A substantial increase in government revenue due to consumer market
expansion and tax collection.
The proposal concluded by stating how well the project fitted with broad
objectives of the economy and how it 'specifically supported national
priorities in area such as exports, agriculture, employment and technology.'
Pepsi's Commitments : 'Nothing Official About It'?
The growing evidence shows that right from the beginning, Pepsi had no
intention of implementing these commitments. Various studies have also
pointed out the fact that Pepsi had no intention of encouraging the
diversification of Punjab agriculture as the real motive was to sell soft
drinks in our domestic market.
Creation of Employment : Tall Claims
The major commitment, that the project would create 50,000 jobs
nationally including 25,000 extra jobs in Punjab, stands nowhere close to
reality. In 1992, Pepsi claimed in its official reports that it has created
direct employment to 909 people. In 1996, the total employment figures
increased to 2400 which is just 3 percent of its commitment of generating
75000 jobs.
Although Pepsi has claimed that it has generated an employment for over
26000 people in India through indirect employment, its definition of
indirect employment is incorrect as it includes vendors such as paanwalas
and juicewalas who sell its
softdrinks. By this definition, all those
companies can claim to have created employment for a vendor
(e.g.paanwalla)
as he sells products of these companies. Does it mean that this vendor is an
employee of all such companies? By adding to their items of sale and putting
a large signboard on their shops, it is totally illogical for Pepsi to claim
that these vendors are its employees.
Employment Generated by Pepsi Foods Limited
|
Source of Employment
|
'90-91 Direct
|
'90-91 indirect
|
'91-92 Direct
|
'91-92 Indirect
|
|
Food Processing
|
169
|
9903
|
170
|
9082
|
|
Administration
|
117
|
432
|
179
|
432
|
|
Concentrate & Bottling
|
497
|
15115
|
560
|
16900
|
|
Total
|
783
|
25450
|
909
|
26314
|
Source:Data taken from
Balance-sheets of Pepsi Foods Ltd.
In the case of Futura Polymers Limited, a company located in Tamil Nadu
with majority holding owned by PepsiCo, the emphasis is on how to reduce the
workforce rather than creating new jobs. Dr.
L.R.
Subbaraman, senior manager
of the company says that he would like to replace as many workers as
possible with machines. He explained that workers cause problems, such as
being lethargic. He also said "Later they will ask for more money, form
organisations, may be union. We are always trying to be more machine
oriented..." (Multinational Monitor, September 1994). If the strategy of the
Pepsi is to have a small workforce, then why did it commit to Indian
government and people of creating 75000 jobs?
Processing plant in Zahura : Uncertain Future
For processing of fruits and vegetables, Pepsi put up a plant at Zahura
village in Hoshiarpur district of Punjab. The company was not satisfied with
the local varieties of tomato. Therefore, germplasms of tomatoes were
imported and tomatoes were grown on 1600 hectares of land, by entering into
contract farming with big farmers. In 1989, Pepsi signed an agreement with
the farmers under which the farmers were to supply hybrid tomatoes to the
paste plant located at
Zahura. However, when the crop was harvested at the
end of 1990 winter, Pepsi's Zahura paste plant failed to start operations.
As a result, these farmers suffered combined losses of nearly Rs 25
lakhs.
The farmers are still waiting for the compensation to be paid by Pepsi.
According to one estimate, only big farmers have benefitted from this plant
so far while it has not contributing anything to small and medium farmers of
Punjab.
Already, there have been press reports indicating that the company is no
longer interested in the continuation of this plant and is making attempts
to sell it off. Our attempts to know the exact position from the company on
this matter have not yielded any information.
Change of Brand Name
When Pepsi was allowed to begin its operation, one of the commitments
made was that the company would not use its brand name, Pepsi, in India. But
this commitment was also broken by the company. During the first year of
operation, Pepsi used an Indian brand name, Lehar Pepsi. But, with the
introduction of the new economic policy in 1991 under which the use of
foreign brands was allowed, Pepsi immediately changed its soft drink brand
name from Lehar Pepsi to Pepsi.
Agro-Research Centre in Punjab : Yet to Start
Pepsi agreed to set up an agro-research centre in consultation with ICAR
and Punjab Agriculture University, Ludhiana in Punjab. But no such centre
has been set up by the company so far.
The Reality of Export Commitments
Another major commitment made by the Pepsi was that 50 percent of the
total value of the produce will be exported. A quick glance at the items
exported by Pepsi reveals that export value of fruits or vegetable based
products are negligible. In order to fulfill its commitment, the company
resorted to exporting a variety of Indian products like 'Basmati' rice,
Darjeeling tea, shrimps, glass bottles, champagne and even leather products.
These traditional export products have already been exported by many
companies in India. What has been Pepsi's own contribution and expertise in
exporting these goods from India?
Pepsi's Exports
(in
Rs.
crore)
|
Products
|
1992-93
|
93-94
|
94-95
|
95-96
|
|
Rice
|
7.9
|
10.4
|
7.4
|
18.0
|
|
Paste*
|
3.2
|
2.5
|
4.1
|
3.0
|
|
PSS
|
8.6
|
9.1
|
21.6
|
40.0
|
|
PET
|
0.4
|
0.4
|
36.2
|
133.5
|
|
Guar
|
12.8
|
14.3
|
2.8
|
3.4
|
|
Others
|
3.3
|
2.0
|
1.2
|
3.0
|
|
Total
|
36.2
|
39.7
|
73.3
|
200.8
|
Source: Global, January,1997.
*includes tomato & chilly.
The above table indicates that environmentally hazardous products such as
PET bottles produced by Pepsi's other company in India, FPL, constitute
nearly 70 percent of its total exports.
Plastic Business : Heavy Environmental Costs
In 1994, PepsiCo International initiated a joint venture with an Indian
company called Indian Organic Chemicals Limited
(IOCL) to make resins for
the PET bottles in which the soft drink is sold. This joint venture called
Futura Polymers Limited (FPL) is located at Manali outside Madras and is
among the largest fully export-oriented companies in India. Within two years
of its operation, FPL has become a global sourcing point with its products
are being sold to over 14 countries. Apart from resins, FPL also makes
'Preforms' - these are PET bottles which are miniaturised for convenience in
shipping and are blown upto full size in the bottling plant. FPL has a
long-term supply contract with Pepsi. Recently, Pepsi has invested a further
Rs 25 crore to augment capacity by 7000 tpa to 28000
tpa, taking its equity
in the project from 52 percent to 70 percent. This plant imports used PET
bottles and materials from US and other countries to reprocess it. The
economic logic behind export of this plastic waste is very simple. For
Pepsi, it is much cheaper to export this waste from US to India than to
recycle it in US or transport it to US landfill sites. Plastic production is
a very hazardous process. Various studies by experts have found out that the
production of a 16 ounce PET container generates over 100 times more toxic
emissions than a glass bottle of the same size. With the setting up of FPL,
Pepsi has managed to relocate the hazards involved in production and
disposal of PET bottles from US to India.
Based on US Customs Department data, Greenpeace analysts found that Pepsi
exported 9,167,722 pounds or about 4,500 tons of 'Plastic Scrap' in 23
shipments during 1993 to this plant. The FPL representatives have also
admitted that they have been importing plastic waste. The FPL
representatives told Greenpeace researchers that a portion of the imported
plastic waste cannot be processed at their site. They estimated that 60-70
percent can be processed, but the rest is either too contaminated, non-PET
plastic, or other garbage. The representatives also said that they get rid
of the non- usable portion. Greenpeace representatives have also documented
the bad working conditions of the workers, especially women workers, in the
plant. (Multinational Monitor, September 1994).
From Joint Venture to Fully-Owned Subsidiary
Pepsi is no longer a joint venture company with its Indian partners.
Taking full advantage of liberalised policies, it has taken full control of
Pepsi Foods. In 1994, Pepsi made a offer to both Voltas and PAIC to buy
their equity at 'attractive' terms. Voltas sold all its shares to Pepsi
while
PAIC, being a public enterprise, was forced to pull out and now it
holds less than 1 percent of the total equity in Pepsi Foods Ltd. Instead of
taking strict action against Pepsi for not following its commitments, the
Indian government has given more concessions to it in the
post-liberalisation period. For instance, it has allowed Pepsi to increase
its turnover of beverages component to beyond 25 percent, and Pepsi is also
no longer restricted by its commitment to export 50 percent of its turnover.
Recently the government also allowed PepsiCo to set up a new company in
India called PepsiCo India Holdings
Pvt.Ltd, a wholly owned subsidiary of
PepsiCo International. Surprisingly, the new company is also engaged in
beverage manufacturing, bottling and exports activities as Pepsi Foods Ltd.
All the new investments by the PepsiCo International have been channelised
through this new venture. It now handles 28 bottling plants with a sales
turnover of Rs 500 crores which is higher than Pepsi Foods's turnover of
Rs.375 crore in 1996. (The Financial Express, April 21, 1997). Although the
financial performance of both these companies in India has not been
creditable so far, with total accumulated losses close to Rs.350 crore
(except small surplus in 1996), yet it has been successful in achieving
significant market share and brand royality in India. The company in recent
years has not only bought over bottlers in different parts of India but also
bought Dukes, a popular soft-drink brand in western India to consolidate its
market share. It has also shrewdly consolidated its position through
agressive marketing and advertising in India. According to surveys conducted
by many market research agencies, Pepsi now holds over 40 percent share in
Indian soft drink market. In 1995 alone, the company's beverage business
grew 50 percent, well ahead of the market which expanded by 20 percent.
Another important recent shift in Pepsi's marketing strategy has been its
focus on Cola over other non-Cola brands. "We have single- mindedly focused
on brand Pepsi" admits
Rishi, Vice-President, Marketing, Pepsi. (Business
India, January 15-28, 1996). At the international level, PepsiCo
International has been focussing more on India where the consumption of soft
drinks is expected to increase many- fold which is only three ounces per
person now as compared to 200 ounces in Europe and over 300 ounces in North
America. But, at the same time it is not realised that there is a vast
difference between the purchasing power of an average Indian and North
American as it takes an Indian 1.5 hours of work to be able to buy a bottle
of Pepsi whereas for an North American, it takes less than 5 minutes. This
experience of eight years clearly shows that Pepsi, totally preoccupied with
selling soft drinks in India, has broken promises. The responsibility of
implementation of commitments cannot be left to Pepsi alone. One should
expect the state machinery to intervene and enforce these commitments on
Pepsi. Surprisingly, there is a total silence on the part of state
machinery. Thus, the question is - Who will force Pepsi to implement its
commitments?
Key Demands
In November 1994, PIRG issued an open letter to Christopher Sinclair,
President and CEO, PepsiCo demanding :
-
Pepsi should immediately stop importing plastic wastes to India and
the use of plastic bottles for its soft drinks in India;
-
Pepsi should immediately pay compensation to the Punjab farmers who
suffered losses due to its indifferent attitude;
-
Pepsi should take steps to make its financial reports and other
documents accessible to Indian public; and
-
Pepsi should fulfill all its commitments made by it.
Source:
Public Interest Research
Group, New Delhi.
