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Pesticide Charges Bubble Up in India's Soft Drink Industry - 2003-08-24

India's soft drink industry is in turmoil, following allegations that beverages sold by Coca-Cola and Pepsi contain high levels of pesticide residue. The Indian government says drinks produced by the cola giants meet domestic standards, but the controversy refuses to go away.

After several years of steady growth in India, the Pepsi and Coca-Cola companies suffered a sudden setback this month. The independent Center for Science and Environment alleged that soft drinks sold by the two companies in India had "dangerously" high levels of pesticide residue - far exceeding the levels in the same drinks sold in United States or Europe.

The charges stunned consumers and sparked protests and product boycotts by activists and restaurants around the country.

The $1.5 billion Indian soft-drink market took a massive hit. The cola companies, which dominate the Indian market, have not given exact figures, but retailers and local media estimate that sales may have plummeted by as much as 40 percent in a few short weeks, as people switched to non-carbonated drinks, such as juices. The cola companies were relieved, after Health Minister Sushma Swaraj said their beverages conformed to Indian safety limits. She said pesticide residue in most of the samples slightly exceeded European Union norms, but were not as high as the environment group had suggested.

Coca-Cola India's vice president, Sunil Gupta, says he is confident about regaining market share, and his company is launching a mass advertising campaign to restore consumer confidence.

"We will once again get into the consumer-connect mode," said Mr. Gupta. "Now that they understand that the government's approval and the government's stamp has come, I am very confident that our consumers will be back with us."

But controversy over the safety of Coke and Pepsi beverages is persisting, despite Health Ministry assurances.

The Center for Science and Environment is sticking by its charges, saying pesticide residues were identified in the government report, vindicating its position that the beverage industry needs regulation.

Opposition lawmakers questioned the health minister's report also, prompting the government to establish a committee of senior lawmakers to investigate pesticide levels in soft drinks. Independent market analysts describe the cola controversy as a public health issue that has caught the consumers' imagination. They say the soft drink giants may have a difficult task trying to recover their market share. They also describe it as a wake-up call to India's food and beverage industry to stick more closely to international norms.

The government admits that standards for the soft drink industry need tightening, and promises to set more stringent rules by January.