Coca-Cola & Pepsi Harm India's Ecology

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Case Details:

Case Code : BECG023
Case Length : 14 Pages
Period : 2001 - 2002
Pub. Date : 2002
Teaching Note :Not Available
Organization : Coke, Pepsi
Industry : Food and Beverage
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"What Coke and Pepsi need to realize is that passing the buck is not the solution. The fact remains that their dealers and franchisees have defaced the mountains and caused irreparable damage to the ecosystem."

- "Make Coke and Pepsi Pay for this," www.indianexpress.com, August 14, 2002.

"The fine imposed by the Supreme Court on Coke, Pepsi and others is a warning for other violators who think that in India you can completely disregard the principles of corporate governance and get away with it."

- "Coke, Pepsi Fined for Defacing Himalayan Rocks," www.newsindia-times.com, October 04, 2002.

A Novel Controversy!

On August 10, 2002, Coca-Cola India (Coke) and Pepsi Foods Limited (Pepsi), the Indian subsidiaries of multinational cola majors Coca-Cola and PepsiCo, found themselves under attack. In an article published by leading Indian newspaper, Indian Express (titled 'Rape of the Rock'), the two companies were accused of destroying the ecological balance of the Himalayan state of Himachal Pradesh (HP).

Coke and Pepsi had allegedly defaced rocks that were over 45 million years old along the Manali-Rohtang road in the state. These companies had painted their advertisements on the rocks, thus harming the ecosystem and disfiguring the beauty of the mountainous region (Refer Exhibit I for pictures of the painted rocks). While many other companies were also found to have damaged the rocks in this way, Coke and Pepsi were the most high profile organizations involved in this activity as a result they attracted the maximum criticism.¹ This news report (and many other related reports that followed) generated wide-spread outrage against the companies and their illegal use of government-land for advertising products. Many environmentalists referred to this act as 'commercial vandalism.'

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One such protestor, P. K. Manohar, a Supreme Court (SC) advocate and member of the Legal Action for Wildlife and Environment (LAWE),² said, "This is not a free-for-all, and painting old, geologically valuable rocks this way cannot be allowed."³

Environmentalists argued that the damage done by the companies to the fragile ecosystem was irreparable. They pointed out that though the damage might seem to be repairable on paper, in reality it was virtually impossible. Commenting on this, Professor Ashok Sahni (Sahni) of Punjab University said, "It becomes a very expensive proposition trying to wash off the paint with gallons and gallons of thinner and then too completely cleaning it and restoring the original surface is impossible."⁴ Worldwide, companies following good corporate governance policies do not exploit natural formations for commercial purposes. Analysts said that by harming the ecology of the Manali-Rohtang road area, Coke and Pepsi had shown a gross negligence of their duties as socially responsible corporate citizens.

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1] The other companies included Malhotra Book Depot (MBD), Fena Detergent, Birla White Cement, Nestle India, State Bank of India, Sleepwell Mattresses, Annapurna Hotels, Ayur, Amaron Batteries, Hotel Trishul, Hotel Marble, Marble Gold Chai, Rin Zin Resort, Hotel Prashant, Gagan Vanaspati, Shiva Fun World, Water Fun World and Lake View Café. The advertisements of many religious and state government institutions were also found on the rocks.

2] LAWE is a group of lawyers working for the cause of environmental protection and legislation in India.

3] 'Coke, Pepsi under Fire for Painting Rocks in India,' news.nationalgeographic.com, August 27, 2002.

4] 'Rape of the Rock,' www.indianexpress.com, August 10, 2002. Thinner refers to mineral spirits that are used to dilute oil-based paints and varnishes (commonly used to clean painting brushes/equipments). They contain chemicals that could damage the environment if not disposed of properly.