Market Overview

Indian Dream Fizzling Out: Indian State Pulls U.S. Soft Drinks Over Water Scarcity

Indian Dream Fizzling Out: Indian State Pulls U.S. Soft Drinks Over Water Scarcity

The Coca-Cola Co (NYSE: KO) and PepsiCo, Inc. (NYSE: PEP) are being pushed to the back by some unsavory developments in their international operations.

In its fourth-quarter earnings call, Pepsi sounded out a word of caution on the global macroeconomic conditions. Rival Coca-Cola said it sees continued macroeconomic challenges in the emerging and developing world and continued growth in the developed world. These comments underline the importance of the emerging and developing markets in the scheme of things for both these companies.

Related Link: Kraft Heinz Might Have Its Eyes On PepsiCo

Pulled Up For Exploiting Water Resources

In the Indian state of Tamil Nadu, Pepsi and Coca-Cola are facing opposition from trade associations and NGOs, which claim that they unscrupulously exploit the scarce water resources of the state. The allegation coming from a country, where farmer suicides are rampant due to crop failure that pushes them deeper into the debt trap, is something that cannot be shrugged off lightly. The boycott called by the association took effect from March 1.

The lead in the revolt is assumed by a trader association called Vanigar Sangam, which belongs to Tamil Nadu. Vikram Raja, the president of the associated was quoted as saying, "[Foreign companies] are exploiting the state's water bodies to manufacture aerated drinks while farmers were facing severe drought."

The views were echoed by Amit Srivastava, director at the NGO India Resource Centre. He reeled off statistics to substantiate his claims. To make a small bottle of the fizzy drinks marketed by Pepsi and Coco-Cola, he claims, would need 1.9 liters of water. This coupled with the water required to irrigate the irrigation-intensive sugarcane, which is being used by these companies, would ratchet up the water consumed for making a bottle of cola to 400 liters.

The contention here is can India afford to squander so much water when several of its states are facing a severe drought following a poor monsoon season last year.

Mass Boycott

Opposition to these beverage makers is increasing, with over a million traders in India choosing to boycott fizzy drinks marketed by them. The Vanigar Sangam said the boycott decision was taken with the concurrence of 6,000 affiliated member associations. More than 1.5 million members of the associations have agreed to replace the foreign-made fizzy drinks with local beverages, it said.

The seed for the current uprising was sown in January when the youth of Tamil Nadu came together to voice their opinion against a court order banning Jallikattu, India's version of bullfighting — considered a traditional sport of the state. The forum there was used to discuss several other issues that affected the native pristineness.

Countering By Dangling Job Carrot

Meanwhile, just as every coin has two sides, the take of the people who stand by the cola companies is this: Consumers are deprived of their choice of consumption. The Indian Beverage Association, a body representing soft drink makers, has decried the boycott, reasoning that Pepsi and Coca-Cola offer employment to about 7,000 people, both directly and indirectly, in Tamil Nadu, the epicenter of the current revolt.

Belgian Bar's Fitting Riposte To Trump's Protectionism

On another count, expressing displeasure over President Trump's policies, a bar in Belgium, going by the name Café ZeeZicht, has decided to take U.S. products off the shelves, beginning Friday. The news reported by the Washington Post said affected products include Coke and Lay's potato chips. As an alternative, the bar is looking to use domestically made colas and chips.

Posted-In: Amit SrivastavaEarnings News Guidance Emerging Markets Global Markets Trading Ideas Best of Benzinga


Related Articles (KO + PEP)

View Comments and Join the Discussion!

Nat Gas Bears Admit There Could Be Some Upside This Summer

Caterpillar Attempts To Stabilize After Thursday's Plunge