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TN Ban: PepsiCo, Coca-Cola working out a solution

If implemented, the ban could deliver a sales loss of Rs 1,400 cr a year for the two cola majors

Arnab Dutta  |  New Delhi 

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PepsiCo and Coca-Cola, the two beverages majors, are trying to reach an amicable solution with traders’ associations in Tamil Nadu, who have decided not to sell their products from 1 March.

According to sources, local-level officials of the two Cola majors and their franchise bottlers are currently in touch with the office bearers of the associations to persuade them to revisit their decision. Top-level executives of Coke and PepsiCo, both of whom are headquartered in Gurgaon, are monitoring the situation closely. They are also considering the way forward if local-level talks fail. However, the two at present are willing to end the matter locally and involving top-level officials may come only if initial talks fail.

Traders’ associations in Tamil Nadu, such as Federation of Tamil Nadu Traders’ Association earlier this week announced that retailers under them would stop selling products from the two multinational cola firms after February end. According to them, around 1.5 million retail outlets and 6,000 smaller trade associations are to follow the mandate. While, and PepsiCo holds over 85 per cent of the beverages market in the state, the later has a significant food and snacks portfolio. It is not yet clear, however, whether the ban extends to their food products as well. If implemented, the step could lead to significant loss of sales for the two firms. According to some estimated the extent of loss could be Rs 1,400 crore a year.

However, trade experts say such a ban, taken up by traders associations, without any statutory backing may not stand in a court of law. “It is a ban imposed by traders’ bodies and not by the local authorities or the concerned state department, neither it has any legal backing. In such a case, it might appear as biased in a court of law as they are not banning the sale of colas as whole but only products from two companies”, an industry expert, who has dealt with such issues earlier, said. According to sources, if required the cola majors are open to take the battle to the court.

The traders’ associations earlier said that their decision to ban the two are backed by many reasons -– from their foreign origin and consequently taking away profits earned from the market in India to exploitation of ground water tables in the region. Issues related to exploitation of ground water are not new for the two firms in India. Currently, sources its beverages from 54 bottling plants and for PepsiCo the number is 42. Out of which, Coke has two plants in Tamil Nadu and PepsiCo has three -– one company-owned and two franchise-operated.

During the past years several such allegations have come up from different parts of the country where their plants are located. In December last year, the Madras High Court issued an interim injunction disallowing use of water from the river Tamirabani by the two firms.

Since 2014 Coca-Cola, the bigger player in beverages, has faced questions over exploitation of water and polluting the environment in at least six sites, where it has a plant or was planning to build one. These are Varanasi, Hapur and Dasna (UP), Kala Dera (Rajasthan), Plachimada (Kerala) and a site near Narmada river (Gujarat). Out of these it had to shut down at least two units in 2016.

Archrival PepsiCo is facing protest in Palakkad, Kerala where the local panchayat and ground water department is currently observing the allegations of depletion of ground water by the firm, which has a plant in the region. According to source, culture minister A K Balan has asked the department to speed up the process following allgegations that the government is soft-peddling the issue.

According to K Mohan, secretary, Federation of Tamil Nadu Traders’ Association, while they have been contemplating such a ban for quite some time, the recent rise of nationalistic sentiments during the Jallikattu protests in the state has led them to take the decision. Both Coke and PepsiCo are American multinationals. Incidentally, various local players have been requested to ramp up supply of cola drinks to substitute products from and PepsiCo on retail shelves.

First Published: Fri, January 27 2017. 14:13 IST