Coke, Pepsi could bear brunt of Jallikattu protests

They stand to lose about Rs 1,400 crore in sales this summer as protesters make them the fall guy

PepsiCo and Coca-Cola may have to sweat it out this summer as the call to boycott soft drinks made by the two multi-national giants picks up steam in Tamil Nadu.

While the pro-Jallikattu protest simmers on, people in the state have started to rally behind new battle cries. Some want a speedy solution to the Cauvery water dispute, others want Prime Minister Narendra Modi to do more on the Jallikattu issue, while a section of the protesters wants a ban on beverages sold by PepsiCo and Coca-Cola on health and environmental grounds.

These protesters allege that PepsiCo and Coca-Cola, by extending financial support to PETA, the US-based animal rights body that is against the traditional sport of bull taming, have allied with their enemy in trying to kill native cattle breeds — all in a bid to make inroads for their dairy products into the market. Over the past week, protesters have been gathering across the city to destroy Coke and Pepsi bottles to whip up support for their cause.

The discontent has partly been fuelled by the drought that some parts of the state are reeling under. The protesters’ contention that these companies exploit ground water resources to manufacture aerated drinks even as farmers suffer has struck a chord with many.

Last week, the Tamil Nadu Vanigar Sangankalin Peramaippu, the largest traders outfit in the state with 1.5 million members, stepped in with a call to boycott Coke and Pepsi effective March 1, 2017, citing the harmful effects these products have on children.

Finding popular support

The traders’ body had made a similar call in 1998, but it failed to convince consumers and the demand for aerated beverages continued to grow unabated. This time, traders are confident that they would be able to garner support as they believe the popular sentiment is with them with the majority of Jallikattu supporters in favour of the ban.

“We have been thinking about banning these products but were not sure what would be the response from customers. But during the Jallikattu protest, youngsters were demanding such a step. So, we have decided not to sell soft drinks made by PepsiCo and Coca-Cola from March 1,” says K Mohan, secretary of the association.If the decision goes through, the ban could deliver a big blow to PepsiCo and Coca-Cola. Sales worth around Rs 1,400 crore are at stake for them. While the soft drinks market in Tamil Nadu is estimated at Rs 2,000 crore annually, the share of local players is only at Rs 600 crore.

“They (soft drinks) cause more harm than good to the body. Only recently, one of the brands had admitted that their soft drinks are not suitable for children and that they contained certain harmful chemicals,” says A M Vikramaraja, president of the Tamil Nadu Vanigar Sangangalin Peramaippu.

To be sure, Coca-Cola in a print advertisement recently said that its products — Coke, Sprite, Thumps Up and Limca — are “not recommended for children”. As the ad clip went viral, the company clarified that the warning was a mandatory safety disclaimer for products with artificial sweetener and that its soft drinks were safe for everyone to consume.

The damage, though, was done. Several theatre owners, restaurants, hotels and schools quickly heeded to the trade association’s call to stop selling Coca-Cola and PepsiCo products. Along with tender coconut water, local brands such as Kali Mark’s Bovonto, Sri Mapillai Vinayagar, one of the oldest brands in Tamil Nadu, and Bangalore Soft Drinks' Torino are being proffered as alternatives. The state’s catering association too has stopped serving PepsiCo and Coca-Cola products at weddings and parties.

Against the interest of farmers

While PepsiCo and Coca-Cola did not respond to an email seeking their response on allegations made against them, the Indian Beverage Association, where both the companies have representation, says it is deeply disappointed by the stance taken by the trade association. “At the outset, we would like to clarify that there is absolutely no connection between our member companies and the ongoing events in Tamil Nadu. The proposed call is not just against the interest of farmers, traders and retailers of the state, it also undermines the role the industry can play in economic growth and development,” says Arvind Verma, secretary general, IBA.

He says both PepsiCo and Coca-Cola have been actively involved in improving the livelihood of farmers in the state through restoration of water bodies, building check dams and other social initiatives, and the backlash against them is unjustified.

The selective ban called by the traders’ association is being questioned by others as well. “At least the big manufacturers such as PepsiCo and Coca-Cola come under some sort of regulation; many micro brands don’t come under such scrutiny and some of them are run by fly-by-night operators,” says an industry source.

Harish Bijoor, a Bengaluru-based brand consultant, calls the ban “retail jingoism” to say local is better than international. “Retailers are intermediaries, they must not influence to create or destroy a brand. That role belongs to the consumer. There are clear vested interests in this issue,” he says. A CEO of an FMCG company, who does not want to be named, says at the beginning of summer, when cold drink sales spike, traders in a bid to negotiate better margins usually threaten to boycott manufacturers. Currently, MNC products carry a margin of 15-16 per cent, while local brands offer double of that.

The margins on MNC products are not attractive and the only benefit, traders say, is that these companies provide a refrigerator to keep their products. However, the electricity charges are paid by retailers and that takes a toll on their earnings.

Local companies, meanwhile, are hopeful it will be a sweet summer for them. Madurai-based Sri Mappillai Vinayagar Soda Company, which was established in 1909, hopes to increase its market by 100 per cent if the boycott is implemented. The company at present sells its products in just 8 districts in Tamil Nadu and has only recently started to sell in Chennai.