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Ratna Bhushan

New Delhi , Dec. 29

THE soft drinks industry met its waterloo in 2003. While the year began on a healthy note - growing at a healthy 25-30 per cent during the first-half of the year, thanks to an aggressive push strategy for the Rs 5 price point and scale of marketing activity - everything changed for Coca-Cola and PepsiCo on August 5.

The Delhi-based NGO, Centre for Science and Environment (CSE), headed by Ms Sunita Narain, announced study findings revealing that all soft drink brands sold by Coke and Pepsi comprised a cocktail of pesticide residues. The study identified 12 major brands as containing pesticide residue, and Ms Narain, Director, CSE, said that the tests were based on `international methodology', adding that all samples contained residues of four toxic pesticides and insecticides: lindane, DDT, malathion and chlorpyrifos. She pointed out that the existing laws — the Prevention of Food Adulteration Act and the Food Products Order — were weak and did not regulate pesticide content in soft drinks.

CSE's findings, while hotly contested by Coca-Cola and Pepsi, were enough to stir up a national-level controversy. Both Mr Rajeev Bakshi, Chairman, PepsiCo India Holdings, and Mr Sanjiv Gupta, President and CEO, Coca-Cola India, maintained that their soft drink brands in India were no different from those sold in global markets. Consumers, however, were in no mood to listen. Sales of soft drinks, across the country, took a drastic dip by up to 15 per cent, a fact acknowledged by both companies, and their global headquarters. As further embarrassment, brands of Coke and Pepsi were banned in Parliament.

In the weeks of allegations and counter-allegations that followed, Coca-Cola, PepsiCo and CSE dominated the news headlines. While Coca-Cola India's President & Chief Executive Officer, Mr Sanjiv Gupta, initially stated that the company was considering `legal recourse' against the CSE, no legal action was taken against the CSE.

Subsequently, the Union Health Ministry announced findings by the Mysore-based Central Food Technological Research Institute (CFTRI), stating that Limca, Diet Pepsi and Pepsi were three among the 12 soft drinks that were found to be below permissible limits for pesticides as per the EU norms. While confusion about the norms persisted, the matter now rests with the Joint Parliamentary Committee (JPC), under the chairmanship of Mr Sharad Pawar. The JPC is expected to submit its final report in the Budget session of Parliament.

The 15-member JPC, comprising 10 members from the Lok Sabha and five from the Rajya Sabha, is expected to also outline safety standards for fruit juices and other beverages where water is the main constituent.

Coke and Pepsi, both of which have been high-profile advertisers with several of the country's cricketing and Bollywood stars in their fold, first fell silent on any advertising referring to the controversy, and then post the CFTRI report, began airing television campaigns with the objective of building consumer confidence.

While Aamir Khan led the `Coke is clean' campaign, Sachin Tendulkar and Shah Rukh Khan were seen together in a `safe Pepsi' television commercial.

Coca-Cola found its back to the wall for several other reasons too. Around the time that the pesticide controversy was raging, the company was accused of disposing hazardous sludge outside its bottling plant in Palakkad, Kerala.

Consequently, Coca-Cola faced aggressive public protests and calls to boycott its products in the State. The JPC is probing the sludge allegation as well. And as the year came to a close, Coca-Cola India's image took yet another beating. Reports on alleged sexual harassment by Coke's marketing head, Mr Shripad Nadkarni, involving former Ms Universe, Sushmita Sen, began emerging. The company's efforts to hush up charges of sexual harassment against Mr Nadkarni were immediate. But even though Mr Sunil Gupta, Vice-President, Coca-Cola India, claimed that "the Sushmita Sen case is closed as far as the company is concerned", the final verdict on the issue by former Supreme Court Judge, Mr Justice S.P. Bharucha, is awaited.

Meanwhile, the aggressive pricing strategy that both companies adopted for returnable glass bottles (RGB) earlier in the year, was taken to the in-home segment as well. According to Mr Shashi K. Kalathil, Executive Director, Marketing, Pepsi Foods, "Post the pesticide controversy, while sales in metros are now bouncing back as far as on-premise consumption goes, the in-home segment has been that much slower in recovery."

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