APPENDIX – 1

Title : Business Ethics in Aerated Drinks

business

Subject : OVBE

Level / Semester : Level1 / Trimester I

Programme : MBA (Part Time)

Subject Tutor : Dr. Jayshree Desai

Name of Student : Rajaseelan Manavalan

Student’s Registration Number : WBPT/ F09 /07

Date of Submission : 2nd August 2009

Word Count : 1980 words

Word Limit : 2000 words.

 APPENDIX – 2

Student Name Rajaseelan

Manavalan
Registration Number
WBPT/F09/07
Date for submission of the Assignment.
The cover page is in the correct format as indicated in the Guidelines of
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All material written in this assignment is my own and I have not used any
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Signature of the student Date: 2nd August 2009

(________________)

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Analysis of business ethics in the
aerated drinks business
12th April 2009

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 Table of Contents
1 Problem Statement............................................................................................................5
2 Is the world getting drowned in Cola?..............................................................................5
3 So where’s the Trouble?...................................................................................................6
4 Is that the real trouble?......................................................................................................7
5 What then is the magic trick to sell?.................................................................................8
6 When does this magic run out of gas?..............................................................................9
7 Time to reform?................................................................................................................9
8 The Last word!................................................................................................................10
Appendix I – References / Bibliography..........................................................................11

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1 Problem Statement
Research and write a report on:

Choose any product or service you consider to be defective, addictive or inherently dangerous.
Register your choice with the tutor and get it approved. Write a report on your chosen
product/service using the following context:

‘Business organizations today have to consider Ethical Perspectives in the manufacturing and
selling of defective, addictive and inherently dangerous products.’ Critically examine this.

2 Is the world getting drowned in Cola?

Gone are the days when people used to quench their thirst with water and aerated drinks were
consumed only during certain occasions and parties as families could not afford purchasing these
drinks.1

Nowadays, soft drinks are offered in different quantities and oh so affordable prices! Aerated
drinks no longer have segmentations based on income groups more valid. They are consumed by
all except those who cannot afford to buy any drink. An NCAER study says that 91% soft drink
sales are made to the lower, middle and upper middle classes.

Indian homes have been invaded by these attractively marketed aerated drinks displacing some
of their conventional habits. Tea, Coffee, Nimbu-paani, Sherbets and other fruit drinks are now
being replaced by Coke and Pepsi. With change in Indian life style, the fast food culture is
introducing Cola’s as a well packaged very handy drink to go by your meals or to entertain your
guests or just to quench your thirst.

The per capita consumption of soft drinks in India is around 5 to 6 bottles (same as Nepal's)
compared to Pakistan's 17 bottles, Sri Lanka's 21, Thailand's 73, the Philippines 173 and Mexico
605. According to indiastat.com, the 72-billion rupee soft drink industry is growing at 6 to 7%
annually. In India, Coke and Pepsi have a combined market share of around 95% directly or
through franchisees. The demand for aerated drinks is currently 373 million and is expected to be
around 479 million by the year 2014-15. The market growth rate is expected to be 3.5% from
2009-10 to 2014-15.

So it’s a growing market and the aerated drinks are gaining market share with innovative
marketing and sales techniques. So what’s wrong in a business becoming successful?

1
Source: http://you.liveoncampus.com/story-lifestyle/the-world-is-being-drowned-in-cola-1428.html

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3 So where’s the Trouble?
“Two of world’s biggest brand names, known for wooing customers around the world, are facing a
credibility crisis in one of their crucial emerging markets.

The centre for science and the environment announced in August that drinks manufactured by
Coca Cola and PepsiCo in India contained on average more than 24 times the safe limits of
pesticides, which could come from sugar, water and other ingredients.

When those reports appeared on the front pages of newspapers in India, Coke and Pepsi
executives were confident that they could handle the situation, but they stumbled.

They underestimated how quickly events would spiral into a nationwide scandal, misjudged the
speed with which local politicians would seize on an Indian environmental group’s report to attack
their global brands and did not respond swiftly to quell the anxieties of their customers.

Three weeks later, Coke and Pepsi are still struggling to win back the confidence of consumers.
Partial bans on their products remain in a quarter of India’s states and a complex legal battle to
overturn the bans is just beginning. The companies acknowledge that things have not gone
smoothly.

The battle offers a cautionary tale for multinational corporations doing business in developing
countries, especially one like India, where the market for soft drinks is about $1.6 billion, with
Coke holding about 60 percent.”2

For years, residents and activists in Kerala and across India have been fighting a battle against
soft-drink giant Coca Cola for perilously depleting and polluting drinking water supplies3. Coca
Cola and PepsiCo, two of the world’s largest transnational corporations, have been banned in the
southern Indian state of Kerala! Neither of the two soft drink manufacturers can now produce,
distribute or sell their soft drinks in that state.

It raised a few questions on this incident:

1. How did Pepsi & Coke corporate relations with the public and state governments in India result
in such pervasive mistrust for their brand?
2. How does this incident affect Coke and Pepsi’s future business in India?

There were quite a few news items in the media reported at that time that the water sourced for
these products itself contained pesticides. There were also reports about these companies being
targeted by NGOs because of their American background. Many others chose to compare them
with the quality of drinking water supplied by government and other consumer food habits that
had much lesser hygiene. Maybe the companies themselves felt that they were unfairly targeted
by the public, government and the NGOs.

But these companies still can chose to get their acts together and decide whether their future
would beckon them either with pride or shame depending on what they choose to do.

2
Source Clip: http://www.nytimes.com/2006/08/23/business/worldbusiness/23place.html?_r=1 August
2006
3
Source: http://www.globalexchange.org/update/publications/4203.html

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Cartoonist: Khalil Bendib

What lies behind us and what lies ahead of us are tiny matters compared to what lives within us.
~ Oliver Wendell Holmes

4 Is that the real trouble?

It’s not really just the pesticides and depleting water resources, the aerated drinks have a whole
bunch of other health issues as well. Aerated drinks4 are loaded with sugar and devoid of
nutritional value associated with low intakes of vitamins. Regular intake of aerated drinks instead
of water could lead to the following health concerns5:
• High Fructose Corn Syrup, used in preference to sugar, is reported to develop liver
problems similar to those of alcoholics.
• Aspartame, used in diet sodas, is a potent neurotoxin and endocrine disrupter.
• Another problem with aerated drinks is that they act as dehydrating diuretics, inhibit
proper digestive function.
• Caffeine is addictive & stimulates the adrenal gland without providing nourishment. In
large amounts, caffeine can lead to adrenal exhaustion, especially in children.
• The phosphoric acid lowers the pH of the saliva to acidic levels resulting in the body
pulling calcium ions from the teeth. The result is a very rapid depletion of the enamel
coating on the teeth.
• Citric acid often contains traces of MSG, a neurotoxin.
• Artificial Flavors may also contain traces of MSG.
• Water may contain high amounts of fluoride and other contaminants.

4
Source: http://you.liveoncampus.com/story-lifestyle/the-world-is-being-drowned-in-cola-1428.html
5
Source: http://www.ghchealth.com/soft-drinks-america.html

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Cartoonist: Khalil Bendib

5 What then is the magic trick to sell?

What makes the “Cola industry” click? Though the aerated drink is produced in just 50
paisa/bottle, its marketing/advertisement costs being very high add to the selling price of the
product.

The advertisements feature the most popular icons of the Indian society: movie and cricket stars.
It’s marketed as combo meal with other foods in fast food joints. The marketing slogans like
“thanda matlab coca-cola”, “yeh dil maange more” capture the attention of a huge audience of
kids, youths and working professionals and embed the idea that a cola is a cool thirst quencher.
It’s a mental positioning of the cola companies that displaces all other drinks including water in
the minds of people, majority of whom are ignorant of long term health affects of these aerated
drinks.

The society does get warned about dangers in consumption of drugs, tobacco and alcohol. But
no one will tell these kids, youths and working professional about health impact on addiction to
these drinks. These aerated drinks don’t come labeled like the warnings that come with tobacco
and alcohol.

The prevalent image is that these cola’s are a cool thing to drink!

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6 When does this magic run out of gas?
The best example of business organizations fudging on dangerous products was the tobacco
industry. The “Big Tobacco”6 in mid 20th century engaged in decades-long conspiracy to deceive
the American people about the various health risks associated with the modern cigarette. Plots
featured elaborately orchestrated disinformation campaign including maligning medical studies.

At the turn of the 20th century, most of the tobacco firms were engaged in expensive lawsuits 7
against proven serious health damages. Its now widely recognized that tobacco consumption
leads to proven serious health diseases. Half a century back, without the proven hazards, the
onus was on those companies to be more ethical about their manufacturing, marketing and
selling practices. Today, the tobacco business is looked down upon and its firms more disgraced
and distanced from the people thane ever.

A very similar situation exists for the cola companies today. Obesity related diseases and other
health issues of aerated drinks could become the next serious health concerns and today’s cola
companies could be tomorrow’s tobacco companies as far as their smart deceitful branding is
concerned. The Information Age has also morphed in to a new Age of Truth, where a company's
reputation, precious brands and stock can be broken in real time by negative postings by global
watchdog groups such as Corpwatch.org and Global Exchange.

7 Time to reform?
Today, the call for market reform is morphing into demands for reforming markets and capitalism
itself. Today, this one-size-fits-all conventional recipe for economic growth is being challenged not
only on social and environmental grounds - because it is widely seen as failing.

Such market reforms include more ethical, transparent and accountable corporate management,
full disclosure, responsible marketing and advertising, environmentally-friendly products, cutting
exorbitant executive pay and stock options, curbing lobbying and political influence of elections,
unfair labor practices, environmental pollution and resource depletion.

The “Big Colas” have started to come to make some steps in the right direction. The Coca Cola
Company8 and Pepsi have initiated efforts for healthy lifestyle beverages in US. Both have also
started to recognize obesity and started to address the cause within by introducing more healthy
drinks and initiating health, nutrition and environmental concerns.

Since its 2004 launch, Pepsi Smart Spot symbol has made it easier for consumers to identify
PepsiCo products that contribute to a healthier lifestyle in the U.S. The Smart Spot symbol – the
symbol of Smart Choices Made Easy – is a simple labeling system that explains why each
product is a smart choice. It is the only industry symbol that meets nutrition criteria based on
authoritative statements from the U.S. Food and Drug Administration and the National Academy
of Sciences.

6
Source: http://www.thefreelibrary.com/The+Cigarette+Century:+The+Rise,+Fall,
+and+Deadly+Persistence+of+the...-a0197666907
7
Source: http://www.fairness.com/resources/category?node=406
8
http://www.thecoca-colacompany.com/citizenship/fitness_active_lifestyles.html

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Products that carry the Smart Spot label: Contain at least 10% of the Daily Value of a target
nutrient (i.e. protein, fiber, calcium, iron, vitamin A, vitamin C) and meet limits for fat, saturated
fat, trans fat, cholesterol, sodium and added sugar, and/or Are formulated to have specific health
or wellness benefits, and/or Are reduced in calories or nutrients such as fat, sodium or sugar

In 2007, the Coca Cola Company launched 450 new beverage products, including 150 low- and
no-calorie options for consumers. The launch of these low- and no-calorie options expanded our
portfolio of that category by approximately 17 percent from 2006 to 2007. To date, we have more
than 700 low- and no-calorie beverage products, accounting for approximately 23 percent of our
2007 unit case volume. Coca-Cola Zero, now available in more than 90 countries, has been an
important addition to these no-calorie beverage alternatives.

8 The Last word!

Business ethics9 is the behavior that a business adheres to in its daily dealings with the world.
The ethics of a particular business can be diverse. They apply not only to how the business
interacts with the world at large, but also to their one-on-one dealings with a single customer.

Many businesses have gained a bad reputation just by being in business and practicing what
would have been fair a few decades back. The business conduct themselves no bring in ethical
behavior as one its components to address some of its corporate social responsibilities.

Good business ethics should be a part of every business. Competition and Consumers would
always be demanding but the bottom-line growth of the company brand and its trust with its
customers would depend a lot on how the company approaches ethics.

9
Source: http://www.wisegeek.com/what-is-business-ethics.htm

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Appendix I – References / Bibliography
1. http://businessethicsnetwork.org/article.php?list=type&type=176
2. http://www.businessethics.ca/blog/2006/08/coke-pepsi-in-india.html
3. http://you.liveoncampus.com/story-lifestyle/the-world-is-being-drowned-in-cola-
1428.html
4. http://www.researchandmarkets.com/reports/452653/china_soft_drink_market_fo
recast_report_2007_2008
5. http://www.ghchealth.com/soft-drinks-america.html
6. The Cigarette Century: The Rise, fall, and Deadly Persistence of the Product that
Defined America. By Allan M. Brandt
7. Ethical Markets: Growing the green economy. Hazel Henderson & Simran Sethi.
8. http://news.bbc.co.uk/2/hi/south_asia/4776623.stm
9. http://www.expressindia.com/news/fullstory.php?newsid=72176
10. http://www.worldchanging.com/archives//006410.html
11. http://www.pepsico.com/Purpose/Health-and-Wellness/Commitment-to-
Health.aspx
12. http://www.thecoca-colacompany.com/ourcompany/hal.html
13. http://www.corpwatch.org/article.php?id=11916
14. http://www.corpwatch.org/article.php?id=9568
15. http://www.corpwatch.org/article.php?id=2289
16. http://www.corpwatch.org/article.php?id=11379
17. http://www.pepsiindia.co.in/replenishing.html
18. http://www.wisegeek.com/what-is-business-ethics.htm
19. http://www.thecoca-colacompany.com/citizenship/pdf/cwp_map.pdf

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