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D. Sampathkumar

Bottles of Pepsi-owned brands being crushed in Bhopal after several cases were found to be of low quality and past the expiry dates. Would local ownership of the bottling operations have reduced the vehemence of the attack? — A. M. Faruqui.

BY ANY reckoning the recent controversy over pesticide residue in carbonated beverages has been a public relations disaster for the cola majors. To be in the limelight and often for reasons not entirely of their choice is not something new for them. A protest against American policy has, in the circumstances, tended to manifest itself as a protest against Coke or Pepsi, not just in India but elsewhere as well.

Interestingly enough, even consensus on multilateral issues is seen as a victory for American national interests and, as a corollary, inimical to third world interests, and the protest at American arm twisting expresses itself as a protest against American multinational corporations.

And what better example of such enterprise can there be than a Coke or Pepsi? And so it is that these enterprises have over the years been exposed to protest marches to their factory gates, calls for boycotts of their products, burning down of their trucks or breaking up of cola bottles and even the odd bomb blast at the factory premises.

Why does this happen? Part of the explanation is that people always prefer to have tangible symbols to focus their protest on, rather than something as abstract as, for instance, if the protest is against globalisation of national economies. Of course, it is also true that Coke or Pepsi might well be tangible examples of such a process of globalisation. But even so, their role as a rallying point for any mass action against any aspect of American policy cannot be dismissed as a mere aberration.

For all the experience in handling public protest action and still managing to post handsome growth in numbers, the latest episode involving pesticide residue in their products is one that is quite unlike anything that they have experienced earlier.

The manifestations of anger might be very similar but the underlying causes are vastly different. In the past, these companies have been targeted not for something that they had done but rather what their government had.

If the public in some part of the world felt that the American invasion of Iraq was wholly unwarranted whatever may be that nation's own perception of the situation, the resultant public anger expressed itself as a call to boycott Coke or Pepsi or some such thing. But on the latest occasion they are being targeted for something they have been directly responsible for. In other words it is a case of guilt by conduct rather than one of being merely guilty by association.

It is nobody's case that they should not be held responsible for the high level of pesticide residue in the soft drinks they sell. But, equally, the problem of pesticide contamination is part of a larger problem of contamination across the entire food chain in the country. Even more significantly, it has been with us for a number of years with some alleging that it goes as far back as the mid-1960s with the ushering in of the Green Revolution.

It is not just in bottled water or cola made by the Pepsis and Cokes of this world that there is a problem of pesticide contamination. It extends to every conceivable product ingested by Indians, including milk from State cooperatives or water supplied by municipal authorities.

Again, the business in coloured and flavoured aerated water is not the exclusive preserve of cola MNCs. There is a flourishing industry involving quite a few regional players and a vast number of tiny unorganised players. Yet if the issue has surfaced now involving the cola MNCs there surely has to be something more to the timing then mere fortuitous circumstance.

It cannot also be attributed to the presence of vigilant non-governmental organisations, important though it is. It has something to do with the fact these companies, by virtue of their distinct identity invite, special attention to themselves and their business processes.

The MNC cola majors have an identity uniquely their own. As enterprises with base of operations in the US, they acquire an aura of exclusivity that the nation has as the world's sole superpower. To compound matters, they have collectively thrust themselves to the forefront with substantial share in the national market for aerated soft drinks.

In a market, being distinct confers certain advantages as that status could be exploited to secure premium prices for one's offerings. But the market is also a metaphor for society at large. In a social context, being different is a disadvantage as collectively society seeks to impose conformity.

A communal riot is in a sense an attempt by the majority in a community to impose on others its own brand of identity. Those that thrust their individuality pay the supreme price, as happened in the case of Sikhs in the 1984 Delhi riots, or Muslims in Ahmedabad last year after the Godhra incident.

By being different (in size, product attributes, etc.) the MNC cola majors have invited attention to themselves and so have had to pay the price of being judged by yardsticks that other more `conforming' — in a manner of speaking — enterprises operating in the country have managed to avoid all these years.

Clearly, MNCs have to somehow dilute their distinct identity, if they are not to draw attention to themselves. This may not be a serious problem for those in the manufacture of capital and intermediate goods.

A General Electric or a Hewlett Packard or an SKF Bearings may not run any serious risk of public attention being focussed on their operations. But a Kellogs or a Coke most certainly has to worry about this. Again, non-American MNCs have less to worry about than the American ones.

Enterprises that run the risk of intense public scrutiny need to dilute their distinct identity. Co-opting local stakeholders who would deflect some of that scrutiny away from these enterprises can do this.

By far the simplest of such tactics would be to rope in local shareholders. If this were not possible, at least reengineer the business in such a manner as to present a local face at the retail level. In the case of soft drinks, an ideal approach would be to completely localisebottling operations — an approach that Coke had adopted at the time of its original foray into the country.

That way the cola majors may have been able to pass off the latest controversy as purely a local phenomenon. The presence of local stakeholders would also act as a counterbalancing force to the ones unleashed by vigilant civil society. It is a moot point if the report of the Centre for Science and Environment would have had the same kind of effect had the bottling operations across the country been controlled by influential local politicians.

The point is, quite simply, this: Ownership structure in the broadest sense has strategic implications and multinational enterprises that suffer from a problem of distinctiveness need to address this for long-term survival in a hostile environment.

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