Coke sales fall 11% on pesticide controversy

Coca-Cola said sales in India declined 11 per cent in the third quarter of 2003 due to "false" allegations that its soft drinks contained a high level of pesticides.

This was declared by the company in its quarterly filings with the US Securities Exchange Commission.

This is the first time that the world's largest soft drink company has declared the extent of losses incurred by it due to the allegations by the Delhi-based Centre for Science and Environment (CSE), which said the top 12 soft drink brands of PepsiCo and Coca-Cola contained pesticides and insecticides in excess of the limits set by the European Economic Commission (EEC).

Coca-Cola said: "The unit case volume in India declined 11 per cent during the third quarter of 2003. This is because the beverage industry was impacted by false accusations that soft drinks contained high levels of pesticides." It added that the decline followed several consecutive quarters of strong volume growth.

The company added that following the accusation, the company took proactive steps to reassure the government and consumers about the safety of its products.

Coca-Cola also told the SEC that though unit case volume trends had stabilised over the past few weeks, the company continued to monitor the situation closely.

The multinational's admission of a drop in sales due to the pesticide controversy is significant because in the first week of October, rival cola major PepsiCo International had reported to the SEC that India had contributed significantly to its growth in the third quarter of 2003.

Meanwhile, Coca-Cola India has written a letter to the joint parliamentary committee probing allegations of pesticides in beverages, seeking permission to depose before it.

Coca-Cola's SEC filings also pointed out that the dented sales in India coupled with poor demand in Japan, caused sales in Asia to grow 1 per cent, compared with 9 per cent in the corresponding quarter last year.

It added that the unit case volume rose 4 per cent for the first nine months in 2003, compared with 11 per cent in the same period last year.