This case study discusses a 2003 controversy where tests found soft drinks in India like Pepsi and Coke contained toxic pesticides above permissible limits. The Centre for Science and Environment found pesticides 16 and 9 times the EU limit in Pepsi and Coke. This was due to use of contaminated groundwater in manufacturing. While the companies denied the findings, later tests confirmed pesticides in samples. The controversy hurt sales and margins for the companies and led to new regulations requiring warning labels on products in India.

1. This caselet was written by Mylavarapu Vinaya Kumar, under the direction of D.G. Prasad, ICFAI
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than to illustrate either effective or ineffective handling of a management situation
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CLIBE- 042
Cola Drinks – How Safe are they?
In mid-2003, soft drinks manufactured by Coca-Cola and Pepsi in India, were found
to contain high levels of pesticides. In May 2003, the Centre for Science and
Environment (CSE), a non government organization announced that tests conducted
by its Pollution Monitoring Laboratory showed up many cold drinks such as Pepsi,
Coca Cola, Thums Up, etc. sold in and around Delhi as containing toxic pesticides
and insecticides such as lindane, DDT, malathion and chlorpyrifos that crossed the
maximum permissible amount. In fact, this is not an isolated case of contaminated
food products being sold. Earlier, in February 2003, the CSE found pesticide residues
in bottled water sold in Delhi and Mumbai.
According to the European Economic Commission, the maximum permissible total
pesticide limit in water used as food is 0.0005 mg per liter. However, total pesticides
in all Pepsi brands on an average were 0.0180 mg per litre and 0.0150 mg a litre in
Coca-Cola brands. The six-month long tests, conducted by the CSE, revealed that the
amount of DDT in Pepsi and Coca-Cola was sixteen and nine times higher
respectively than European Union (EU) norms. Analysts at CSE added that
consumption of those samples could result in severe disruption to the immune system,
cancer, damaged nervous and reproductive systems, etc. It was reported that many
farmers in Karnataka, Andhra Pradesh, etc. were using these soft drinks as pesticides
for their crops to great effect. The Indian Parliament banned the sale of all soft drinks
produced by Coca-Cola and Pepsi at its staff canteen.
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2. Cola Drinks - How Safe are they?
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Of course, the soft drinks sold by both the brands in the United States were found to
contain pesticides within the permissible limits. The reason for the high pesticide
content in the drinks sold in India was the usage of highly chemically contaminated
underground water for manufacturing soft drinks. The underground water in Delhi
was shown to contain high pesticide residues, fluoride nitrate, cadmium, etc.
Pepsi and Coca-Cola, addressed a joint press conference and dismissed CSE reports
as “baseless" and an attempt "to tarnish" the image of the two companies. They
further asked the then BJP government to conduct an independent scientific
investigation into the CSE findings. Accordingly, the government laboratories
conducted tests on 24 samples of both the companies. On 21st
August 2003, the
government confirmed the presence of pesticides in 18 of the 24 samples of the soft
drinks but said that the amount of residues found were lower than those detected by
CSE. The then Health Minister, Ms. Sushma Swaraj accepted the fact that the
government regulations for soft drinks were weak and virtually non-existent for
pesticide residues.
In India, even though we have legislations to regulate the quality of contents in
beverages, like The Prevention of Food Adulteration (PFA) Act of 1954 and the Fruit
Products Order (FPO) of 1955, they do not provide any scope for regulating
pesticides in soft drinks. The FPO has standards only for the bottled water industry,
and here it is confined to permissible amount of substances like lead and arsenic.
Also, soft drink manufacturers do not come under the purview of the provisions of
industrial licensing under the Industries (Development and Regulation) Act of 1951.
Thus the soft drinks sector is exempted from any specific regulations. Further, a
license once obtained from the ministry of food processing industries is enough for
the soft drink manufacturers as it includes a no-objection certificate from the local
government and the state pollution control board, and a water analysis report. Thus,
there would not be any further investigations on the environmental effects and the
quality of water used in manufacturing of the soft drinks.
The journey since the pesticide controversy has not been smooth for the cola giants.
Also, just before the end of the year 2004, the Supreme Court ordered Pepsi and
Coca-Cola to carry a label warning consumers of the possibility of the product
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containing pesticide residues. The impact of the pesticide controversy continued
throughout 2004, resulting in a drop in the sales of the products of both companies.
This led to reduced margins for retailers, bottlers and for the two companies
themselves. To make up for the drop in sales, the two companies increased the prices
of their 300ml bottle soft drinks.
The problems for both the companies did not end there. Many Non-Governmental
Organizations protested against the depletion of ground water by the soft drink
manufacturers. However, all these incidents did not deter both companies from
launching their new products - Vanilla Coke by Coca-Cola and Gatorade by Pepsi –
in the Indian market. In the light of all the events of the last two years, analysts expect
2005 to be a year of consolidation and slow growth for both the companies.
Questions for Discussion:
1. Do you think the lack of a proper regulatory body for soft drinks sector has given
rise to controversies such as the pesticide controversy? Comment.
2. “Soft drinks production without any government control is a direct assault on the
health of the nation.” What are the measures that the government can take to
prevent a recurrence of contamination in soft drinks and bottled water?
Additional Readings / Reference Material:
1. Another reason why Cocacola is bad for you! MAYBE?,
www.news.bbc.co.uk, August 7, 2003.
2. Mahaan Deepak, Cola Giants Fight Pesticide Claims in India,
www.cnsnews.com, August 7, 2003.
3. Hard Truths About Soft Drinks, Centre for science and environment,
www.india.eu.org, August 19, 2003.
4. Coke, Pepsi India deny pesticides in soft drinks, Reuters, www.forbes.com,
August 05, 2003.
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5. Devraj Ranjit, Indian Coke, Pepsi Laced with Pesticides, Says NGO,
www.indiaresource.org, August 05, 2003.
6. Pepsi, Coke dismiss CSE charge, Business, www.reifff.com, August 05, 2003.
7. Iype George, Regulate soft drink firms' operations, urge activists,
www.reifff.com, August 06, 2003.
8. Chatterjee Sivabrata, Tackling pesticides, the ozone way,
www.thehindubusinessline.com, August 21, 2003.
9. Toxic Pesticides Found in India's Soft Drinks, www.ens-news.com, August 05,
2003.
10. Bhattacharya J.Sindhu, 2004 not a great year for cola majors,
www.thehindubusinessline.com, January 01, 2005.
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