Global Economics

Behind the Coke-Pepsi Pesticide Scare


Fearless researchers nail two big, bad American multinationals selling toxic soda to India's masses? Get Bollywood on the line! Unfortunately for Coca-Cola (KO) and PepsiCo (PEP), this scenario isn't a film pitch. An anti-corporate lynch mob has pursued the pair of soda makers since Aug. 9, when a New Delhi environmental group released data purporting to show their soft drinks contain levels of pesticides that greatly exceed proposed Indian safety standards. In response, several Indian states banned sales of Coke and Pepsi.

If the companies have been negligent, of course, they deserve to be punished. But so far it appears that they have been singled out because they are foreign-owned. No Indian soft drink makers have been tested for similar violations, even though many people believe that pesticide levels are even higher in Indian-made milk and bottled tea. And while pesticide residues are present in virtually all groundwater in India, New Delhi has largely ignored the problem. "We are continuously challenged because of who we are," says Atul Singh, CEO of Coca-Cola India.

ABOUT STANDARDS. It's nothing personal, counters Sunita Narain, director of the Center for Science & Environment, the group that published the pesticide data. The CSE made the charges simply because the duo "violated safety standards in India." Narain's protestations notwithstanding, it sure looks like India—where all those American software and back office jobs go once they're "Bangalorized"—is having its own xenophobic moment. Some members of the Hindu nationalist Bharatiya Janata Party have called for a nationwide ban on Pepsi and Coke. And BJP party activists have smashed bottles and staged mock funerals to express their outrage.

The whole affair is bad for India. Sure, the economy has been growing at 8%-plus over the last three years. But much of that expansion has been fueled by the vibrant information technology and outsourcing sectors, which do little to help India's millions of unskilled workers. And while the $5.5 billion India drew last year in overseas investment isn't bad, it pales beside China, which pulled in 10 times as much.

What India needs is more investment in manufacturing—even by makers of soda pop—if it hopes to improve the lot of its 350 million living in poverty. Together, Coke and Pepsi have invested nearly $2 billion in India over the years. They employ about 12,500 people directly and support more than 200,000 indirectly given their huge purchases of India-made sugar, packaging material, and shipping services. Coke is even India's No. 1 consumer of mango pulp for one of its local soft drink offerings. If these two keep getting mauled, other potential investors just might reconsider their plans. "India's credibility may come into question," says S.K. Poddar, head of the Federation of Indian Chambers of Commerce & Industry.

INCONCLUSIVE DATA? Coke and Pepsi are doing what they can to cap the frenzy. They cite research from labs overseas certifying the safety of their products in India, and say that the data released by CSE are inconclusive. The companies may have a point. Even India's Health Minister, Anbumani Ramadoss, on Aug. 22 questioned the validity of the methods the environmentalists used to test the sodas.

It's also hard to square the outrage when New Delhi hasn't even formalized its own regulations. The levels that Coke and Pepsi are said to exceed—by 24 times—are still proposals that won't go into effect until early next year. And both companies have been strong supporters of new standards. "It's absolutely in our interest to have clear regulations that are scientifically verifiable," says Mike White, chief executive of PepsiCo International. New Delhi would do better to get its own house in order and let Bollywood dream up tales of corporate villainy.


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