PepsiCo, Coca-Cola in a bind in drought-hit Kerala
Kerala shopkeepers have decided to promote local brands over Coca-Cola and PepsiCo beverages, following boycott from counterparts in Tamil Nadu
Latest News »
- IRDA identifies 6 insurers to take over Sahara India Life Insurance
- Market round-up: Oil’s bearish bets prompt warning of violent rally
- Pro Kabaddi League 2017: advertisers number up three-fold in 5th season
- Corporate rights and the backlash against globalization
- The transformative power of genome editing
Mumbai/Delhi: A potent blend of pride, economic nationalism and mounting concern over water security have the world’s two biggest cola brands in a bind in southern India.
Shopkeepers in drought-hit Kerala decided on Wednesday to promote local brands over Coca-Cola Co. and PepsiCo Inc. beverages after counterparts in neighbouring Tamil Nadu boycotted the multinational drinks. While retail groups claim the companies are siphoning off groundwater and selling products tainted with pesticides, academics and analysts say the soda giants have become scapegoats for a water crisis that’s become mired in politics and patriotism.
India is one of the most water-challenged nations, and fights over water have erupted between users periodically for decades. Failed monsoon rains over as many as the past three years in some states have parched rivers and dams, forcing farmers, manufacturers and municipal water suppliers to rely more on wells to meet their needs. Problem is, those too are drying up, and that’s hurting farmers, India’s economic mainstay.
“The root cause for the boycott isn’t the multinational companies, but the enduring fight between industrial users and farmers, especially in several drought-hit states,” said P.L. Beena, an associate professor with the Centre for Development Studies in Thiruvananthapuram, Kerala.
‘Make in India’
On top of that, Prime Minister Narendra Modi’s call to companies to “make in India” has given rise to a pro-India push—and, in some cases, an anti-foreigner backlash—that’s supporting local brands.
“With Modi at the centre, many activist groups and political parties are taking their agenda to the street more strongly than they have in the past instances,” Beena said.
The latest action means drinks from Coca-Cola and PepsiCo, which together have a 96% hold on India’s $4.9 billion soda market, will be kept off the shelves of more than 1 million shops.
Vendors would rather lose business than sell the products, said A. M. Vikrama Raja, president of a retailers’ association in Tamil Nadu with about 1.5 million members. The boycott started 1 March, a day before the Madras High Court dismissed a petition seeking a ban on the American soda-makers drawing water from the local Thamirabarani river.
“Instead of foreign sodas, we will promote local beverages,” said T. Naseeruddin, president of a retailers’ group that says it has more than 700,000 retailers in Kerala, which is facing its worst drought in 115 years.
The group stopped short of joining the boycott in Tamil Nadu after a meeting Wednesday with Kerala chief minister Pinarayi Vijayan, a spokesman said. Instead, retailers will pursue “sensitization against multinational products” via a state-level conference, and seek a policy response from the state government.
India has at least 50 local drink brands, which are typically 20% cheaper than the global cola brands, brokerage Kotak Securities Ltd said in a 23 February report.
Manpasand Beverages Ltd, based in Vadodara, Gujarat state’s cultural capital, is “aggressively expanding its reach in Tamil Nadu to take advantage of the ongoing cola ban,” it said in a statement Wednesday. The company, which sells carbonated fruit drinks and juices, is setting up a Rs1.5 billion ($23 million) plant in Sri City, about 55 kilometers (34 miles) north of Chennai to cater to the demands of southern markets, it said.
A boycott from farmers could result in Coca-Cola and PepsiCo losing “a big part of their consumer base in the rural areas,” said Oru Mohiuddin, a strategy analyst for market researcher Euromonitor International in London. Still, India’s rural population tends to prefer water, tea and fresh coconut water over sodas, and sales of carbonated drinks are slowing as Indian consumers switch to bottled water and other healthier options, Mohiuddin said.
Atlanta-based Coca-Cola and PepsiCo, based in Purchase, New York, declined to comment on the allegations of water exploitation and contamination, referring questions to their Indian units. The local units also declined to comment, referring questions to a statement from the Indian Beverage Association, which said that Hindustan Coca-Cola and PepsiCo India are compliant with all applicable regulations and that their products are safe.
The association said it’s “deeply disappointed” with Kerala retailers’ call to boycott the beverages since it hampers consumer choice, and said both companies use less than 0.5 percent of the water used by all industries in India, according to an emailed statement Wednesday.
The blacklisting of the brands is, according to the association, against the spirit of Modi’s “Make in India” program, which gives preferential treatment to foreign companies that agree to have a portion of the manufacturing done domestically. Coca-Cola and PepsiCo provide employment to 2,000 families in Tamil Nadu and help support more than 200,000 retailers, the association said.
Pepsi’s beverage and snack units in India used 6.98 billion liters of water and added 19.7 billion liters through various water-saving programs in 2015, according to estimates the company said are verified by accounting firm Deloitte LLP. Coca-Cola India has achieved “full balance between total water used in beverage production and that replenished to nature and communities through community water projects,” it said in February 2016.
“There is a political overtone to the boycott,” said Ramu Manivannan, a political analyst and head of the politics department at University of Madras in the Tamil Nadu capital, Chennai. “It’s not just politics, but pure economics, too. Shopkeepers are making a politically correct stance by boycotting multinational beverages.’’
An anti-American backlash was sparked in January after animal rights groups, including the People for Ethical Treatment of Animals, or PETA, successfully petitioned the Supreme Court of India to enforce a ban on a popular Tamil spectacle in which people attempt to subdue bulls. The resultant ire of supporters of the event was initially directed at US-based PETA, but then shifted to more visible American targets: Coca-Cola and PepsiCo, which together operate 60 bottling plants in India.
Neither are new to water-related community complaints in India. Coca-Cola’s plant in Plachimada, Kerala, was shut down by the state government in 2004 after protests that began in 2002, and the company scrapped a $24 million expansion in Uttar Pradesh state in August 2014, citing delays obtaining permits to extract more water.
PepsiCo sought police protection for water being brought to a plant in southern Tamil Nadu in 2015. The beverage-manufacturing facility, located in a water-stressed area, had been the target of a community-led campaign to shut it down, according to the India Resource Center.
Most companies share water with farms, which employ about half of India’s 1.3 billion people and contribute 18% of the $2 trillion economy. Agriculture gets the lion’s share, leaving industrial users to fight with municipal water suppliers for the precious resource.
The federal government in 2015 required companies to obtain permission to use groundwater. Last April, the then junior environment minister Prakash Javadekar said India would aim to reduce industrial water usage by half over five years by using newer technology to reuse, recover and recycle water.
Relief for India’s tiring aquifers can’t come fast enough. More than a quarter of groundwater systems are too salty, becoming depleted or are over-exploited, according to a 2013 Planning Commission presentation. In addition, at least 75% of the country’s rivers, lakes and other surface water bodies are contaminated by human and agricultural waste and industrial effluent.
“No noticeable changes to the protection of freshwater sources is yet featuring on the Indian government’s agenda,” said Jenny Gronwall, program manager for water governance at Sweden’s Stockholm International Water Institute . “It seems as if the situation must get worse and the general public unite in loud protests before a reduce–reuse–recycle paradigm takes hold.’’
Targeting foreign brands isn’t likely to solve India’s water crisis, said Damandeep Singh, a director of CDP India, a non-profit that said it holds the world’s largest database of corporate-related water information using disclosures from companies such as Coca-Cola, Ford Motor Co. and Nestle SA.
“Beverage companies are at clear risk due to worsening water security,” said Singh, adding that companies and other users must work together to safeguard the river basins in which they operate. “Actions in water-scarce regions, like Tamil Nadu, have to be mapped out and planned much in advance and with extreme care.” Bloomberg