Pepsi: Repairing a Poisoned Reputation in India

How the soda giant fought charges of tainted products in a country fixated on its polluted water

by Diane Brady

• View Slide Show

Indra K. Nooyi says she still feels guilty filling a bathtub with water. It sounds far-fetched coming from the chief executive of a major multinational corporation, until you consider her early years. Nooyi, the chief executive of PepsiCo Inc. (PEP), didn't get much water growing up during the 1960s in the Indian coastal city of Chennai. Although she describes her family as "very middle class," they still had to rise every morning between three and five—the only hours that the valves to the municipal water supply were turned on—and fill every bucket in the house. Two buckets were set aside for cooking, and two each would go to Nooyi, her older sister, and her younger brother. "You had to think about whether to take a bath," says Nooyi, matter-of-factly. "You learned to live your life off those two buckets."

Nooyi left Chennai, propelled by a dream to build a career in the U.S. She headed to the prestigious Indian Institute of Management and later Yale University before moving into the corporate sphere, eventually settling at PepsiCo in 1994. When she was named CEO in October of last year, India's water again became a focus of her life.

This time Nooyi was cast as part of the problem. Villagers charged that PepsiCo—which has named India as a top strategic priority—consumes excessive groundwater in their parched communities. Even worse was the repeated claim that the snack and beverage company, along with rival Coca-Cola Co. (KO), were allowing pesticide residue from groundwater to get into locally made soda. The charges, first leveled in 2003, emerged again two months before Nooyi took over the top job. Pepsi's soda sales, which fell by double digits in India when the scandal first broke, took another big hit last fall. She braced herself as protestors smashed bottles on the streets while several states in India banned or restricted sales of soft drinks. Nooyi, now 51, was livid. "For somebody to think that Pepsi would jeopardize its brand—its global brand—by doing something stupid in one country is crazy."

AN ACTIVIST FAMILY
But Indian politicians and consumers took the charges seriously, in part because they came from Sunita Narain. A well-known activist in New Delhi, Narain, 45, was born into a family of freedom fighters who supported Mahatma Gandhi in the push for India's independence in 1947. She idolized her late father even though he may not always have hewed to Gandhi's creed of nonviolence. "I'm told he even made bombs," she says.

In high school Narain took up environmental causes, campaigning to stop developers from cutting down New Delhi trees. Unlike Nooyi, her ambition was not to leave India but to save it from the excesses of industrialization. She skipped college, explaining that she "was very keen to do a degree in environmental issues, but nobody offered it." Instead, in 1981, she fell in with a charismatic activist named Anil Agarwal who had just started the Centre for Science & Environment (CSE). Narain became director of the fledgling advocacy group in 2002 when Agarwal died. Her tone in that role tends toward the-end-is-nigh alarmism; her savvy tactics often draw media attention and have garnered such environmental accolades as the 2005 Stockholm Water Prize. Indians, she declares, are "getting poisoned by pesticides," and CSE tests show Pepsi contributes to this toxic assault.

On one level a tale of two strong-minded individuals, Pepsi's ongoing battle over water in India also illustrates an escalating global backlash against the ways multinationals consume natural resources. Foreign companies have long transformed oil, diamonds, and countless other raw materials into profits that flow from developing nations to wealthy ones. Now the playing field is leveling. Activists such as Narain have blogs, e-mail, and other cheap, powerful tools for getting their messages out.