Coca-Cola has aggressively expanded into India, now one of its largest markets, through acquisitions and marketing. However, it has faced challenges from environmental groups accusing its plants of polluting water sources and products containing unsafe pesticide levels. While Coca-Cola denies wrongdoing and courts lifted bans, it continues to face opposition and was ordered to pay $47 million in damages. It aims to double sales in India by 2020 with $5 billion in additional investments, but faces competition from Pepsi in this growing market.

1. (Mt) – Read this case, answer questions
Brief Integrative Case 2.1 Coca-Cola in India Coca-Cola is a brand name known throughout
the entire attractive market From 2003-2006, foreign investment world. With stagnant soft
drink sales in markets like doubled to $6 billion. Imported goods have become a sta- Europe
and North America, Coca-Cola has aggressively tus symbol for the burgeoning middle class.
looked to new, expanding markets to continue to grow its Coca-Cola has been targeting
India for potential brand. India, with 1.2 billion consumers, has been a pri- growth, as
Indians consume an average of 12 eight-ounce mary target for Coca-Cola; through
acquisitions and beverages per year. In comparison, Brazil consumers clever marketing, the
company now covers 60 percent of drink roughly 240 beverages per year on average.
Despite India’s $1 billion soft drink market. the relatively low amount of beverages
consumed by India Coca-Cola’s expansion in India has not been without on average, India
has been one of Coke’s best emerging minor setbacks, however. In 2006-2007, Coca-Cola
faced market plays. In 2014, India surpassed Germany as Coca- some difficult challenges in
the region of Kerala, India, Cola’s sixth largest market. During the January to March after it
was accused of using water that contained pesti- period of 2014, sales volumes in India
increased 6 per- cides in its bottling plants. An environmental group, the cent. This growth
is on par with Coca-Cola’s other emerg- Center for Science and Environment (CSE), founding
market operations in China (12 percent growth over 57 bottles of Coke and Pepsi products
from 12 Indian the same period) and Brazil (4 percent growth over the states that
contained unsafe levels of pesticides.’ The same period). As part of its investment plan,
Coca-Cola Kerala minister of health, R. Ashok, imposed a ban on plans to expand capacity at
all 13 of its bottling plants, the manufacture and sale of Coca-Cola products in the which
should help expand the company’s distribution region. Coca-Cola then arranged to have its
drinks tested throughout the country. Coca-Cola is aiming to double in a British lab, and the
report found that the amount of both revenue and volume in India by the year 2020.
pesticides found in Pepsi and Coca-Cola drinks was harm- In 2014 FDI in India stood at
$33.9 billion. In 2015, less to the body. Coca-Cola then ran numerous ads to India overtook
the United States and China as the top regain consumers’ confidence in its products and
brand. destination for FDI, according to a report by the Financial However, these efforts did
not satisfy the environmental Times. A 2015 survey of Japanese manufacturers con- groups
or the minister of health. ducted by the Japan Bank for International Cooperation ranked
India as the most promising country for overseas India’s Changing Marketplace business
operations.” During the 1960s and 1970s, India’s economy faced of 8.5 percent during the

2. six years spanning 2003–2008. India’s GDP grew at the impressive average annual rate
many challenges, growing only an average of 3-3.5 per- Even the global financial crisis,
which began in Septem- cent per year. Numerous obstacles hindered foreign com- ber 2008,
only cut the rate of growth by 2-3 percentage panies from investing in India, and many
restrictions on points, and the economy has continued to grow at the economic activity
caused huge difficulties for Indian annual rate of 6-7 percent in the years since the crisis.
12,13 firms and a lack of interest among foreign investors. For But the country needs more
investment in manufacturing many years the government had problems implementing if it
hopes to improve the lives of the 350 million people reform and overcoming bureaucratic
and political divi- living in poverty. sions. Business activity has traditionally been underval-
ued in India; leisure is typically given more value than work. Stemming from India’s colonial
legacy, Indians Coca-Cola and Other Soft Drink are highly suspicious of foreign investors.
Indeed, there Investment in India have been a few well-publicized disputes between the
Coca-Cola had experienced previous confrontations with Indian government and foreign
investors. the Indian government. In 1977, Coke had pulled out of More recently, however,
many Western companies are India when the government demanded its secret formula. 15
finding an casier time doing business in India. In 1991, Circumstances have dramatically
improved over the political conditions had changed, many restrictions were years for soft
drink providers of India. Coke and Pepsi cased, and economic reforms came into force. With
more have invested nearly $2 billion in India over the years. than 1 billion consumers, India
has become an increasingly They employ about 12,500 people directly and support 248
Brief Integrative Case 2.1 Coca-Cola in India 249 200,000 indirectly through their purchases
of sugar, pack- “Pepsi and Coke are doing our work for us. Now the whole aging material,
and shipping services. Coke is India’s nation knows that there is a pesticide problem.”
number one consumer of mango pulp for its local soft Coca-Cola fought back against the
accusations. “No drink offerings. 16 Coca-Cola in India is also the largest Indian soft drink
makers have been tested for similar vio- domestic buyer of sugar and green coffee beans.”
From lations even though pesticides could be in their products 1994 to 2003, Coca-Cola
sales in India more than doubled. such as milk and bottled teas. If pesticides are in the In
2008-2009 Coca-Cola announced its plans to invest groundwater, why isn’t anyone else
being tested? We are more than $250 million in India over the next three years.
continuously being challenged because of who we are,” The money would be used for
everything from expanding said Atul Singh, CEO of Coca-Cola India.24 bottling capacity to
buying delivery trucks and refrigera- Some believe that Coca-Cola was targeted to bring the
tors for small retailers. The new money meant around a subject of pesticides in consumer
products to light. “If you 20 percent increase in the total Coca-Cola has invested in target
multinational corporations, you get more publicity,” India. Coca-Cola’s sales in India climbed
31 percent in adds Arvind Kumar, a researcher at the watchdog group the three months
ended March 31, 2009, compared to a Toxic Links. “Pesticides are in everything in India.”
year earlier. That’s the highest volume growth of any of Coke’s markets. 19 Furthermore,
Coca-Cola announced plans in 2012 to India’s Response to the Allegations invest upwards of
US$5 billion in India by 2020. This After CSE’s discovery of the unsafe levels of pesti-
investment marks a 150 percent increase over the announced cides, 26 some suggested the

3. high levels of pesticides plans from 2011 to invest up to US$2 billion in India cover came
from sugar, which is 10 percent of the soft drink the next five years. Putting this investment
in perspective, content. However, laboratories found the sugar samples Coca-Cola has
invested a total of just over US$2 billion in to be pesticide free. its India operations over the
past 20 years. Despite the large Kerala is run by a communist government and a chief
investment in India, Coca-Cola will see serious competition minister who still claims to have
a revolutionary objec- from Pepsi in this market. Together Coke and Pepsition to the evils of
capitalism.” Defenders of Coca-Cola make up 97 percent of the market for carbonated soft
drinks claim that this is a large reason for the pesticide findings in India, where soda sales
overall are estimated to be in Coca-Cola products. After the ban was placed on all US$1.05
billion. Coke accounted for 60 percent of all sales Coca-Cola and PepsiCo products in the
region of Kerala, while Pepsi received 37 percent of the market share. Coca-Cola took its
case to the state court to defend its Royal Crown Cola (RC Cola) is the world’s third larg-
products and name. The court said that the state govern- est brand of soft drinks. The brand
was purchased in 2001 ment had no jurisdiction to impose a ban on the manu- by Cott
Beverages and entered the Indian market in 2003. facture and sale of products. Kerala then
lifted the For production in India, the company hired three licensing statewide ban on Coke
products.” and franchising bottlers. In order to ensure that it was not In March 2010, after
several years of tense battles, the associated with the pesticide accusations against Pepsi
Indian unit of Coca-Cola Company was asked to pay $47 and Coke, RC Cola immediately had
its groundwater million in compensation for causing environmental dam- tested by the
testing institute SGS India Pvt Ltd. 21 age at its bottling plant in the southern Indian state of
Kerala. A state government panel said Coca-Cola’s sub- The Charges against Coke sidiary,
Hindustan Coca-Cola Beverages Pvt Ltd (HCBPL), was responsible for depleting
groundwater and dumping The pesticide issue began in 2002 in Plachimada, India. toxic
waste around its Palakkad plant between 1999 and Villagers thought that water levels had
sunk and the 2004. Protests by farmers, complaining about the alleged drinking water was
contaminated by Coke’s plant. They pollution, forced Coca-Cola to close down the plant in
launched a vigil at the plant, and two years later, Coke’s 2005. Coca-Cola responded that
HCBPL was not respon- license was canceled. Coca-Cola’s most recent pesticidesible for
pollution in Palakkad, but the final decision on issue began at a bottling plant in Mehdiganj.
The plant the compensation will be taken by the state government. was accused of
exploiting the groundwater and polluting it with toxic metals. – Karnataka R. Ashok, the
health minister of Kerala, India, banned the sale of all Coca-Cola Pepsi’s Experience in India
and PepsiCo products, claiming that the drinks contained PepsiCo has had an equally
noticeable presence in India, and unsafe levels of pesticides. it is not surprising that the
company has weathered the same The alleged contamination of the water launched a
storms as its rival Coca-Cola. In addition to claims of exces debate on everything from
pesticide-polluted water to the sive water use, a CSE pesticide study, performed in August
Indian middle-class’s addiction to unhealthy, processed 2006, accused Pepsi of having 30
times the “unofficialpes- foods. “It’s wonderful,” said Sunita Narin, director of CSE. ticide
limit in its beverages Coke was claimed to be 27 times 250 Part 2 The Role of Culture the
limit in this study).” These findings, coupled with the severe water shortages, locating

4. water-extracting plants in original 2003 CSE study that first tarnished the cola compa-
“drought prone” areas, further limiting water access by nies’ image, have prompted
numerous consumers to stop contaminating the surrounding land and groundwater, and
their cola consumption. Some have even taken to the streets, irresponsibly disposing of
toxic waste. Colleges and uni- burning pictures of Pepsi bottles in protest versities
throughout the United States, U.K., and Canada Indra Nooyi, CEO of PepsiCo Inc. and a native
of have joined in holding the company accountable for its India, is all too familiar with the
issues of water con- overseas business practices by banning Coca-Cola prod- tamination and
water shortages. Yet, in light of the recent ucts on their campuses until more positive results
are claims made against Pepsi, she has expressed frustration reported. However, critics
have argued that TERI’s assess- with the exaggerated CSE findings (local tea and coffee
ment would undoubtedly be biased because the organiza- have thousands of times the
alleged pesticide level found tion has been largely funded by the Coca-Cola Company. * in
Pepsi products) and the disproportionate reaction to Coca-Cola stands behind the safety of
its products. Pepsi’s water-use practices (pointing out that soft drinks “Multinational
corporations provide an easy target,” says and bottled water account for less than 0.04
percent of Amulya Ganguli, a political analyst in New Delhi. “These industrial water usage in
India). 33 corporations are believed to be greedy, devoted solely to In order to reaffirm the
safety and popularity of its profit, and uncaring about the health of the consumers.”
products, Pepsi has taken on a celebrity-studded ad cam- There is also a deeply rooted
distrust of big business, and paign across India, as well as continued its legacy of cor-
particularly foreign big business, in India.” This is a porate social responsibility (CSR). Some
of Pepsi’s CSR reminder that there will continue to be obstacles, as there efforts have
involved digging village wells, “harvesting” were in the past, to foreign investments in India.
rainwater, and teaching better techniques for growing rice In order to reaffirm their
presence in India, Coke and and tomatoes. * Pepsi has also initiated efforts to reduce Pepsi
have run separate ads insisting that their drinks are water waste at its Indian facilities. safe.
Coke’s ad said, “Is there anything safer for you to Although Pepsi sales are back on the rise,
Nooyi real drink?” and invited Indians to visit its plants to see how izes that she should have
acted sooner to counteract CSE’s the beverage is made. Nevertheless, in July 2006, Coke
claims about Pepsi products. From here on out, the com- reported a 12 percent decline in
sales.” pany must be more attentive to its water-use practices; but Coca-Cola has
undertaken various initiatives to improve Nooyi also notes, “We have to invest, too, in
educating the drinking water conditions around the world. It has communities in how to
farm better, collect water, and then formally pledged support for the United Nations Global
work with industry to retrofit plants and recycle.”35 Compact and co-founded the Global
Water Challenge, which improves water access and sanitation in countries in critical need. It
is improving energy efficiency through Coke’s Social Responsibility Commitments the use of
hydrofluorocarbon-free insulation for 98 per- Coca-Cola has recently employed The Energy
and cent of now refrigerator sales and marketing equipment. Resources Institute (TERI) to
assess its operations in Specifically, in India, Coke has stated, “More than one- India. The
investigations have been conducted because of third of the total water that is used in
operations is renewed claims that Coca-Cola has engaged in unethical production and

5. returned to groundwater systems. Among its first practices in India. These alleged practices
include causing water renewal projects was installation of 270 rainwater Table 1 A
Timeline of Coca-Cola In Kerala, India 1977 Coca-Cola pulls out of India when the
government demands its secret formula. 1991 Restrictions are eased in India for easier
International business development 1999 A report is published by the All-Indian
Coordinated Research Program stating that 20% of all Indian food commod- ities exceed the
maximum pesticide residue level and 43% of milk exceeds the maximum residue levels of
DDT. Villagers In Plachimada, India, make the accusation that Coke’s botting plant is
contaminating their drinking water. 2003 The Center for Science and Environment
produces a study that finds unsafe levels of pesticides in Coca-Cola products in India.
January 2004 Parliament In India forms a Joint Parliamentary Committee to Investigate the
charges by the CSE. March 2004 A Coca-Cola bottling facility is shut down in Plachimada,
India. 2004 Indian government announces new regulations for carbonated soft drinks based
on European Union standards. 2005 Coca-Cola co-founds the Global Water Challenge,
develops the Global Community-Watershed Partnership, and establishes the Ethics and
Compliance Committee. August 2006 The CSE produces another report finding 57 Coke and
Pepsi products from 12 Indian states that contain unsafe pesticide levels. September 2006
India’s high court overturns the ban on the sale of Coke products in Kerala. Indian unit of
Coca-Cola Co. asked by state government to pay $47 million compensation for causing
environmen- tal damage at its bottling plant in Kerala. 2002 March 2010 Brief Integrative
Case 2.1 Coca-Cola in India 251 Average Plant Ratios 3.2 3.12 Figure 1 Coca-Cola’s Water
Use: Historical Average Plant Ratios 3.1 3 2.9 2.9 2.B Water Use Ratio liters/liter of product
2.72 2.6 2.6 2.5 2.4 2.3 2002 2003 2004 2005 Years Source: The Coca-Cola Company, 2005
Environmental Report
www.thecocacola.company.com/citizenship/environmental_report2005.pdf catching
devices. Later, Coca-Cola expanded the num- beverages and their production. For us that
means reduc- ber of rainwater harvesting projects by partnering with the ing the amount of
water used to produce our beverages, Central Ground Water Authority CGWA), State
Ground recycling water used for manufacturing processes so it can Water Boards, schools,
colleges, NGOs, and local com- be returned safely to the environment, and replenishing
munities to combat water scarcity. According to Coca- water in communities and nature
through locally relevant Cola India’s 2007-2008 Environment Report, the company
projects.” Coca-Cola hopes to spread these practices to was actively engaged in 400
rainwater harvesting projects other members of its supply chain, particularly the sugar
running across 17 states. These efforts were contributing cane industry. The Coca-Cola-
WWF partnership is also to the company’s eventual target of being a “net zero” user focused
on climate protection and protection of seven of of groundwater, a goal that it achieved in
2009. the world’s most critical freshwater basins,” including Having inspected its own
water-use habits, Coca-Cola the Yangtze in China. Although Coca-Cola’s corporate has
vowed to reduce the amount of water it uses in its social responsibility efforts have included
other projects bottling operations. As of 2014, Coca-Cola had reduced with the WWF in the
past, it hopes that this official part- the amount of water needed to make one liter of Coke to
nership will help achieve larger-scale results.” 2.03 liters (compared with 2.70 liters a

6. decade before). As a part of its 2013 goals, Coca-Cola and the WWF At the June 2007 annual
meeting of the World Wildlife committed to achieve 100 percent replenishment of all Fund
(WWF) in Beijing, Coca-Cola announced its multi- water used, 75 percent recycling rate in
developing mar- year partnership with the organization to conserve and kets, 30 percent
plant-based packaging by 2020, and protect freshwater resources,” and in 2013, the
partnership 25 percent improvement to water efficiency by 2020.45 was expanded to
include new goals. E. Neville Isdell , Figures 1 and 2 highlight Coca-Cola’s rapidly declining
chair and CEO of the Coca-Cola Company, said, “Our water use on a per-plant and
systemwide basis that goal is to replace every drop of water we use in our occurred
between 2002 and 2005. Systemwide Total Figure 2 Coca-Cola’s Water Use: Systemwide
Total 310 307 305 300 297 Water Use Total in billion liters 295 290 285 283 280 278 275
270 265 260 2002 2003 2004 2005 Years Source: The Coca-Cola Company, 2005
Environmental Report
www.thecocacola.company.com/citizenship/environmental_report2005.pdf 252 Part 2 The
Role of Culture Coca-Cola has also established EthicsLine, which is a focused too much on
the charges instead of winning back global web and telephone information and reporting
ser- the support of its customers. “Here people interpret vice that allows anyone to report
confidential information silence as guilt,” said Mr. Seth, Coke’s Indian public rela- to a third
party. Service is toll free—24 hours a day—and tions expert. translators are available. Coca-
Cola is currently focusing Ms. Bjorhus, the Coke communications director, said on
improving standards through the global water chal- she could now see how the
environmental group had lenge and enhancing global packaging to make it more picked
Coca-Cola as a way of attracting attention to the environmentally friendly. It is also working
on promoting broader problem of pesticide contamination in Indian food nutrition and
physical education by launching programs products. Coca-Cola stands behind its products
as being throughout the world. For example, in January 2009, pesticide free. It is now up to
the Indian consumer to Coca-Cola India announced a partnership with the Bharat decide the
success of Coca-Cola in future years. Integrated Social Welfare Agency (BISWA) to build
Nevertheless, Coca-Cola has been optimistic about its awareness regarding micro-nutrient
malnutrition (or “hid- future in India. While India was still among the countries den
hunger”) in the bottom of the socio-economic pyra- with the lowest per capita consumption
of Coke, in 2014 mid” population in India. The two partners will work it was the second-
fastest-growing region in terms of Coca- together to establish a successful income-
generation Cola unit case volume growth. Coca-Cola recorded a model for communities
through self-help groups in Sam- 2 percent growth in sales in 2014 and most of it came
balpur in Odisha and also provide them with affordable from India, Russia, Brazil, and
China, even as the com- alternatives to alleviate “hidden hunger.” The first product pany
faced hard economic times elsewhere in the world.” developed by Coca-Cola India to
address the issue of “hidden hunger” is Vitingo, a tasty, affordable, and refreshing orange-
flavored beverage fortified with micro The Global Water Challenge nutrients. A decade ago
in 2007, one out of every five people glob- During the past decade, the Coca-Cola Company
has ally lacked access to clean drinking water. In August invested more than US$1 billion in
India, making it one 2006, an international conference was held in Stockholm, of India’s top

7. international investors. By 2020, the com- Sweden, to discuss global water issues. A UN
study pany will have invested over US$5 billion. Almost all the reported that many large
water corporations have decreased goods and services required to produce and market
Coca- their investments in developing countries because of high Cola are made in India. The
Coca-Cola Company directly political and financial risks. Even nations that have had
employs approximately 5,500 local people in India, and abundant water supplies are
experiencing significant indirectly, its business in India creates employment for reductions.
These reductions are believed to be caused by more than 150,000 people. Hindustan Coca-
Cola Bever- two factors: the decline in rainfall and increased evapora- ages Pvt Ltd operates
22 bottling plants, some of which tion of water due to global warming and the loss of wet-
are located in economically underdeveloped areas of the lands. Water is something that
affects every person each country. The Coca-Cola system also includes 23 franchise- and
every day. The executive director of the Stockholm operated plants and has one facility that
manufactures Water Institute, Anders Berntell, noted that water affects concentrates or
beverage bases.” the areas of agriculture, energy, transportation, forestry, trade, financing,
and social and political security. The Lessons Learned Food and Agriculture Organization
points out, “Agriculture is the world’s largest water consumer. Any water crisis Yet Coca-
Cola was caught off guard by its experience in will therefore also create a food crisis.” India.
Coke did not fully appreciate how quickly local There have been attempts to improve the
water condi- politicians would attack Coke in light of the test results, tions around the
world. The United Nations recently released nor did it respond quickly enough to the
anxieties of its the World Water Development Report. This report was com- consumers. The
company failed to realize how fast news piled by 24 UN agencies and claimed that, in
actuality, only travels in modern India. India represents only about I per- 12 percent of the
funds targeted for water and sanitation cent of Coca-Cola’s global volume, but it is central to
the improvement reached those most in need. The United company’s long-term growth
strategy. The company Nations stated that more than 1.1 billion people still lack needed to
take action fast.“ access to improved water resources. Nearly two-thirds of the In what Coke
thought to be a respectful and immediate 1.1 billion live in Asia.” In China, nearly a quarter
of the time frame, it formed committees in India and the United population is unable to
access clean drinking water. Over States. The committees worked on rebuttals and had their
half of China’s major waterways are also polluted. The Insti- own labs commission the tests,
and then they commented tute of Public and Environmental Affairs reported that 34 in
detail. Coke also directed reporters to Internet blogs foreign-owned or joint-venture
companies, including Pepsi, full of entries that were pro-Coke. Critics say that Coke have
caused water pollution problems in China. Ma Jun, the