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Asia May 31, 2007, 8:34AM EST

Pepsi: Repairing a Poisoned Reputation in India

(page 3 of 5)

Narain suspected Pepsi didn't want tougher standards for water because that might require more rigorous treatment of the water going into its sodas. Naturally suspicious of corporate behavior, she thought: "Why don't we check their soft drinks?"

Over the next six months, Narain had CSE's scientists test random samples of 12 major soft-drink brands, from Diet Pepsi and Coca-Cola to local favorites like Mirinda and Thums Up. "Before we did this," she insists, "I had no idea that all of them were owned by Pepsi or Coke." Still, with an annual budget of less than $1 million at the time (it grew to $1.2 million last year), Narain knew very well the value of snagging big-name villains to promote her cause. "Looking at soda draws attention to the whole pesticide problem," she says. What CSE found were minute traces of pesticides such as lindane, DDT, malathion, and chlorpyrifos. Although much lower than those CSE had detected in milk, the residue levels exceeded stringent European Economic Commission standards for water. Pepsi was 36 times as high as the standards, in CSE tests, while Coke was 30 times as high. On Aug. 5, 2003, Narain held a press conference in New Delhi, saying that the Indian-made soft drinks were "unfit for human consumption" and could cause cancer and birth defects over the long term. As a further insult to Indian consumers, she says, samples tested from the U.S. contained no such residue, prompting Narain to accuse Pepsi and Coke of pushing products "they wouldn't dare sell" at home.

Pepsi executives were stunned and outraged. "When you're testing in subparts per billion," Seth says, "it's like measuring one second in 320 years." Pepsi's India team immediately got on the phone with Nooyi, then president and chief financial officer, and Michael White, PepsiCo International's CEO. "We took it very seriously," says White, "but we also knew our products were completely safe." Pepsi held a rare joint press conference with Coke in New Delhi, offering data that contradicted CSE's and saying the company followed the same strict standards all around the world.

Even Narain didn't quibble with the American companies' argument that the level of pesticides in soda was far lower than what Indians put up with in most other foods. But she contended that fruits, vegetables, and milk offer important nutrition, whereas carbonated sugar drinks don't. As for tap water, she said, most Indians have no choice but to drink it. Moreover, Narain adds, multinationals are "a powerful user of water.... We wanted to draw attention to their impact."

She succeeded. Protesters in Mumbai and Kolkata defaced Pepsi and Coke ads and burned placards depicting soda bottles. Several states restricted or banned soda sales. Blasted with e-mail alerts from CSE, journalists and bloggers worldwide leapt on the story, raising the specter of a global consumer reaction just when soda makers were coming under harsh scrutiny for contributing to obesity.

Nooyi says that Indians' sensitivity about both water quality and foreign companies made Pepsi an inviting target. But its marketing strategy had made matters worse, she admits. Rather than promote the company's efforts to improve water and crops, Pepsi had run splashy ads bursting with Indian celebrities. It painted titanic versions of its red, white, and blue logo on ancient Himalayan rocks and buildings around the country. "Combine the public seeing the mercenary side of us, along with the fact that this was an American company," she says, and "they didn't see the other things we were doing."

Nooyi also appreciates the anxiety many Indians feel over rapid change, especially when it comes in the form of a big foreign company. As she puts it: "Parents were scared that their children were consuming things they had never consumed. And now they had a reason to stop it. Pesticides in cola. Nobody stopped to say: What pesticides?' Or, incidentally, your tea and your coffee has many thousand times that.'"

Linking Pepsi with pesticides was enough to scare off even sophisticated consumers like advertising executive Manish Sinha. He drank cola almost every day and had even worked on Pepsi promotions at the JWT ad agency a few years earlier. "

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