Cola giants get deja vu feeling

Cola giants get deja vu feeling

Author | Source: The Economic Times | Friday, Aug 04,2006 5:54 AM

Cola giants get deja vu feeling

Cola majors are under siege in India once again. And the timing of this recent, two-day old pesticide-in-cola controversy is eerily similar.

Around August 2, three years back, the Centre for Science & Environment (CSE) released its report alleging high pesticides content in colas selling in India.

Now, Indian subsidiaries of cola giants are half-way through their Q3 when pesticide controversy hits them like a bolt from the blue.

If the damages to cola sales last time hold any indications, this time too, it could deal a crippling blow to the cola companies, say sources. “While the Wednesday's report has caught cola companies unaware once again, CSE has chosen to project it as a 'review' after three years,” said a senior executive in the beverage industry.

This pretty much echoes the sense that many others say they are getting from the press note from the NGO. “Three years after CSE released its findings on pesticide residues in soft drinks, a new nationwide study shows nothing much has changed: soft drinks remain unsafe and unhealthy,” the CSE release said.

Such an allegation, industry feels, threatens to further erodes the public trust in cola companies since it suggests that cola giants have failed to bring their product in order. Queries e-mailed to both - Coca-Cola and Pepsi - did not elicit any response.

Sources say, the two have jointly agreed not to take media queries individually, but tackle them through the ISDMA.

There are concerns within the two companies about the impact the controversy raked once again, could have in the coming months. Bottlers who ET spoke with say, this time around, they haven't seen any communication from the two cola majors.

“They don't seem nimble-footed unlike the last time. We haven't got any calls to keep us abreast of what's going on,” one Delhi-based bottler said.

Last time, Coca-Cola by its own admission saw its volume sales plummet by as much as 11% in the third quarter ending September. Remember, August September are lean seasons for the cola companies. And such alarming allegations take time to sink in the popular memory.

All hell broke loose in the months that followed. In the aftermath of pesticide controversy in 2003, the impact on sales was alarming. Bottling sources had told ET that time, volumes sales slid by over 30% over the six month period. Something which both Pepsi and Coca-Cola have still not been able recover, till date.

This wasn't surprising. Mothers were concerned at the alarm raised by the CSE report, schools banned colas in their cafeterias, yoga gurus scoffed at the product and health drink, and fruits juices companies got aggressive.

No wonder then, Coca-Cola India has witnessed dropping unit case volume nine consecutive quarter despite several initiatives to stem the decline. Pepsi figures could not be sourced, but sources close to the company say, things aren't too good for Pepsi either.

However, analysts surmise, the company may have managed to mitigate the losses on account of its wide non-cola portfolio.

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