188 © Chapter 5 © Political and Legal Environment SHORT CASES ooereoee INDIA Coca Cola has had a glorious past selling cola all over the ‘world, In fact, the “Coke” brand is one of the most well-known, in the world and it carries with itan image of American culture, But Coke's experience in the emerging Indian market has always been especially challenging due to the protectionist political and legal environment. “Today, the Indian economy is gradually opening its doors to foreign companies in various industrial sectors, But when Coke first stepped into the Indian market, it acquired a significant market share and was a popular drink in the market. It was, then forced to exit India in 1977 when the government at that time demanded that Coca-Cola reduce its stake in its wholly, owned Indian subsidiary to 40 percent. Since then, India has revised its attitude toward foreign investment in a major way and Coca-Cola once again entered India in 1994 after staying away from this largely populated and thusatiractive market for ‘many Years. This ime around, though, Coca-Cola fully owns its, subsidiary and when it returned to the Indian market, it also acquired some local cola and soft drinks brands, including Thumbs Up, which had over 59 peteent market share and a ‘reat distribution network. Coca-Cola’s biggest rival, Pepsi hhad alzeady carved its niche in the market with more than 25 percent market share. ‘While things went smoothly for a while after Coke's re- entry into India, it soon started run-ins with the regional political bodies. Coca-Cola had set up a $12 million plant in Plachimada, a rural town in the southern state of Kerala in India in 2000. But four years later in 2004, the company had to, shut it down, at least temporarily to begin with, The start of 2002 witnessed the anti-Coke ‘Coca Cola, Quit Plachimada, ‘Quit India movement, It began when people who were living lose tothe plant noticed that water in their wells was drying up ‘or becoming polluted, acidic and therefore not drinkable Never having faced this water situation before, all fingers pointed toward the newly established Coke plant, which extracted considerable quantities of ground water on a daily ‘basis for its operations. A small local protest that started off with less than a hundred people, exploded into a nationwide agitation, Soon, social activists and nationalists, who were. against foreign firms and privatization, joined in. Before Tong, the campaign against Coca-Cola hid found supporters, from all over the world including the US., Sweden and France, Source: Mark Thomas, “If Water Has Become a Searce Resource, then the Americans Will Invade Wales and the PM Will Defend Therm b Insising that Wales Could Launch a Water-Borne Chemical Ato.” ‘New Stotesman, Febroaey 16, 2004, p. Mf; Terrenee H. Witkowski “Antigiobal Challenges. to Marketing. in Developing Countries: Exploring the Ideological Divide,” Journal of Public Policy & Market ‘ng, 24 (Spring 2005), pp. 7-23; and “Coke In India: A Not-So-Silent Spring,” Corporate Accountability Incerational,latpziwwwstopeor “The local political body in the area, known as the Pan: chayat, which had initially laid out the red earpet for the Coca Cola plant refused to renew HCCBPL's (Hindustan Coca Cola overages Private Limited) license in 2003. The state govern ‘ment also chipped in and joined the dispute. Eager to fight, back, Coca-Cola approached the High Court in India, but the court ruled that water, being common property, could not be excessively used by one body. By the year 2004, the contro- versy had erupted to such an extent that Kerala state govern ‘ment ordered that the company stop using the ground water. Shortly thereafter, Coca Cola was forced to suspend produc tion at the plant ‘AS a result of this incident and other incidents in India where researchers found that its beverages contained high levels of pesticides that were potentially harmful to human beings, Coca-Cola lost millions in the Indian market. In Sep: tember 2003, a legal notice was issued to the company’s headquarters in Atlanta, the US. by the Joint Parliamentary Committee in India asking the company to immediately sus- pend sales in India or then it would sue the company for $10 billion for selling dangerous drinks. similar notice was given 10 Pepsi as well, They were also expected to recall any already sold products. Coca-Cola overcame this particular setback eventually but it did not in any way make its survival in the Indian market any easier. Its new product launches in India such as the vanilla flavored Coke drink and others such as its energy drink Shock proved to be debacles. However, Coca- Cola isnot giving up in India this time. Itis hanging on with the hhope that some day it will be able to win over the world’s, second largest population. Coca-Cola has responded to grow- ing protests against it in India through a variety of corporate social responsibility initiatives, including the much-hyped Every Drop Counts campaign launched in 2007. USEFUL TWO VIDEO CLIPS MAY BE VIEWED AT WWWUTUBE.COD 1. Coca-Cola responsible for water depletion in India bitps/www youtube.comiwatch?v=USOA_M-sMnwv 2 Indi ns Protest Coca Cola Plant http:/iwww:youtube.com’ -=wyFsodVUd-ot feature=related DISCUSSION QUESTIONS: 1. What should Coca-Cola do to appease the Indian govern- ‘ment and ensure its survival in the market? 2, What effect will this ease have on Coca-Cola's operations in India? 3. What lesson does this ease have for other multinationals that want to enter the Indian market?