UNDERSTANDING INDIA

Prof. M. V. Rajeev Gowda

Indian Institute of Management Bangalore

reachprofgowda@gmail.com

Dr. Ranjini

Indian Institute of Management Bangalore

ranjini.cr@gmail.com

Welcome to India!

What was this ad all about?

http://www.youtube.com/watch?v=ujoxqJbm1ME

Pesticides in Colas

http://newsimg.bbc.co.uk/media/images/39431000/jpg/_39431771_colaboy203afp.jpg

Flashback … 2003

In 2003, the Centre for Science and Environment (CSE), a

non-governmental organization, said soft drinks produced by

multinational giants Pepsico and Coca-Cola, contained toxins

such as DDT that can contribute to cancer and a breakdown of

the immune system.

Tested products included Coke, Pepsi, and several other soft

drinks (SevenUp, Mirinda, Fanta, Thums Up, Limca, & Sprite).

CSE found that the Indian-produced Pepsi had 36 times the

level of pesticide residues permitted under European Union

regulations; Coca Cola's had 30 times. CSE said it had tested

the same products in the US and found no such residues.

Corporate Reactions

Coke and Pepsi both denied CSE’s allegations.

Coke only "hinted at the issue" in ads as it didn't want to legitimize the interest group's claims.

Coke became mired in technical detail, publicizing its own tests that showed the drinks met tough European standards and pointing out that India's Health Ministry had taken issue with CSE's testing methods.

That was the start of a two-year slide for Coke's case sales, (15% drop) which analysts say was made worse by a troubled distribution system and a decision to raise prices in the midst of the pesticide controversy.

Parliament’s Response

Parliament banned the drinks in its canteen.

It also set up a Joint Parliamentary Committee to examine the issue.

The JPC validated the findings of CSE and in early February 2004 asked the government to set standards for carbonated drinks.

The Bureau of Indian Standards met over 20 times to deliberate on the standards. This was the first time standards were being formulated for pesticide residues in soft drinks by the BIS.

In October 2005, after months of data analysis and discussion with all stakeholders — including the two soft drink majors and CSE, it finalised the standards. But these standards had not yet been notified in 2006. Until standards are officially notified, they have no value.

2006: Deja Vu The controversy flared up again in August of 2006,

when CSE released its new test results.

“The study finds pesticide residues in all samples; it finds a cocktail of 3-5 different pesticides in all samples—on an average 24 times higher than BIS [Bureau of Indian Standards] norms, which have been finalized but not yet notified.”

“The levels in some samples—for instance, Coca-Cola bought in Kolkata—exceeded the BIS standards by 140 times for the deadly pesticide Lindane. Similarly, a Coca-Cola sample manufactured in Thane contained the neurotoxin Chlorpyrifos, 200 times the standard.”

Counterevidence

India's Health Ministry said in a sworn statement to the

Indian Supreme Court that Coke and Pepsi beverages

tested in three government labs contained little to no

pesticide residue, and none of the levels found

exceeded "statutory limits."

A prominent government lab in the United Kingdom also

reported it found none of the pesticides cited by the

public interest group.

Standards? Which? For Whom?

When the controversy broke, New Delhi had not even formalized its own regulations.

The levels that Coke and Pepsi were said to exceed—by 24 times—were still proposals that wouldn’t go into effect until early 2007.

Both companies had been strong supporters of new standards. They had participated actively in the government’s standard setting process.

"It's absolutely in our interest to have clear regulations that are scientifically verifiable," says Mike White, chief executive of PepsiCo International.

Media Makes It an Emotive Issue

Newspapers printed

images of cans of the

drinks with headlines

like "toxic cocktail."

News channels

broadcast images of

protesters pouring

Coke down the

throats of donkeys.

http://images.usatoday.com/money/_photos/2006/08/09/inside-indiacola.jpg

Political Response

Governmental response was harsh. Seven of India's

28 states imposed partial bans on Coke and Pepsi.

The state of Kerala banned the drinks altogether.

Officials there have ignored a subsequent high court

ruling overturning the ban (on the grounds that only

the central government can ban a food product).

Judicial Response: Disclose!

The Rajasthan High Court set a deadline of August 3,

2006 for Coke and Pepsi to disclose contents of soft

drinks, including the permissible levels of pesticides

and chemicals, on bottle labels.

Coke & Pepsi, filed an appeal in Supreme Court

against this order

Civil Society Response: Expanding Fronts of Attack

National Alliance of People's Movements coaxed the Central Pollution Control Board in Varanasi to visit a Coke bottling plant at Mehndiganj to check if toxic effluents were polluting water bodies & fields close to the unit.

They alleged that around 25 lakh litres of ground water was being depleted daily by these companies pushing down the water level. (Incidentally, this was exactly what had happened in Plachimada in Kerala that resulted in the Coca Cola factory being closed.)

According to Dr Sandeep Pandey, National Coordinator of the NAPM, the sludge from the factory had heavy metal concentrations like lead, chromium and cadmium that was over the permitted limit.

Interlude: The Cola Companies in India

Coca Cola’s History in India

India's leading soft drink until 1977; it left after the Janata government ordered it to turn over its secret formula & dilute stake in Indian unit as per FERA

In 1993, it returned post-liberalization In 2005, Coca-Cola and Pepsi together held 95%

market share of soft-drink sales in India. Greenpeace urged the Kerala government to close

down the Coca-Cola bottling plant at Plachimada, in Palakkad district, for the "criminal cheating" it had indulged in by passing on to the farmers of the area "toxic wastes" in the guise of fertiliser.

That plant was closed down also because of allegations that it was depleting the groundwater of the area; opposed by farmers

Pepsi’s History in India

Banned from import in 1970s for refusing to release list of ingredients.

Gained entry into India in 1988 by creating a joint venture with Punjab Agro Industrial Corporation (PAIC) and Voltas, selling Lehar Pepsi till 1991.

After liberalisation, Pepsico bought out its partners. Joint venture ended in 1994.

Pepsi arrived on the market shortly after.

Can Coke & Pepsi Walk Away From the Indian market?

India is a small part of the global soft drink business. In 2005,

India made up about 1.4 percent of the 20.6 billion cases of

beverages Coke sold worldwide. Profits were even thinner

Yet, India is key to Coke & Pepsi for their future.

Sales of cola-type soft drinks are on the decline in the US,

where consumers are turning to diet sodas, water, sports

drinks & other noncarbonated beverages. That means

companies have to look for future growth in countries such as

India, where there are lots of people and a growing economy

Indians consume only seven 8 oz servings per capita per year;

scope for growth enormous!

Coke & Pepsi’s Economic Impact

Together, Coke and Pepsi have invested nearly $2 billion in India

They employ about 12,500 people directly and support more than 200,000 indirectly given their huge purchases of India-made sugar, packaging material, and shipping services.

Coke is even India's No. 1 consumer of mango pulp for one of its local soft drink offerings

Of course, there is probably an adverse health impact from consumption of Coke & Pepsi

But details of such externalities are unavailable

Back to the Action: How to Manage the Controversy?

The Two Sides: Coke vs. CSE

Trace amounts of pesticides can be found in India's

water supply and in its crops, as well as in raw

ingredients such as sugar.

Coke says it treats the local water in its plants

before using it to produce soft drinks.

CSE’s director, Sunita Narain, says pesticide residue

can cause cancer, birth defects and damage to

nervous and immune systems if consumed over a

long period.

Risk Regulation & Implications

Refuting these allegations is difficult because:

Standards for safe pesticide levels in drinks have been

agreed on in India but never made a legal requirement.

The industry continues to argue over whether tests are

needed for the final product or the water that goes into

the drinks.

There is also debate over how to cleanse sugar of its

pesticide traces and a recognition that India's

groundwater is so badly contaminated that most food

products contain some pesticide residue.

Science: Explaining the Specifics

Asim Parekh, a vice president of Coca-Cola India, said his

"heart sank" when he first heard the allegations because he

knew consumers would be easily confused .

"I have tried my level best to communicate this information.

But even terminology like PPB - parts per billion - is difficult

to comprehend. This makes our job very challenging."

Bakshi, the Pepsi executive, also struggled with the

message. "The subject is extremely technical. It is hard to

explain the entire story. "

Tactical Aspects: Identity Politics?

Have Coke & Pepsi been singled out because they are foreign-owned?

"We are continuously challenged because of who we are," says Atul Singh, CEO of Coca-Cola India.

But Indian soft drink makers have been tested for similar violations, and many people believe that pesticide levels are even higher in Indian-made milk and bottled tea.

While pesticide residues are present in virtually all groundwater in India, New Delhi has largely ignored the problem.

Brand Vulnerability

Isdell of Coke said CSE "picked on carbonated soft drinks

because that would get the headlines ... for a broader issue

of pesticides in the food chain in India.“

David Cox, Coke's Hong Kong-based communications

director for Asia, accused Sunita Narain, of "brandjacking" —

using Coke's brand name to draw attention to her campaign

against pesticides.

Bakshi, the head of Pepsi in India, said, "You are not just up

against the person holding the press conference, but also the

people who seize on the allegations, the other constituencies

who jump on the fray."

Gaining Leverage

Sunita Narain acknowledged she targeted the soft

drink giants to bring attention to the issue of pesticide

contamination of food products but has stood by her

testing.

"Our concern was that if we are finding pesticides in a

product that is supposedly clean and safe, it means

there is widespread contamination in India," Narain told

National Public Radio's "Morning Edition"

Coke has joined Narain in calling for limits on

pesticide residue in finished soft drinks, not just the

water used to make them.

Crisis Response

In 2006, within a week of the CSE report, Coke

launched the first of three rounds of newspaper ads

refuting the claims. The ads were in the form of a

letter from India's more than 50 company-owned and

franchised Coke bottlers saying their products were

safe. Similar letters were given to retailers.

Merchandisers pressed stickers onto drink coolers

that proclaimed Coke was "safety guaranteed."

"We had a communication that took the bull by the

horns," said Kini, Coke India's marketing chief.

Standard Operating Procedures?

Coke & Pepsi formed committees in India and the US, working in parallel on legal & PR issues.

Worked around the clock fashioning rebuttals

They commissioned their own laboratories to conduct tests and opted to wait until the results came through before commenting in detail.

This approach quickly backfired: their reticence merely fanned consumer suspicion.

They became bogged down in the technicalities of the allegations, instead of focusing on winning back the emotional support of their customers.

Coca-Cola also decided to go on the attack, though indirectly.

Coke officials from Delhi gave briefings during which they

questioned the scientific credentials of their accusers.

They directed reporters to blogs containing large quantities

of uniformly pro-Coke entries

They handed out the cellphone number for the director of

an organization called the Center for Sanity and Balance in

Public Life.

Coke also decided to address customers directly, printing an advertisement asking, "Is there anything safer for you to drink?" and inviting Indians to visit its plants to see how the beverage was made.

Experience has shown that consumers are often reassured by the sight of the water filtration process in the factory.

Coke said it had received about 2,000 calls from people interested in the tour.

And, of course, Coke used the Aamir Khan ad

Assessing the Crisis Response

Coke and Pepsi stumbled badly in their response to the pesticide allegations:

they underestimated how quickly this would spiral into a nationwide scandal

misjudged the speed with which local politicians would seize on an Indian environmental group's report to attack powerful global brands

failed to respond swiftly to quell the anxieties of their customers.

In short, two of the world's biggest brands failed to do what they do best: pitch the virtues of their products directly to their customers.

PR Consultants’ Gyaan

Coke & Pepsi should have known better—Suhel Seth, Advisor to Coca Cola

"Fringe politicians will continue to be publicly hostile to big Western companies, regardless of how eager they are for their investment."

"Large multinational corporations are still seen by pockets of consumers and opinion makers as marauders and not as contributors."

Levick, an American PR consultant, agrees:

"They underestimated their own importance.

"Much more than companies, they are symbols of the West. They don't realize how powerful that is."

"Crisis abhors a vacuum. They needed to show leadership. These minimalist statements were not adequate." —Levick

Because they failed to anticipate the political potency of the story, Coke and Pepsi initially hoped that the crisis would blow over and adopted a policy of virtual silence.

"In the U.S. and the West there is a certain dignity to silence,” said Seth, the Indian public relations expert . "But here people interpret silence as guilt. You have to roll up your sleeves and get into a street fight. Coke and Pepsi didn't understand that."

The companies also failed to realize how fast news travels in modern India

"We are living in a new, very aware India," said Amit Agnihotri, a public relations analyst in Delhi. "We have 36 news channels. People are interested in what is happening around them. Coke and Pepsi haven't understood the power of this new India. They tried to wish this problem away, by ignoring it, by not responding to it. That won't work any more."

Sunita Narain Counterattacks

Takes on Cola cos: “What a line of attack!”

Pepsi’s ads denying it had pesticides in its drinks, said there were

more pesticides in tea, eggs, rice & apples.

Coca-Cola, in its defense, has similarly argued that as everything in

India is contaminated, its drinks are safe.

They say this is being done to target them, because they are big

brands & US multinationals.

The pesticide industry wants the focus not to be on pesticides but on

heavy metals & other contaminants. They also say that they are

being singled out.

We also do not have the luxury of first cleaning agricultural raw

material, then building our processed food industry. We will have to

clean both ends of the food chain—the farm & the fork.

Sunita Narain Analyses MNC Tactics

Tactics used by MNCs against opponents

Diversion is just one of the ploys.

The second is to Deny. This is where 'science' becomes a handy weapon. Even though science has created modern toxins, it is slow on generating knowledge about the impact of toxins and pollutants on our bodies and our environment. The polluters want 'conclusive' & 'incontrovertible‘ evidence that there is cause & effect. We the victims have to prove our science.

The third tactic is to Discredit and Dismiss: your science is not good, it is not validated or peer reviewed. The health minister (Anbumoni Ramadoss) did exactly this when he used a half-baked report to try & discredit our laboratory and our work on soft drinks and pesticides.

The fourth step in the polluter's game-plan is to Damn and to Destroy.

Paradox! Swaminathan S. Anklesaria Aiyar on Risk-Risk Tradeoffs

Colas are safer than alternatives.

The biggest health risk comes not from pesticides but bacteria, which kill millions. Cola has far less bacteria. That is why many foreign tourists drink Coke, Pepsi or bottled water, & nothing else. Ironically, these three drinks are the ones targeted by CSE as being unsafe.

Besides, the actual pesticide level, is

3,080 times higher in milk, 111,600 times in fruit, 69,700 times in vegetables, 60,000 times for tea leaves than in proposed cola standards. These are priority items in diet, and so are permitted high levels,

If you ban colas, what will people switch to? Water, tea, cane juice & fruit juices. (More nutrition?) Banning colas will increase pesticide intake, not decrease it.

The cost is entirely bearable for cola companies. So OK

The Final Word—Indra Nooyi

"One thing I should have done was appear in India three years ago and say: Cut it out. These products are the safest in the world, bar none. And your tests are wrong."

[OK! This sounds like a good strategy]

"We have to invest, too, in educating communities in how to farm better, collect water, and then work with industry to retrofit plants and recycle."

[Really? Doesn’t sound like a typical Pepsico agenda!]

The Course

Overview of the Course

Rationale:

IIM Bangalore welcomes 100s of exchange students from around the world

This course aims to provide them with a broad overview of different aspects of India

Examines external, environmental, societal forces that affect corporations and markets

Very interdisciplinary, lots of great thinkers!

Taught by range of professors & guests

Course Evaluation ... Subject to Revision

15% Film or Book Review

40% Group Project Exploration of some aspect of India

Groups of 3-4

Identify topics and clear them with us

45% Final Examination In-class, closed-book

Questions based on real-world developments, taken from newspapers, linked to course

75% attendance required Grade drops by one if below requirement

The Professors

Introducing Professor Gowda

Born Oct 29, 1963, Bangalore, India

St. Joseph‘s Boys High School, Bangalore

BA: History, Economics, Political Science

St. Joseph‘s College, Bangalore University, 1984

MA: Economics

Fordham University, New York, 1985

PhD: Public Policy and Management

Wharton School, University of Pennsylvania, Philadelphia, 1992

Has never left school! But …

John M Olin Postdoctoral Fellow Law School, University of California, Berkeley,

1990-91

Associate Professor and Research Fellow Political Science + Science and Public Policy,

University of Oklahoma, 1992-2000*

Professor Economics and Social Sciences, Indian

Institute of Management-Bangalore, 2000 – present**

Chairperson, Centre for Public Policy, 2009-13

*Assistant Professor, 1992-1999; **Associate Professor, 2000-2007

http://www.rediff.in/election/2004/mar/15espec.htm

Some Other Things He Does

Quiz Founder Secretary, Karnataka Quiz Association, 1983 BBC TV Mastermind India National Runner-up, 2001

Agitate Triggered protests against attacks on women by

Rama Sena

Write Articles, edited books and on hamaracongress.com

Run an NGO Resurgent India Trust, aimed at youth empowerment

Other Director, Central Board, Reserve Bank of India Carnegie Council Global Ethics Fellow

Introducing Dr. Ranjini

PhD, Sociology/Women’s Studies, Lancaster University

Post-doctoral Researcher and Program Manager, Centre for Public Policy, IIMB

Expertise in e-governance, Information and Communication Technology for development, gender, social and health informatics

Formerly journalist with New Indian Express and Financial Express

Will be the anchor/contact point for this course

Course Website

www.iimb.ernet.in/understanding-india

Contains

Readings

Schedule

Lecture presentations (after each class, the PPT will be uploaded on the Schedule page)

Assignments

Project Groups

Topics Covered/Class Sessions

Introduction to India

India’s Institutional Structure

Negotiating with Indians

India’s Political Evolution

India’s Economy

India’s Consumers

India’s Agrarian Sector

Inclusive Business Models

Innovation in India

India’s Information Technology Sector

Infrastructure and India

Indian Society

Women’s Issues in India

Media and India

Indian Classical Music and Culture

India on the Global Stage: Foreign Policy

Environmental Issues in India

Field Visit to Infosys & INSTEP Program

Rest: Guest lectures/Project presentations

India and You

First, a stream of consciousness experiment

What thoughts/images come to mind when you come across the word India?

OR

What is your impression of India?

Now

While growing up

What motivated you to come to India?

Group Formation

We need to form groups of 3-4 students for the project groups

Ideally, each group should have students from different countries

END