The Coca-Cola Company: Allegations of Pesticides in

Soft Drinks in India

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Author: Michael Erdman, Sean Kelly, Eddie Lerum, James S. O’Rourke

Pub. Date: 2017
Product: Sage Business Cases
DOI: https://doi.org/10.4135/9781526405951
Keywords: Coca-Cola, pesticide, India, pesticide residues, beverages, bottled water, Center for Science and
Environment
Disciplines: Business & Management, Business Ethics & Corporate Social Responsibility, International
Business & Management, Strategic Management, Corporate Social Responsibility, Managing Across
Cultures, International Strategic Management
Access Date: November 21, 2023
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© 2006. The Eugene D. Fanning Center for Business Communication,

Publishing Company: The Eugene D. Fanning Center for Business Communication, Mendoza College of
Business, University of Notre Dame
City: London
Online ISBN: 9781526405951

© 2017 The Eugene D. Fanning Center for Business Communication, Mendoza College of Business,
University of Notre Dame All Rights Reserved.

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Abstract

This paper highlights the history of the development of the carbonated beverage industry in India by
the Coca-Cola Corporation and recent allegations made by the non-governmental organization, Cen-
ter for Science and Environment, of pesticides found in Coca-Cola’s soft drinks. The purpose of this
paper is to encourage discussion on how the key players in this event used communication and the
media to further their interests on the local and international levels and what Coca-Cola should do to
elevate the situation now and in the future.

Case

For the second time in three years, allegations of the presence of pesticides within cans of Coca-Cola have
devastated soda sales in India. While these allegations are leveled on the cola industry as a whole, Coca-
Cola has the most to lose. Leading retailers, restaurants, and college campuses have stopped sale of Coca-
Cola products all together. Temporary bans on the sale of colas were even enacted in the New Deli region
and the state of Kerala. This crisis comes on the heels of massive growth within the India market that has
made Coca-Cola the market leader in sales of syrups and bottled beverages.

These new allegations carry the added weight of coming from the reputable NGO, the Center for Science and

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Environment (CSE). CSE stated that they found the presence of pesticides in bottled water and drinks man-
ufactured in New Delhi and Mumbai. The substances lindane, DDT, Malathion and chlorpyrifos, all pesticides
that have been proven to cause cancer and breakdown the immune system, were all found in Coca-Cola’s
beverages. While Coca-Cola denies any wrongdoing and claims to test their products on a regular basis,
sales have suffered. This problem, among others Coca-Cola is experiencing in India, is a potential threat to

what is universally recognized as the number one 1 brand in the world.

Coca-Cola’s History

John Pemberton in Atlanta, Georgia, first created the recipe for Coca-Cola in 1886. Coca-Cola was first sold
as syrup to be mixed with soda water as a cure-all for physical and mental disorders. In time, ownership of the
Coca-Cola recipe came under the control of Asa Candler. Mr. Candler added carbonation and Coca-Cola’s

trademarked bottle. By 1895 2 , Coca-Cola was being sold in every state and territory in the United States. To
increase the speed at which the company could grow, Coca-Cola began franchising their bottling operations,
rapidly increasing capacities. Since the adoption of this model, the Coca-Cola Corporation itself produces
mostly syrups and leaves the actual bottling and distribution to its franchise bottling operations.

It was during World War II that Coca-Cola became a true world powerhouse. Coca-Cola’s CEO at the time,
Robert Woodruff, insisted that Coca-Cola should be available to troops during the war. Woodruff was able to
get Coca-Cola labeled as a military supplier, so that it was exempt from sugar rationing. To supply troops at
the front lines, Woodruff had Coca-Cola factories built in Europe during the war. Woodruff is quoted as saying,
“that every man in uniform gets a bottle of Coca-Cola for five cents, wherever he is and at whatever cost to

our company. 3 ”

Corporate Communications at Coca-Cola

Corporate communications was an important business function for Coca-Cola, given their marketing strategy
of creating a global brand. With the complexity of their operations in multiple parts of the world, a central com-
munications structure was simply not feasible for the company.

Due to the geographic diversity required in Coca-Cola’s worldwide communications, regionally based corpo-

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rate communications were required in addition to worldwide corporate resources. As a result, six regional
teams were introduced: Africa; East, South Asia and Pacific Rim; North Asia, Eurasia and Middle East; Eu-
ropean Union; Latin America; and North America. Each region had a corporate communications director and
professional team.

These six directors reported to Thomas Mattia, the director of worldwide Public Affairs and Communications
and senior vice president of the Coca-Cola Company. Mattia was responsible for global affairs and commu-
nications, including corporate communications, media relations, government relations, corporate reputation
and public policy. In addition, Mattia also served as a member of Coca-Cola’s executive committee.

In an attempt to repair its reputation in the region, Coca-Cola India contracted with public relations firm Perfect
Relations in late 2003. The firm was hired to manage public relations across ten states in India, in addition to
building up the Coca-Cola image. This move was in response to the stinging criticism and tarnished reputa-
tion Coca-Cola suffered as a result of the previous pesticide warning.

Coca-Cola’s History in India

India has a rich and diverse culture that dates back millennia. With over a billion potential consumers now
living in India, Coca-Cola has a great interest in this developing market. In its post World War II growth spree,
Coca-Cola became the leading soft drink brand in India. This was all for not. In 1977, when the Janta party
government came to power, they enacted the Foreign Exchange Regulation Act. This act required that Co-
ca-Cola dilute its ownership in its Indian franchises and subsidiary to include more Indian ownership. More
importantly, the act also required that Coca-Cola reveal its secret recipe, which even to this day is known only
by two people. Rather than comply with the act, Coca-Cola left India.

Coca-Cola returned in 1993 when government changes brought about a liberalization of the Indian market.
To speed its return to India, Coca-Cola set about purchasing local soft drink brands and bottlers. The most

notable was the “Thums Up” brand, which is still the most trusted brand in India. 4 Through acquisitions and
organizational growth, Coca-Cola quickly came to dominate the beverage industry.

In addition to the purchase of local soda brands, Coca-Cola also recognized that carbonated beverages made
up a very small portion of Indian beverage consumption. For example, per capita consumption in India is six
bottles per year, in comparison to seventeen in Pakistan, seventy-three in Thailand, one hundred seventy-
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three in the Philippines, and eight hundred in the United States. 5 Initially, the consumption of carbonated
beverages was limited to the wealthy and affluent due to high costs. When Coca-Cola returned to the market,
it made a concentrated effort to market and sell to lower and middle class consumers. Coca-Cola even went
so far as to offer a smaller bottle priced at almost fifty percent of the traditional cost.

Given the very rural nature of the client base in India, Coca-Cola had to develop nontraditional means of
distribution. Coca-Cola developed a service fleet of ten-ton trucks, open-bay three wheelers, trademarked tri-

cycles and pushcarts to deliver beverages to over 700,000 retail outlets. 6

Center for Science and Environment

The Center for Science and Environment (CSE) was established in 1980 in India as a nongovernmental orga-
nization (NGO). Traditionally, NGOs targeted major corporations and key investors in an effort to raise aware-
ness of an issue and bring about change. Their success was due to their ability to bring attention and focus
on an issue quickly and the high level of credibility NGOs generally possessed.

The CSE was founded in order to “catalyze the growth of public awareness on vital issues in science, tech-

nology, environment, and development.” 10 The CSE’s efforts included pollution monitoring, education and
training, and awareness. Based on a report released in February 2003 concerning bottled water, the CSE
produced an August 2003 report claiming soft drinks were potentially harmful to Indian citizens. Samples con-
tained residues of pesticides known to cause long term health complications, and total pesticides averaged

.015 mg/l, thirty times higher than the limit allowed in Europe by the European Economic Commission. 11

Coca-Cola Products in India

Coca-Cola brought all of its standard brands to India: Coca-Cola, Diet Coca-Cola, Sprite, Fanta, and other
commonly recognized brands. The additional purchase of recognized local brands gave Coca-Cola a num-
ber of established brands upon which to build. Some of these included: Thums Up (a Pepsi-like cola), Limca
(a sharp lemon/lime soda), Maaza (a mango fruit drink), Citra (a grapefruit flavored beverage comparable to
Squirt), Gold Spot (an orange beverage eventually replaced with Fanta), and Kinley (bottled water and soda

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waters). Coca-Cola also recognized that many of its customers were not familiar with carbonated beverages.
In an attempt to make rural customers more comfortable with the Coca-Cola Company, Coca-Cola developed
products based on traditional local beverages. Some of these included lemon water, green coconut water,
fruit juices, tea, and lassi (a blend of yogurt, water, and fruit flavors or spices).

Stakeholders

The Coca-Cola Company itself has 55,000 7 employees in numerous nations around the world. This number
does not include the multitudes of people employed by the franchised Coca-Cola bottling divisions. As pre-
viously stated, in India, Coca-Cola is served in 700,000 retail outlets. Coca-Cola estimates that it indirectly

employs 125,000 Indians through procurement, supply, and distribution networks. 8

The Coca-Cola Company (KO) is a publicly traded company on the NYSE. As of October 1, 2006, the Coca-

Cola Company has a market cap of 104.66 billion dollars. 9

Top Institutional Holders 10

Holder Shares % Out Value* Reported

Berkshire Hathaway, Inc 200,000,000 8.54 $8,604,000,000 30-Jun-06

Suntrust Banks, Inc. 101,255,489 4.32 $4,356,011,136 30-Jun-06

Capital Research and Management Company 91,745,000 3.92 $3,946,869,900 30-Jun-06

Barclays Global Investors UK Holdings Ltd 77,085,582 3.29 $3,316,221,737 30-Jun-06

State Street Corporation 65,099,375 2.78 $2,800,575,112 30-Jun-06

Vanguard Group, Inc. (The) 53,080,570 2.27 $2,283,526,121 30-Jun-06

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Coca-Cola’s Problems in India

Over the last few years, Coca-Cola faced criticism from the Indian public over its manufacturing processes in
the Kerala region. Allegations arose that Coca-Cola caused health and environmental damage by passing on
bio-solids as fertilizer. Similarly, Coca-Cola was accused of excessively depleting the water table due to its
bottling operations, drastically reducing the water available for irrigation to local communities.

Concerned by the allegations and negative publicity accompanying them, Coca-Cola was forced to respond
to the issues. The company suspended the application and disposal of bio-solids until an independent safety
analysis could be conducted and a standard set of testing protocols introduced. Coca-Cola also released the
findings of a study conducted by the Kerala State Pollution Control Board, which showed that the concentra-
tion of heavy metals was below the prescribed limits.

Coca-Cola also continued to maintain that it had complied with all laws and regulations concerning water con-
sumption since the Kerala plant’s construction in 2000. The company has installed an advanced harvesting

technology to gather rainfall in an effort to recharge the area’s groundwater reserves. 16 Coca-Cola’s hope
was that the company would one day contribute more water to the Kerala region than they consumed on an
annual basis.

Pesticide Problem

On August 2, 2006, CSE released a second report detailing findings on pesticide residues in soft drinks in
India. The first report was released on August 5, 2003, which claimed that twelve soft drink brands sold in and

around New Delhi contained “a deadly cocktail of pesticide residues.” 11

The second report has much of the same negative conclusions regarding soft drinks in India, saying, “a new
nationwide study shows nothing much has changed: soft drinks remain unsafe and unhealthy.” The 2006
study conducted by CSE tested fifty-seven samples of eleven soft drink brands, from twenty-five different
manufacturing plants throughout twelve states.

The study concluded that the eleven soft drinks tested on average were twenty-four times higher than the

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Bureau of Indian Standards (BIS) norms. 12 The BIS norm has been set at .5 parts per billion (ppb) of total

pesticides. 13 This norm is a level agreed upon by the BIS, but has yet to be made legal because of a number
of factors. One factor is that the BIS are comprised of many different parties including government scientists,

government officials, companies, and consumer and environmental organizations. 14 Another factor is that
the pesticide problem is complicated and has a number of issues that play into it. Thus, with the combina-
tion of these two factors, a number of organizations such as government officials like the Ministry of Health
build arguments against making the standard level of .5 ppb legal. Issues protesting organizations bring to
light include the sugars also used in the drinks have high levels of pesticides, the water input should be test-
ed instead of the final product, and also India’s groundwater generally is so badly contaminated that most

food products contain some pesticide residue. 15 Because no legal standard has been made and the issue is
complicated to grasp, much room for debate is made available, and Coca-Cola representatives are finding it
difficult to communicate the information. Asim Parekh, a vice president of Coca-Cola India, said, “I have tried
my level best to communicate this information, but even terminology like PPB – parts per billion – is difficult

to comprehend. This makes our job very challenging.” 16

As a result of these allegations, India has reacted negatively to the pesticide accusations. Seven of India’s
states have partially or completely banned the use of Coca-Cola soft drinks, and more than 10,000 schools
have banned the beverages. While the protests have mainly been small and scattered, there are rumors of a
larger protest planned that is being called, “Coke, Pepsi, Quit India” and consists of blockading some ninety

plants for five days. 17 Additionally, newspapers have been printing headlines, referring to Coca-Cola, that
read, “Toxic Cocktail,” and news channels have been broadcasting protests of Coca-Cola. Indeed, not only
an issue of health is prevalent, but a battle of public perception has been thrown into the mix of CocaCola’s
problems in India.

Coca-Cola’s Response

One of Coca-Cola’s initial responses was a media response on August 5, where they asserted the safety of
their soft drinks and the importance of their consumers, “Consumer safety is paramount to us. The soft drinks

manufactured in India comply with stringent international norms and all applicable national regulations.” 18
(Exhibit 2) A second response on August 12, featured an independent study by Central Science Laboratories

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(CSL) in the United Kingdom, concluding that Coca-Cola’s soft drinks, “meet the stringent purity criteria set

by the European Union for pesticides.” 19 The CSL’s results showed all Coca-Cola products contained less
than .1 ppb, which is significantly less than the required .5 ppb set by the BIS (Exhibit 3).

Although these test results may seem convincing, many people in India remain unconvinced and Coca-Cola
still faces the task of regaining positive public perception in India. The company has opened its plant doors to
the public, inviting consumers to see how the beverages are made, and the company has received as many
as 2,000 responses. Also, Coca-Cola has made its website an integral part of its communications strategy by

uploading all its press releases and statements, lab reports, press ads and contact details. 20 Communica-
tion experts have commented on Coca-Cola’s response, “A measured response is what the textbooks advise,
aiming to achieve quick closure. And both companies have adopted conscious safety first stands.”

Some communication experts think Coca-Cola underestimated how rapidly the pesticide allegations would
spiral into a nationwide crisis. Richard Levick, president and chief executive of Levick Strategic Communica-

tions, said, “They got behind the curve, and now they are chasing the crisis.” 21 He also thinks Coca-Cola
became tied up in the technicalities of the allegations, instead of focusing on the emotional support of their
customers in India. Finally, there are others who think Coca-Cola needs to make a more public stance. Anir-
ban Sarkar, a senior manager at New Delhi’s Upmarket Olive Bar and Kitchen, said, “It looks as if they are

hiding something from us. They need to communicate more to come clean on the issue.” 22 While Coca-Cola
looks to have good proof that their products are safe, they still may need to work on gaining a better public
perception.

Discussion Questions

1. While India is not a big profit vehicle for Coca-Cola, they want to convert its growing middle class into

loyal drinkers as sales slow in maturing Western markets. 23 What should Coca-Cola do to revive
public perception and lock in a stronghold in the Indian market?
2. Does Coca-Cola need to react at all? Is it better to remain below the public eye and let the issue die
a natural death?
3. If Coca-Cola should take a more public stance, what are some ways Coca-Cola could become more
public in the Indian community?

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4. Does Coca-Cola’s problem underscore how quickly foreign companies can get hurt by nationalism in
a developing country like India, whose economy for decades was largely closed to the outside world?
If so, what barriers does Coca-Cola need to overcome?
5. If an incident occurs once, there’s a great probability it will happen again, as seen in this case. Should
Coca-Cola start preparing for round three?

References

1. Wikipedia. Coca-Cola. Retrieved September 20, 2006 from http://en.wikipedia.org/wiki/Coca_cola

2. Ibid.

3. The Coca-Cola Company. Around the World. Retrieved September 18, 2006 from http://www2.cocaco-
la.com/ourcompany/aroundworld.html

4. “Brands of Coca-Cola in India,” Rai University, 11/04.

5. Beverage Consumption Table, Retrieved from http://www.indiastat.com

6. FAQ. Coca-Cola. Retrieved on Sept 20, 2006 from http://www.coca-colaindia.com

7. Coca-Cola Co. (KO) Profile. Yahoo! Finance. Retrieved September 26, 2006 from http://finance.ya-
hoo.com/q/pr?s=KO

8. FAQ. Coca-Cola. Retrieved on Sept 20, 2006 from http://www.coca-colaindia.com

9. Coca-Cola Co. (KO) Profile. Yahoo! Finance. Retrieved September 26, 2006 from http://finance.ya-
hoo.com/q/pr?s=KO

10. Ibid.

11. Centre for Science and Environment (CSE): Soft Drinks Still Unsafe, August 2, 2006.

12. Ibid.

13. Ibid.

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14. http://www.cseindia.org/misc/cola-indepth/cola2006/pdf/cola-presentation.pdf

15. Levick Strategic Communications: Pesticide Charge in India Hurts Pepsi and Coke, August 22, 2006.

16. Ibid.

17. The America’s Intelligence Wire: Coke, Pepsi doing little to confront pesticide allegations in India, August
27, 2006.

18. http://www.coca-colaindia.com/media/View_News_Release.asp?ReleaseId=168

19. http://www.coca-colaindia.com/media/View_News_Release.asp?ReleaseId=175

20.Rediff.com: Management gurus on crisis communication, September 05, 2006.

21. Levick Strategic Communications: Pesticide Charge in India Hurts Pepsi and Coke, August 22, 2006.

22. The America’s Intelligence Wire: Coke, Pepsi is doing little to confront pesticide allegations in India, Au-
gust 27, 2006.

23. Wall Street Journal Online: Path to India’s Market Dotted With Potholes, September 12 2006.

https://doi.org/10.4135/9781526405951

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