Coke’s woes in India

Coke’s woes in India

Climate change is decreasing natural water storage capacity from glacier/snowcap melting, and is subsequently reducing water availability for more than 1/6th of the world’s population that lives in ice fed river basins. The situation is worsened due to extreme changes in precipitation patterns and intensity. In particular, the subtropics and mid-latitudes, where much of the world’s poorest populations live, are expected to become substantially drier.


This reduction in supply is being complemented by a massive increase in demand. Population growth and economic development are driving increases in agricultural and industrial demand for water. Some research estimates an over 40 percent increase in irrigated land by 2080. Freshwater consumption worldwide has more than doubled since World War II and is expected to rise another 25% by 2030. The percentage of global land classified as “very dry” has doubled since the 1970s.


In India, this impact is even more severe. The Central Water Commission data shows that India’s major reservoirs are 79% empty, and 75% of India’s basins are holding less water than the 10-year average. India is currently in the midst of one of the worst droughts ever, with over 330 million people affected. At current rates, the World Bank estimates that India will have exhausted available all water supplies by 2050.


Coke’s (Coca Cola) management is acutely aware of this situation. Listing some of the issues that were affecting the company, Jeffrey Seabright, Coke’s vice president for environment and water resources, mentioned “Increased droughts, more unpredictable variability, 100-year floods every two years,”


For Coke, freshwater is the most valuable resource required. Nearly 2.7L of water go into producing 1L of Coke. The company has been criticized for causing extreme water shortages in developing countries where supplies are scarce. Not only does Coke suffer from direct business risks from scarcity of its as its primary raw material, it suffers an even larger reputational and legal risk as its business puts it in direct conflict with one of humanity’s most basic needs.


Coke has said India could be one of its five biggest markets within the next few years. However, the company has faced crisis in India due to their mismanagement of water resources, including the forced closure of their bottling plant by government authorities in Kerala in 2005, the closure of its 15 year old plant in Varanasi in 2014, the refusal by government authorities to allow a fully-built expansion plant to operate in Varanasi in August 2014, a proposed plant in Uttarakhand cancelled in April 2014, and the withdrawal of the land allocated for a new bottling plant by the government in Tamil Nadu due to large scale community protests in April 2015.


To respond to this challenge, in India and globally, Coke has made this one of its key priorities and instituted a bunch of measures including –


  • Plant assessments and local plans: Coke now requires all bottling plants to conduct a local source vulnerability assessment, following which Coke and its partners develop a locally relevant water resource sustainability program. Often, the plans include partnerships and mitigation initiatives with local governments and communities, water agencies and NGOs.


  • Operational efficiency improvements: The Coca Cola system water use ratio (average plant ratios for liters of water used per liter of Coke produced) has consistently been dropping from 2.61 in 2005 to 2.16 in 2011.


  • Recycling wastewater: Coke is attempting to reduce its impact on water systems and trying to contribute to improved water quality by appropriately treating wastewater and returning it to the environment. In 2011, Coke released 159B liters of treated wastewater across our system (usage of 293B liters)


  • Replenishing the water used: Since 2005, Coke has engaged in 382 projects with partners to improve access to water and sanitation, providing water for productive use and raising awareness about water issues, including engagement on water policy.


At the end of 2011, Coke in India had installed more than 600 rainwater-harvesting structures across 22 states to capture monsoonal rains for aquifer storage. Ponds are being restored in Sarnath and Varanasi and check dams have been constructed at several locations, including areas near Bangalore and Mumbai. In Rajasthan and elsewhere, Coke has been working to advance water-efficient agriculture through drip irrigation, helping 300 farmers install and use the systems. This long-term initiative is lowering farmers’ water and fertilizer costs, increasing their yields and conserving an estimated more than 1.5 billion liters of water every year across approximately 100 hectares of farmland.


It does seem that Coke is doing a lot to mitigate the risks spoken about. One additional area that the company should look at is significant marketing push to protect against the reputational damage, through campaigns and advertising.







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Student comments on Coke’s woes in India

  1. I wasn´t aware Coke was facing these type of issues in India. If I were management at Coke, I would try to forge an alliance with the public sector to better promote water usage responsibility. It can´t be expected for the private sector to provide this types of services, even if it results in positive bottom line results for the company. When the private sector steps in to fill the shoes of the public sector many reputational risks arise. What would happen if Coke suddenly had to stop assisting farmers due to a negative cash flow situation? What would be the backlash?

    1. In India, most MNC’s face massive backlash on all kinds of issues like this. Not unheard of for them to be discriminated against, facing double standards and so on. However, why this problem is unique is because of the simplicity of the problem, I guess. You just cannot use large quantities of water, in an area with shortage, least of all to create Coca Cola. A large part of the water shortage problem in India is due to the inefficacy of the public infrastructure, which will not be solved in a hurry though

  2. Given the popularity of soft drinks and other bottled beverages in India, I wonder whether other beverage production plants are facing similar challenges with government authorities? If so, it would be interesting to see what measures similar companies have also instituted to help mitigate the risks posed by climate change. In particular, I wonder whether Indian beverage companies like Ransa, Limca, and Thumbs up also face similar governmental scrutiny, and if so, how have they responded to these challenges compared to international companies like Coke and Pepsi?

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