flrat writer renewal projects was
the company accountable for its overseas business pmctices
installation of 270 rainwater catching devices.°’ Later,
by harming Can-Cola products on their campuses until
Cocn-Cola expanded the number of rainwater harvesting
more poutive results are reported. However, critics hnve
projects by pampering with the Central Ground Water
argued that TERI ‘s assessment would undoubtedly be
Authority (CGWA), Stnte Ground Writer Boards ,
biased smce the organization h as be largely funded by & Co
schools, colleges, NGOS, and locnl coinmunities to
a- Coln Company“
combat water scarcity. According to Cocn-Cola tndin ‘s
Cocn-Coln stnnds behind the safety of its pmducts.
2O07—2O08 Environment Report, the company was
”Multinational corp orntions provide nn easy target,“ snys
actively engaged in 4£D rainwater harvesting projects
Amulya Ganguli, n political andyst in New Delhi. ”These
running ncross 17 states. These efforts were contributing
corpomtions are believed to be greedy, devoted solely to
to the company ‘s eventual tnrget of being n net zero“
pmfit, arrd uncaring nbout the henlth of the consumers.“
user of groundwater by the end of 2m9."
There is dso a deeply rooted distrust of big business, and
Hnving inspected its own water-use h abits, Cocn-Coln
particularly foreign big business, in tndia.‘ This is n
hue vowed to reduce the rim ount of water it uses in its
reminder that there will continue to be obstacles, us there
bottling operations. As of June 2£D7, Coca-Cola had
were in the pnst, to foreign investments in tndia.
reduced the arrrount of writer needed to make one liter of
In order to renffirrrr their presence in tndia, Coke and
Coke to 2.54 liters (coinpared with 3.14 liters five years
Pepsi leave run separate ads insisting that their drinks are
earlier).° 9
snfe. Coke’s nd said, ts there anything snfer for you to
At the June 2£D7 annunl meetmg of the World wildlife
drink?” and invited Indians to visit ita plnnts to see how
Fund (WWF) in Bajing, Cocn-Coln announced ita rrrulti-
the beverage is innde." Nevenheless, in July 2£106, Coke
year parnlership with the organization ”to conserve and
reported a 12 percent decline in snles.”
pmmt freshwater resources." E. Neville Isdell, chairman
Cocn-Cola hue undertaken various initiatives to
rind CEO of the Coca-Coln Company, snid, ”Our goal is to
irrrprove the drinking water conditions around the wor1‹-L
replace every drop of water we use m our bevemges and
tt h us form dly pledged support for the United Nations
their production. For us thnt means reducing the are ount of
G1obn1 Corrrpnct and co-founded the Global Water Chal-
water used to produce our beverages, recyling water used
lenge, which irrrprnves water access and sanitation in
for rrrnnufacturing priessee so it can he returned snfely to
countries in critic d need. It is impmving energy effi-
the errvironmen5 and replenishmg water m communities

TaT›le 1 A TTmoTTno of Coma-Cola Tn Moral, indd

1977: Coca-Cola pulls out of India when the government demands its secret formula.
1991: Restricfiona are eased in India for easier international business development
1999: A re port i s published by the All -I n di an Coordinated Resea rch Pro g ram stafi ng that 2096 o f all I n dian
foo d comm odifi e a exceed the maxi mu m pe sti cide resi due I evel an d 43+J of mi I k exce e de the m axi
mu m resi- due I ovel a of DDI
2002: \fi II a gers i n PI a chi m a da, I ndia, ma ke the a ecus ation th at Coke'a bottling pl ant is contami natin g
th ei r d rin ki n g water.
2003: The Center for Science and Environment produces a study that finds unsafe level a of pesticides in
Coca-Cola products in India.
J an u ary
20.04: M a red A C oca-C ol a bottli ng facility is sh ut d own i n PI a chi m a da, I ndia.
2004: 2004: I n di an g overnme nt an nounce a new re gul ation s fa r ca rbon ated soft d rin ks based o n Euro pean
Unio n stan d ard s.
2005: C oca-Col a co-foun ds the Global Water C halle n g e, develops th e Global Community-Waterah ed
Pa rtner- shi p, an d eatab lish e s the Ethi ca and Compliance Committee.
AugumZ006: Th e CSE produ ces an other repo rt find in g 57 Coke and Ps pai p roducts from 1.2 I n dian statea th at co nta in
un safe p e sti cide I ovel s.
Geptem ber I n di a’s hig h court overturns the ban o n th e aale of Co ke p roducts in Kerala.
20.06: Indian unit of Coca-Cola Co asked by atate government to pay $47 million compensation for causing
M a red 2010: environmental damage at its boiling plant in Kerala.
 Figure 1
cv-c ia's vaster use:

ffiaurce: The C oca-Col a Company, TO 05 Environs antal Pep ojt, www.thecocacoI a company
com/ citize nshi p/envi ro nme ntal repo rt2005. pd f.

rind nature through locally relevant projects.“ Coca-Coln impmving standards through the globd water challenge and
hopes to sprend these practices to other members of its enhancing globd packagmg to rrrake it more
environmentally supply chain, particularly the sugar crime industry. The friendly. It is also working
orr promoting nunitiorr and phys- Cha-Coln—WWF partnership is also focused on climate icd education by
launching programs throughout die workf protection rind protection of seven of the world‘s ”m ost F-or
example, m January 2009, Can-Coln fndin announced cndcnl freshwater basins," including the Yangtze in Chinn.
a partnership with the Bharat Integrated Said Welfare
Although Cocn-Coln‘s corporate social responsibility Agency (BtSWA) to build awareness regarding rrncro-
efforts hnve mcluded other projects with the WWF in the nutrient rrrdnutrition (or ”Flidderr Hunger") in & ”botmm
past, it hcpss taint this official partnership will help achieve of the smio-econnmic pyrarrnd" population in tndia. The
two larger-scde results.“ Figures 1 rind 2 show Cocn-Cola‘s parsers will work together to establish a
successhil income- declining water use on n per-plant and systerrrwide bnsis. genemtiorr rrrcdel for
committee tbmugh Self-Help Groups Cha-Coln has dso established EtbicsLme, which is n in Sainbnlpur in Orissa and
nlso provide tlierrr with afford- globnl Web and telephone information rind reportmg service able nlternntives
to dlevinte ”Hidden Hunger.“ The first prcd- thnt allows anyone to report confiderrtid information to n uct
devek pad by Cha-Coln tndia to address the issue of third pnrty. Service is ml1 free-24 hours a dny—and ean>
”hidden hunger“ is Vitingo, n tnsty, affordable and refreshing
lators are nvailabk Can-Coln is currently focusing err omnge-flavored bevemge fortified with micm-nunients.

ffiaurce: The C oca-Col a Company, TO 05 Environs antal Pep ojt, www.thecocacoI a company
com/ citize nshi p/envi ro nme ntal repo rt2005. pd f.
ezs la z42 The Role of Culture

During the past decnde, the Coca-Cola Cnmpnny h as many lnrge writer corpomtions h ave decreased their mvest-
mves ted more than USS 1 billion in tndia, m aking it one ments in developing countries because of high polidcal of
tndia’s top internntionnl investors. Almost nll the goods rind financial risks. Even nations that hnve hnd abundant
and services required to produce and market Cm a-Coln writer supplies are experiencing s igrnficant reductions.
are innde in tndia. The Cm a-Cola Cnmpnny directly These reductions nre believed to be caused b y two factors:
employs nppmxiinntely 5,5£t£t local people in Indin: and the decline in rainfdl and increased evaporation of writer
indirectly, its business in tndia creates employrrrent for due to globnl wnrrrrmg and the loss of wetlands. Water is
more tlinn 150,000 people.“ Hindustan Cm a-Coln Bever- sometlnng that affects every person ench and every dny.
nges Pvt Ltd operates 22 bottling plnnts, snme of which The executive director of the Stmkholrrr Writer Insdtute,
are located in ec onomicnlly underdeveloped areas of the Anders Berntell, noted taint water affects the nreas of agri-
country. The Cocn-Coln system also includes 23 franchise culture, energy, trnnsportntion, forestry, trnde, financing,
operated plants, and has one facility that m anufactures rind socinl rind politic d security. The Food rind Agricul-
concentrates or beverage buses.“ ture Organization pomta out, ”Agriculture is the world‘s
largest writer consumer. Any writer crisis will therefore
nlso crente n focd crisis."

Yet Coca-Cola wns cnught off guard by its experience in
tndia. Coke did not fully npprecinte how quickly locnl
polidcinns would nttack Coke in ligh t of the test results,
nor did it respond quickly enough to the anxieties of lfis
consumers. The coinpany fniled to realize how fast news
travels in modern Indin. Indin represents only nbout 1 per-
cent of Cm a-Co1n’s globnl volurrre, but it is central to the
company ‘s long-terrrr growth strategy. The company
needed to tnke action fast.“
Irr whnt Coke thought to be a respec dul rind n mediate
time frnme, it forrrred committees in fndin and the United
Statea. The corrtmittees worked on rebuttds rind hnd iliar
own lube commission the tests, and then they comrrrented
m detail Code nlso direcmd repormrs to Internet blogs full
of enniea taint were pm-Coke. Critics sny that Coke fmused
too much on the charges instead of winning back the sup-
port of ita customers. "Here people interpret silence as
guilt," said Mr. Seth, Coke‘s Indian public relndons expern
Ms. Bjorhus, the Coke coinmunicndons director, said she
could now see how the envimnmentil group hnd picked
Cocn-Coln us a way of attrncdng attention to the broader
problem of pesdcide contzunination in Indinn food
products. Cm a-Coln stnnds behind ita pmducts as being
pesticide fa It is now up to the tndian consumer
to decide the success of Cm a-Coln in future years.
Nevertheless, Cm a-Cola lfas been optimistic nbout 1
future in Indin. WU ile tndia was still among the ."
There have been attempts to nnprove the water condi-
tions around the world. The United Nndons recently
released the World Hirer Drvrl opmrrit Report. This report
iled b y 24 UN agencies and claim ed that, in
nctudity, only 1.2 percent of the funds targeted for writer
rind summation irrrproverrrent reached th ose most in need.
The United Nations stated thnt more than 1.1 billion peo-
ple sd11 lack access to improved water resources. Nenrly
two-thirds of the 1.1 billion live in Asin." tn Chinn,
nearly a quarter of the population is unable to access clean
drinking water. Over half of China‘s innjor waterways are
nlso polluted. The Insdtute of Public and Environmental
Affairs reported thnt 34 foreign-owned or joint-venture
companies, including Pepsi, h ave cnused writer pollution
problerrrs in China. Mn Jun, the msdtute’s founder, snid,
We’re not talking about very high standards. These
companies nre known for their coinmitment to the
environment.‘“"
According to the 2009 UN World Water Oevelopment
Report, the world‘s population is growing by nbout 80
million people n year, nnplymg increased freshwater
demand of ah out 64 billion cubic meters n ye n An esti-
mated 90 percent of the 3 billion people wla o nre expec ted
to be added to the populndon by 2050 will be in develop-
ing countries, marry in regions where the current popula-
tion do•s not hnve sustainable access to s rife drinking
writer or adequate sarntation. The world will hnve substnn-

with the lowest per cnpita consumpdon of Coke, in 2009 tidly m ore people in vulnerable urban and coastal arens
it was the second fastest growing region in terms of Coca- in the next 20 years.“
Cola unit cnse volume growth.^ Cocn-Cola rec ordcd a 3 With businesses expanding globally every dny, writer
percent growth in snles in 2009 and most of it came from is n crucial resource, and water issues will increasingly
tndia and Chmn, even as the company faced hnrd ec o- nffect n11 industries. With writer condidons nnproving at
nomic times elsewhere in the world.“ n slower rate than business development, businesses will
hnve to take on the responsibility of not only finding arr
adequate supply of the dirrnnishing resource but nlso inak-
‘^ ‘"‘‘' "^"""'"" mg sure the water is snfe for n11 to consume. This
respon- tn 20£t7, one out of every five people globally lacked sibility is going
to be nn additional cost to cnmpnnies, but nccess to clean drinking water.^ tn August 2B06, nn inter- n necessary one that
will prevent loss of sdes in the nationd conference wns held in Stockholrrr, Sweden, to futi '• Cm a-Cola’s specific
situation in tndia is a reminder discuss globnl water issues. A UN study reported taint for d1 globnl corporndons.

mny hnve been cnuses of C me’s difficulties in

India?
. H ow rrnght Cm a-Coln leave responded
Questioiis for Review
differently when this situndon first mcurred,
especially in
9Z7

How migh t comparnes like Cm a-Coln and PepsiCo

term s of responding to negative percepdons among
Indians of Coke and other MNCS ?
for
demonstrate their coinmitment to working with dif-
ferent countries and respec dng the cultural rind nat-
ural envimnments of those societies?
s<m : cis cese was prepared by laclyn Johns of Villanm a Uniw-
airy under the superv aton of Professor lonnthan Doh as the bads