bering-rana-plaza-adb_ 9781538.html. Accessed May 27, 2016. CASE 16 Coke and Pepsi in India: Issues, Ethics, and Crisis Management There is nothing new about multinational corpora- pions (MNCs) facing challenges as they do business around the world, especially in developing nations or emerging markets, Royal Dutch Shell had to greatly reduce its production of oil in Nigeria due to guerrilla attacks on its pipelines. Cargill was forced to shut down its soy-processing plant in Brazil because of the claim that it was contributing to the destruction of the Amazon rainforest. Tribesmen in Botswana accused De Beers of pushing them off their land to make way for diamond mines.' Google was kicked out of China only to be later restored. Global business today is not for the faint hearted. It should not come as a surprise, therefore, that MNC giants such as Coca-Cola and PepsiCo- highly visible, multibillion dollar corporations with well-known, iconic brands around the world--would encounter challenges in the creation and distribution those scarce staples is water. Many observers think a shortage of water is the next burgeoning global resource crisis.? Whether it is called an issue, an ethics challenge, or a scandal, the situation confronting both Coke and Pepsi in India, beginning in 2003, richly illustrates the many complex and varied social challenges compa nies face once they decide to embark on other coun try's shores. Their experiences in India may predict other issues they may eventually face elsewhere or trials other companies might face as well. With a billion-plus people and an expanding economy, and with markets stagnating in many Western countries, India, along with China and Russia, represent immense opportunities for growth for virtually all businesses. Hence, these companies cannot afford to ignore these burgeoning markets. INITIAL ALLEGATIONS Coke and Pepsi's serious problems in India began in 2003. In that year, India's Center for Science and Environment (CSE), an independent public interest group, made allegations that tests they had conducted revealed dangerously high levels of pesticide residue of their products in some countries. After all, soft drinks are viewed as discretionary and sometimes lux urious products when compared to the staples of life that are often scarce in developing countries. One of tor of CSE, Sunita Narain, stated that such residues could cause cancer and birth defects as well as harm nervous and immune systems if the products were *This case was prepared by Archie B. Carroll. University of Georgia. Updated and revised most recently in 2016. India from the ravages es of industrialization. She became the director of CSE director of CSE in 2002. According to a Business Week writer, Narain strongly holds forth on the topic of MNCs exploiting the natural resources of developing countries, espe- cially India. She manifests an alarmist tone that tends toward the end-is-near level of fervency. She is skilled at setting media attention. In 2005, she won the Stockholm Water Prize, one of a number of envi ronmental accolades she has received. In addition, she has been very successful in taking advantage of India's general suspicion of huge MNCS, dating back to its tragic Bhopal gas leak in 1984. Narain claims she does not intend to hurt companies but only to spur the country to pass stricter regulations." consumed over long periods of time. Further CSE stated that the pesticide levels in Coken Pena drinks were much higher than that permitted by European Union standards. On one occasion, Narain one occasion, Narain accused Pepsi and Coke of pushing products that they wouldn't dare sell at home. In addition to the alleged pesticides in the soft drinks, another special interest group, India Resource Center (IRC), accused the companies of over consum- ing scarce water and polluting water sources due to its operations in India. IRC intensely criticized the com- panies, especially Coca-Cola, by detailing a number of different "water woes" experienced by different cities and regions of the country. IRC's allegations even more broadly accused the companies of water exploi tation and of controlling natural resources, and thus communities. Examples frequently cited were the impact of Coke's operations in the communities of Kerala and Mehdiganj. In 2004, IRC continued its "Campaign to Hold Coca-Cola Accountable" by arguing that communities across India were under assault by Coke's practices. Among the continuing allegations were communities experiencing severe water shortages around Coke's bottling plants, significant depletion of the water table, strange water tastes and smells, and pollution of groundwater as well as soil. IRC said that in one community Coke was distributing its solid waste to farmers as fertilizer and that tests conducted found cadmium and lead in the waste, thus making it toxic waste. And the accusation of high levels of pesticides continued. According to IRC, the Parliament of India banned the sale of Coca-Cola in its cafeteria. In December 2004, India's Supreme Court ordered Coke and Pepsi to put warning labels on their pro- ducts. This caused a serious slide in sales for the next several years. Sacred Water Coke and Pepsi's problems in India have been com- plicated by the fact that water carries considerable significance in India. We are often told about cultural knowledge we knowledge we should have before doing business in other countries. Water is one of those issues in India. Although the country has some of the worst water in the world, due to poor sewage, pollution, and pesti cide use, according to UN sources, water carries an almost-spiritual meaning to Indians. Bathing is viewed by many of them to be a sacred act, and tra- dition for some residents holds that one's death is not properly noted until one's ashes are scattered in the Ganges River. In one major poll, Indians revealed that drinking water was one of their major life activities to improve their well-being. Indians' sensitivity to the subject of water has undoubtedly played a role in the public's reactions to the allegations. Sunita Narain One major reason that Indian consumers and politi- cians took seriously the allegations of both CSE and IRC was CSE's director, Sunita Narain-a well-known activist in New Delhi. Narain was born into a family of freedom fighters whose support of Mahatma Gandhi goes back to the days when Gandhi was push- ng for independence in India over 60 years ago. She ook up environmental causes in high school. One major cause she adopted was to stop developers om cutting down trees. Her quest was to save COKE'S AND PEPSI'S EARLY RESPONSES Initially, Coke and Pepsi denied the allegations of CSE and IRC, primarily through the media. It was observed that their response was limited at best as they got caught up in the technical details of the tests. Coke conducted its own tests, the conclusion of which was that their drinks met demanding Euro- pean standards. Over the next several years, the debate continued as the companies questioned the studies and conducted studies of their own. The com panies also pointed out that other beverages and foods in the Indian food supply, and indeed water, had trace pesticide levels in it and they sought to deflect the issue in this manner. The IRC also att making the crisis companies were communities while as "public relation away. IRC poin new public relations IRC also attacked Coke and Pepsi for che crisis seriously. They argued were safe. Letters with a similar message went out to that the stairs and stickers were pressed onto drink coolers, were destroying lives, livelihoods, and declare that Gole t y guaranteed." Coke also Es while viewing the problems in India hired researchers to talk to consumers and opinion con le relations problems that they could "spin" leaders to find o u t they believed about 10 pointed out that Coca-Cola had hired the allegations and what the company needed to de le relations firm to help them build a new to convince them the allegations were false in India, rather than addressing the real issues Based on its research findings, Coke created a TV ding to IRC, the then-new CEO of Coke, Neville ad campaign that featured testimonials by well- all immediately made a visit to India, but it was a respected celebrities. One of the ads featured Aamir la visit designed to avoid the heavy protests Khana popular movie star, as he toured one of would have met him had the trip been public Coke's plants. He told the people that the product was safe and that if they wanted to see for themselves also pointed out that Coke had just increased they could personally do so. In August and September marketing budget by a sizable amount in India, 200 over 4.000 people took him up on his offer and I then laid out the steps it felt Coke should take According to IRC, the then- to effectively address its problems. PESTICIDE RESIDUE AND PARTIAL BANS The controversy flared up again in August of 2006 when the CSE issued a new study. The new test results showed that 57 samples from 11 Coke and Pepsi brands contained pesticide residue levels 24 times higher than the maximum allowed by the Indian gow ernment Public response was swift Seven of India's 28 states imposed partial bans on the two companies, and the state of Kerala banned the drinks completely Officials there ignored a later court ruling reversing the ban." During 2006, the United Kingdom's Cen tral Science Laboratory questioned the CSE findings. Coca-Cola sought a meeting with CSE that it denied. Also that year, India's Union Health Ministry rejected the CSE study as "inconclusive." THE COMPANIES RATCHET UP THEIR RESPONSES As a result of the second major flurry of studies and allegations in 2006, both Coke and Pepsi ratcheted up their responses, sometimes acting together, sometimes taking independent action. They responded almost like different companies than they were before. Per haps they finally reckoned this issue was not going to go away and had to be addressed more forcefully. Coke's Response Coke started with a more aggressive marketing cam- paign. It ran three rounds of newspaper ads refuting the new study. The ads appeared in the form of a letter from more than 50 of India's company-owned and franchised Coke bottlers, claiming that their products toured the plants. Opening up the plants sent the message that the company had nothing to hide, and this was very persuasive. The TV ads, which were targeted toward the mass audience, were followed by giant posters with movie star Khan's picture drinking a Coke. These posters appeared in public places such as bus stops. In addi- t ion, other ads were targeted toward adult women and housewives, who make the majority of the food purchasing decisions. One teenager was especially impressed with Khan's ads because she knew he was very selective about which movies he appeared in and that he wouldn't take a position like this if it wasn't appropriate In a later interview, Coke's CEO Isdell said he thought the company's response during the second wave of controversy was the key reason the company began turning things around. After the 2003 episode, the company changed management in India to address many of the problems, both real and imag- ined. The new management team was especially con- cerned about how it would handle its next public relations crisis. Weeks later, in December 2006, India's Health Ministry said that both Coke's and Pepsi's beverages tested in three different labs con- tained little or no pesticide residue. Pepsi's Response Pepsi's response was similar to Coke's. Pepsi decide to go straight to the Indian media and try to bu relationships there. Company representati with editorial boards, presented its own data press conferences, and also ran TV commer Pepsi's commercials featured the then presiden India Rajeev Bakht polished Pepsi laboratory In addition, Pepsi increased its efforts to cut down water war in its plants. Employees in the plants plants. Employees in the plante were or d ine teams and used Japanese-inspired to leams and used lap p ired ka and sted improvements to bring waste under control. The company also employed lobbying of the local government Indra Neay becomes CEO Pepsi had an advantage in rebuilding its relationships in India b i n October 2006 an Indian born woman, Indra Nocyl was selected to be CEO of the marinational corpora tion. It is not known whether Pa r ts in India were in any way related to her being chosen CEO, but It definitely helped After graduating from the pre gious Indian Institute of Management, and later Yale University. Nooi worked her way up the hierarchy at PepsiCo before being singled out for the opposition She previously held positions at the Boston Consulting Group. Motorola, and ABB Group Prior to becoming CEO, Nooyi had a number of Successes in Pepsi and became the company's chief strategist. She was said to have a perceptive business sense and an irreverent personal style. One of Nooyi's first decisions was to take a trip to India in December 2006. While there, she spoke broadly about Pepsi's programs to improve water and the environment. The Indian media loved her, beaming with pride. and covered her tour positively as she shared her own heartwarming memories of her life growing up in India. She received considerable praise. Not sur prisingly, Pepsi's sales started moving upward." While all the criticism of Coke and Pepsi was going on, roughly from 2003 to 2006, both companies were pursuing corporate social responsibility (CSR) initiatives in India, many of them related to improv ing water resources for communities, while the con- flict was center stage. Why were these groups whose to the companies? Was it really pesticides in the and abuse of natural resources? Or was i n mental interest groups wsing every opportunity bash large corporations on s sensitive to the ple? Were CSE and RC Strategically making example of these two hugely successful comper and trying to put them in their place? Tate in 2006, an interesting commentary appeared Wank exploring the topic of what has been going on in India with respect to Coke and P 3 This commentary argued that the companies may have been singled out because they are foreign owned appears that no Indian soft drink companies were s ided out for pesticide testing though many people believe pesticide levels are even higher in Indian mit and bottled tea. It was pointed out that pesticidere des are present in most of India's groundwater, and the government has ignored or has been slow to move on the problem. The commentary went on to observe that Coke and Pepsi have together invested S2 billion in India over the years and have generated 12,500 jobs and support more than 200,000 indirectly through their purchases of Indian-made products including sugar, packing materials, and shipping services the compani hace CONTINUING PROTESTS, RENEWED PRIORITIES, AND STRATEGIES Eventually, the open conflict settled down and sales took an upturn for both companies, but the issue lin- gered. In June 2007, the IRC continued its attacks on Coca-Cola. It accused the company of "greenwashing its image in India. The IRC staged a major protest at the new Coke Museum in Atlanta on June 30, 2007, questioning the company's human rights and environ- mental abuses. They erected a 20-foot banner that read "Coca-Cola Destroys Lives, Livelihoods, Communities in front of the New World of Coke that opened in May 2007. Amit Srivastava of the IRC was quoted as saying "This World of Coke museum is a fairy tale land and the real side of Coke is littered with abuses." A repre. sentative of the National Alliance of People's Move ents, a large coalition of grassroots movements in India, said, "The museum is a shameful attempt by the Coca-Cola Company to hide its crimes. A COMMENTARY ON "WHAT'S GOING ON" Because of all the conflicting studies and the stridency of CSE and TRC, one has to wonder what was going on in India to cause this developing country to so severely criticize giant MNCs such as Coke and Pepsi. Many developing countries would be doing all they could to appease these companies. It was specu- lated by a number of different observers that what was at work was a form of backlash against huge MNCS that come into countries and consume natural m Paling On The protestations by these groups apparently moti vated other groups to take action against Coke. It United Students a t Sweat adered one of ndand more than 20 college in the United States Canada and the m e d Coca-Cola from campus led n atives to put pressure a ddition the protest in Atlanta were ba host of groups that participated in the 11 ba India in the summer of 2010 Other beverage companies were quick to because of t h e free to a activist group the two mpanies decided that a intelort to address i s might make sense The IBA was formed to address the related to the government of Kerala's charge that Coke is pollating the ground in the state and other ation issues that affect both companies. The have been ongoing, but Kerala's government decided to form a tribunal Coca Cola, seeking 48 mil- lion in compensation claims for allegedly causing pola lution and depleting the groundwater level there Social Forum e Coca ve the station e Renewed Priorities Coca-Cola continued its initiatives to the situation in India and around the world water problems around the world be Gece water problems are natural resource that goes into its robust y had 70 clean-water projects in 40 Another important issue was the value-added tax ed at boosting local economies it was (VAT) by the Delhi government. The IBA brought in other bottlers and packaging firms that had similar that these efforts were part of a broader strat interests and issues in India. the part of CEO Neville Isdell to build Cakes we as a local benefactor and a global diplomat WATER ISSUES CONTINUE The criticism of Coke has been most severe in Coke and Pepsi's issues in India, especially surround- CEO Isdell admits that the company's experi- ing the issue of water, never seem to go away. Begin in India has taught some humbling lessons. ning in fall 2011, The India Resource Center (IRC) dell. who took over the company after the crisis alleged that Pepsico's water claims have been decep- had begun, told The Wall Street Journal, "It was tion with a purpose. According to the IRC, Pepsico's were clear that we had not connected with the com- claims of achieving "positive water balance are mis- munities in the way we needed to." He indicated that leading and do not stand up to scrutiny. IRC accuses the company has now made water stewardship a that Pepsico (1) severely underestimates the amount strategic priority, and in a recent 10-K securities fil- of water it uses in India, (2) has flawed water balance int, had listed a shortage of clean water as a strategic accounting techniques. (3) just doesn't get it that risk. In August 2007, Coca-Cola India unveiled its water issues are local issues in India, (4) has one in four of its plants operating in a water stressed area, *s-Pillar" growth strategy to strengthen its bonds with and (5) lacks commitment to local water stewardship India Coke's new strategy focuses on the pillars of in India. People, Planet, Portfolio, Partners, and Performance. In 2012-2013, the IRC's campaigns against Coca- The company also announced a series of initiatives Cola continued as well. According to IRC, fifteen vil- under each of the five pillars and its "Little Drops of lage councils (panchayats) have called upon their gov- Joy proposal, which tries to reinforce the company's for ernment to reject Coca-Cola's application connection with stakeholders in India. expansion because it would further worsen the water Though most of the attention focused on Coca- conditions in the area. They have also called for an Cola, it should also be noted that Pepsi has continued end to Coca-Cola's current groundwater extraction in taking steps on a number of projects as well. One Mehdiganj in Varanasi district in India. The 15 village novel initiative is that the company now gathers rain- councils are located within a 5-km radius of the Coca- water in excavated lakes and ponds and on the roof- Cola bottling plant and are affected by Coca-Cola's tops of its bottling plants in India. The company bottling operations. For the past several years, and on a continuing basis, the IRC has been extremel activist toward Coca-Cola and continues its "Can sponsors other community water projects as well." Indian Beverage Association Formed Though Coke and Pepsi are typically fighting each another in their longstanding cola wars, due to their mutual problems in India they formed the paign to Hold Coca-Cola Accountable. In February 2016, Coke announced that it w closing a bottling plant in north India. Activ QUESTIONS FOR DISCUSSION (1. Identify the ongoing issues in this case with respect to global business ethics, issue management, crisis management, and stakeholder management. Rank these in terms of their priorities for Coca-Cola and for PepsiCo. . Assess the corporate social responsibility (CSR) of Coke and Pepsi in India. 3. Are these companies ignoring their responsibilities in India, or is something else at work? 4. Why does it seem that Coke has become a larger and more frequent target than Pepsi in India? Does having an Indian-born CEO help Pepsi's case? How do companies defend themselves against the nonstop allegations of activist groups that have made them a target? Is any form of stakeholder management workable? bering-rana-plaza-adb_ 9781538.html. Accessed May 27, 2016. CASE 16 Coke and Pepsi in India: Issues, Ethics, and Crisis Management There is nothing new about multinational corpora- pions (MNCs) facing challenges as they do business around the world, especially in developing nations or emerging markets, Royal Dutch Shell had to greatly reduce its production of oil in Nigeria due to guerrilla attacks on its pipelines. Cargill was forced to shut down its soy-processing plant in Brazil because of the claim that it was contributing to the destruction of the Amazon rainforest. Tribesmen in Botswana accused De Beers of pushing them off their land to make way for diamond mines.' Google was kicked out of China only to be later restored. Global business today is not for the faint hearted. It should not come as a surprise, therefore, that MNC giants such as Coca-Cola and PepsiCo- highly visible, multibillion dollar corporations with well-known, iconic brands around the world--would encounter challenges in the creation and distribution those scarce staples is water. Many observers think a shortage of water is the next burgeoning global resource crisis.? Whether it is called an issue, an ethics challenge, or a scandal, the situation confronting both Coke and Pepsi in India, beginning in 2003, richly illustrates the many complex and varied social challenges compa nies face once they decide to embark on other coun try's shores. Their experiences in India may predict other issues they may eventually face elsewhere or trials other companies might face as well. With a billion-plus people and an expanding economy, and with markets stagnating in many Western countries, India, along with China and Russia, represent immense opportunities for growth for virtually all businesses. Hence, these companies cannot afford to ignore these burgeoning markets. INITIAL ALLEGATIONS Coke and Pepsi's serious problems in India began in 2003. In that year, India's Center for Science and Environment (CSE), an independent public interest group, made allegations that tests they had conducted revealed dangerously high levels of pesticide residue of their products in some countries. After all, soft drinks are viewed as discretionary and sometimes lux urious products when compared to the staples of life that are often scarce in developing countries. One of tor of CSE, Sunita Narain, stated that such residues could cause cancer and birth defects as well as harm nervous and immune systems if the products were *This case was prepared by Archie B. Carroll. University of Georgia. Updated and revised most recently in 2016. India from the ravages es of industrialization. She became the director of CSE director of CSE in 2002. According to a Business Week writer, Narain strongly holds forth on the topic of MNCs exploiting the natural resources of developing countries, espe- cially India. She manifests an alarmist tone that tends toward the end-is-near level of fervency. She is skilled at setting media attention. In 2005, she won the Stockholm Water Prize, one of a number of envi ronmental accolades she has received. In addition, she has been very successful in taking advantage of India's general suspicion of huge MNCS, dating back to its tragic Bhopal gas leak in 1984. Narain claims she does not intend to hurt companies but only to spur the country to pass stricter regulations." consumed over long periods of time. Further CSE stated that the pesticide levels in Coken Pena drinks were much higher than that permitted by European Union standards. On one occasion, Narain one occasion, Narain accused Pepsi and Coke of pushing products that they wouldn't dare sell at home. In addition to the alleged pesticides in the soft drinks, another special interest group, India Resource Center (IRC), accused the companies of over consum- ing scarce water and polluting water sources due to its operations in India. IRC intensely criticized the com- panies, especially Coca-Cola, by detailing a number of different "water woes" experienced by different cities and regions of the country. IRC's allegations even more broadly accused the companies of water exploi tation and of controlling natural resources, and thus communities. Examples frequently cited were the impact of Coke's operations in the communities of Kerala and Mehdiganj. In 2004, IRC continued its "Campaign to Hold Coca-Cola Accountable" by arguing that communities across India were under assault by Coke's practices. Among the continuing allegations were communities experiencing severe water shortages around Coke's bottling plants, significant depletion of the water table, strange water tastes and smells, and pollution of groundwater as well as soil. IRC said that in one community Coke was distributing its solid waste to farmers as fertilizer and that tests conducted found cadmium and lead in the waste, thus making it toxic waste. And the accusation of high levels of pesticides continued. According to IRC, the Parliament of India banned the sale of Coca-Cola in its cafeteria. In December 2004, India's Supreme Court ordered Coke and Pepsi to put warning labels on their pro- ducts. This caused a serious slide in sales for the next several years. Sacred Water Coke and Pepsi's problems in India have been com- plicated by the fact that water carries considerable significance in India. We are often told about cultural knowledge we knowledge we should have before doing business in other countries. Water is one of those issues in India. Although the country has some of the worst water in the world, due to poor sewage, pollution, and pesti cide use, according to UN sources, water carries an almost-spiritual meaning to Indians. Bathing is viewed by many of them to be a sacred act, and tra- dition for some residents holds that one's death is not properly noted until one's ashes are scattered in the Ganges River. In one major poll, Indians revealed that drinking water was one of their major life activities to improve their well-being. Indians' sensitivity to the subject of water has undoubtedly played a role in the public's reactions to the allegations. Sunita Narain One major reason that Indian consumers and politi- cians took seriously the allegations of both CSE and IRC was CSE's director, Sunita Narain-a well-known activist in New Delhi. Narain was born into a family of freedom fighters whose support of Mahatma Gandhi goes back to the days when Gandhi was push- ng for independence in India over 60 years ago. She ook up environmental causes in high school. One major cause she adopted was to stop developers om cutting down trees. Her quest was to save COKE'S AND PEPSI'S EARLY RESPONSES Initially, Coke and Pepsi denied the allegations of CSE and IRC, primarily through the media. It was observed that their response was limited at best as they got caught up in the technical details of the tests. Coke conducted its own tests, the conclusion of which was that their drinks met demanding Euro- pean standards. Over the next several years, the debate continued as the companies questioned the studies and conducted studies of their own. The com panies also pointed out that other beverages and foods in the Indian food supply, and indeed water, had trace pesticide levels in it and they sought to deflect the issue in this manner. The IRC also att making the crisis companies were communities while as "public relation away. IRC poin new public relations IRC also attacked Coke and Pepsi for che crisis seriously. They argued were safe. Letters with a similar message went out to that the stairs and stickers were pressed onto drink coolers, were destroying lives, livelihoods, and declare that Gole t y guaranteed." Coke also Es while viewing the problems in India hired researchers to talk to consumers and opinion con le relations problems that they could "spin" leaders to find o u t they believed about 10 pointed out that Coca-Cola had hired the allegations and what the company needed to de le relations firm to help them build a new to convince them the allegations were false in India, rather than addressing the real issues Based on its research findings, Coke created a TV ding to IRC, the then-new CEO of Coke, Neville ad campaign that featured testimonials by well- all immediately made a visit to India, but it was a respected celebrities. One of the ads featured Aamir la visit designed to avoid the heavy protests Khana popular movie star, as he toured one of would have met him had the trip been public Coke's plants. He told the people that the product was safe and that if they wanted to see for themselves also pointed out that Coke had just increased they could personally do so. In August and September marketing budget by a sizable amount in India, 200 over 4.000 people took him up on his offer and I then laid out the steps it felt Coke should take According to IRC, the then- to effectively address its problems. PESTICIDE RESIDUE AND PARTIAL BANS The controversy flared up again in August of 2006 when the CSE issued a new study. The new test results showed that 57 samples from 11 Coke and Pepsi brands contained pesticide residue levels 24 times higher than the maximum allowed by the Indian gow ernment Public response was swift Seven of India's 28 states imposed partial bans on the two companies, and the state of Kerala banned the drinks completely Officials there ignored a later court ruling reversing the ban." During 2006, the United Kingdom's Cen tral Science Laboratory questioned the CSE findings. Coca-Cola sought a meeting with CSE that it denied. Also that year, India's Union Health Ministry rejected the CSE study as "inconclusive." THE COMPANIES RATCHET UP THEIR RESPONSES As a result of the second major flurry of studies and allegations in 2006, both Coke and Pepsi ratcheted up their responses, sometimes acting together, sometimes taking independent action. They responded almost like different companies than they were before. Per haps they finally reckoned this issue was not going to go away and had to be addressed more forcefully. Coke's Response Coke started with a more aggressive marketing cam- paign. It ran three rounds of newspaper ads refuting the new study. The ads appeared in the form of a letter from more than 50 of India's company-owned and franchised Coke bottlers, claiming that their products toured the plants. Opening up the plants sent the message that the company had nothing to hide, and this was very persuasive. The TV ads, which were targeted toward the mass audience, were followed by giant posters with movie star Khan's picture drinking a Coke. These posters appeared in public places such as bus stops. In addi- t ion, other ads were targeted toward adult women and housewives, who make the majority of the food purchasing decisions. One teenager was especially impressed with Khan's ads because she knew he was very selective about which movies he appeared in and that he wouldn't take a position like this if it wasn't appropriate In a later interview, Coke's CEO Isdell said he thought the company's response during the second wave of controversy was the key reason the company began turning things around. After the 2003 episode, the company changed management in India to address many of the problems, both real and imag- ined. The new management team was especially con- cerned about how it would handle its next public relations crisis. Weeks later, in December 2006, India's Health Ministry said that both Coke's and Pepsi's beverages tested in three different labs con- tained little or no pesticide residue. Pepsi's Response Pepsi's response was similar to Coke's. Pepsi decide to go straight to the Indian media and try to bu relationships there. Company representati with editorial boards, presented its own data press conferences, and also ran TV commer Pepsi's commercials featured the then presiden India Rajeev Bakht polished Pepsi laboratory In addition, Pepsi increased its efforts to cut down water war in its plants. Employees in the plants plants. Employees in the plante were or d ine teams and used Japanese-inspired to leams and used lap p ired ka and sted improvements to bring waste under control. The company also employed lobbying of the local government Indra Neay becomes CEO Pepsi had an advantage in rebuilding its relationships in India b i n October 2006 an Indian born woman, Indra Nocyl was selected to be CEO of the marinational corpora tion. It is not known whether Pa r ts in India were in any way related to her being chosen CEO, but It definitely helped After graduating from the pre gious Indian Institute of Management, and later Yale University. Nooi worked her way up the hierarchy at PepsiCo before being singled out for the opposition She previously held positions at the Boston Consulting Group. Motorola, and ABB Group Prior to becoming CEO, Nooyi had a number of Successes in Pepsi and became the company's chief strategist. She was said to have a perceptive business sense and an irreverent personal style. One of Nooyi's first decisions was to take a trip to India in December 2006. While there, she spoke broadly about Pepsi's programs to improve water and the environment. The Indian media loved her, beaming with pride. and covered her tour positively as she shared her own heartwarming memories of her life growing up in India. She received considerable praise. Not sur prisingly, Pepsi's sales started moving upward." While all the criticism of Coke and Pepsi was going on, roughly from 2003 to 2006, both companies were pursuing corporate social responsibility (CSR) initiatives in India, many of them related to improv ing water resources for communities, while the con- flict was center stage. Why were these groups whose to the companies? Was it really pesticides in the and abuse of natural resources? Or was i n mental interest groups wsing every opportunity bash large corporations on s sensitive to the ple? Were CSE and RC Strategically making example of these two hugely successful comper and trying to put them in their place? Tate in 2006, an interesting commentary appeared Wank exploring the topic of what has been going on in India with respect to Coke and P 3 This commentary argued that the companies may have been singled out because they are foreign owned appears that no Indian soft drink companies were s ided out for pesticide testing though many people believe pesticide levels are even higher in Indian mit and bottled tea. It was pointed out that pesticidere des are present in most of India's groundwater, and the government has ignored or has been slow to move on the problem. The commentary went on to observe that Coke and Pepsi have together invested S2 billion in India over the years and have generated 12,500 jobs and support more than 200,000 indirectly through their purchases of Indian-made products including sugar, packing materials, and shipping services the compani hace CONTINUING PROTESTS, RENEWED PRIORITIES, AND STRATEGIES Eventually, the open conflict settled down and sales took an upturn for both companies, but the issue lin- gered. In June 2007, the IRC continued its attacks on Coca-Cola. It accused the company of "greenwashing its image in India. The IRC staged a major protest at the new Coke Museum in Atlanta on June 30, 2007, questioning the company's human rights and environ- mental abuses. They erected a 20-foot banner that read "Coca-Cola Destroys Lives, Livelihoods, Communities in front of the New World of Coke that opened in May 2007. Amit Srivastava of the IRC was quoted as saying "This World of Coke museum is a fairy tale land and the real side of Coke is littered with abuses." A repre. sentative of the National Alliance of People's Move ents, a large coalition of grassroots movements in India, said, "The museum is a shameful attempt by the Coca-Cola Company to hide its crimes. A COMMENTARY ON "WHAT'S GOING ON" Because of all the conflicting studies and the stridency of CSE and TRC, one has to wonder what was going on in India to cause this developing country to so severely criticize giant MNCs such as Coke and Pepsi. Many developing countries would be doing all they could to appease these companies. It was specu- lated by a number of different observers that what was at work was a form of backlash against huge MNCS that come into countries and consume natural m Paling On The protestations by these groups apparently moti vated other groups to take action against Coke. It United Students a t Sweat adered one of ndand more than 20 college in the United States Canada and the m e d Coca-Cola from campus led n atives to put pressure a ddition the protest in Atlanta were ba host of groups that participated in the 11 ba India in the summer of 2010 Other beverage companies were quick to because of t h e free to a activist group the two mpanies decided that a intelort to address i s might make sense The IBA was formed to address the related to the government of Kerala's charge that Coke is pollating the ground in the state and other ation issues that affect both companies. The have been ongoing, but Kerala's government decided to form a tribunal Coca Cola, seeking 48 mil- lion in compensation claims for allegedly causing pola lution and depleting the groundwater level there Social Forum e Coca ve the station e Renewed Priorities Coca-Cola continued its initiatives to the situation in India and around the world water problems around the world be Gece water problems are natural resource that goes into its robust y had 70 clean-water projects in 40 Another important issue was the value-added tax ed at boosting local economies it was (VAT) by the Delhi government. The IBA brought in other bottlers and packaging firms that had similar that these efforts were part of a broader strat interests and issues in India. the part of CEO Neville Isdell to build Cakes we as a local benefactor and a global diplomat WATER ISSUES CONTINUE The criticism of Coke has been most severe in Coke and Pepsi's issues in India, especially surround- CEO Isdell admits that the company's experi- ing the issue of water, never seem to go away. Begin in India has taught some humbling lessons. ning in fall 2011, The India Resource Center (IRC) dell. who took over the company after the crisis alleged that Pepsico's water claims have been decep- had begun, told The Wall Street Journal, "It was tion with a purpose. According to the IRC, Pepsico's were clear that we had not connected with the com- claims of achieving "positive water balance are mis- munities in the way we needed to." He indicated that leading and do not stand up to scrutiny. IRC accuses the company has now made water stewardship a that Pepsico (1) severely underestimates the amount strategic priority, and in a recent 10-K securities fil- of water it uses in India, (2) has flawed water balance int, had listed a shortage of clean water as a strategic accounting techniques. (3) just doesn't get it that risk. In August 2007, Coca-Cola India unveiled its water issues are local issues in India, (4) has one in four of its plants operating in a water stressed area, *s-Pillar" growth strategy to strengthen its bonds with and (5) lacks commitment to local water stewardship India Coke's new strategy focuses on the pillars of in India. People, Planet, Portfolio, Partners, and Performance. In 2012-2013, the IRC's campaigns against Coca- The company also announced a series of initiatives Cola continued as well. According to IRC, fifteen vil- under each of the five pillars and its "Little Drops of lage councils (panchayats) have called upon their gov- Joy proposal, which tries to reinforce the company's for ernment to reject Coca-Cola's application connection with stakeholders in India. expansion because it would further worsen the water Though most of the attention focused on Coca- conditions in the area. They have also called for an Cola, it should also be noted that Pepsi has continued end to Coca-Cola's current groundwater extraction in taking steps on a number of projects as well. One Mehdiganj in Varanasi district in India. The 15 village novel initiative is that the company now gathers rain- councils are located within a 5-km radius of the Coca- water in excavated lakes and ponds and on the roof- Cola bottling plant and are affected by Coca-Cola's tops of its bottling plants in India. The company bottling operations. For the past several years, and on a continuing basis, the IRC has been extremel activist toward Coca-Cola and continues its "Can sponsors other community water projects as well." Indian Beverage Association Formed Though Coke and Pepsi are typically fighting each another in their longstanding cola wars, due to their mutual problems in India they formed the paign to Hold Coca-Cola Accountable. In February 2016, Coke announced that it w closing a bottling plant in north India. Activ QUESTIONS FOR DISCUSSION (1. Identify the ongoing issues in this case with respect to global business ethics, issue management, crisis management, and stakeholder management. Rank these in terms of their priorities for Coca-Cola and for PepsiCo. . Assess the corporate social responsibility (CSR) of Coke and Pepsi in India. 3. Are these companies ignoring their responsibilities in India, or is something else at work? 4. Why does it seem that Coke has become a larger and more frequent target than Pepsi in India? Does having an Indian-born CEO help Pepsi's case? How do companies defend themselves against the nonstop allegations of activist groups that have made them a target? Is any form of stakeholder management workable