The Real Thing? The Rising Power of NGO's

Coke & Pepsi's India Adventures Mark a New Generation in Defending Brands

by Richard S. Levick

Coca-Cola and Pepsi sit together atop a market of great potential in India as that nation’s populace sips its way through 355 million cases of beverage each year. The cola giants – true to their status as world-leading brands – share 90% of India’s soda market, dominating the demand for soft drink in this land of Bollywood blockbusters, dire poverty, and superpower ambitions.

Yet India has given entirely new meaning to the term “cola war.” It is an ongoing war that persuaded two of the fiercest rivals in the history of commerce to stage a separate peace. The real adversary is not a competing brand, but separate political force that, in some senses, opposes all brands. In some ways, the non-governmental organizations -- NGOs -- that played the decisive role in Coke and Pepsi’s India fracas distrust the global economy as a whole.

Attack the global market’s leading brands, and you attack the market itself. It’s a war of attrition likely to last as long as capitalism, with new found powers in the age of the Internet.

India, the world’s largest democracy, has an economy that is now booming with a growth rate of 8% per year and foreign investments of $8.4 billion last year. Coke and Pepsi themselves have invested nearly $2 billion in India over the years, money that their boards no doubt thought was well spent. Imagine their shock when an Indian environmental group leaked a report alleging the soft drinks were unfit for human consumption.

The health scare was surreal as farmers emptied cola bottles into their fields, using the world’s most valuable brand and its rival as pesticides. One popular TV personage regularly told his cable-TV audience to use the colas only as “toilet cleaners.”

What went wrong in India can easily go wrong elsewhere as new players – namely NGO’s – exert ever more influence in markets around the world. India offers a crash course for facing down the challenges of NGOs and maintaining a global momentum that no corporation can afford to relinquish.

Toxic Cocktails

The soda kings’ troubles began this past August, when the Centre for Science and Environment – or CSE – released a report on the results of a lab study that allegedly found 57 bottles of Coke and Pepsi products from 12 Indian states to contain unsafe levels of pesticides, including a “cocktail of 3-5 pesticides” in all samples.

These levels allegedly exceeded by 24 times proposed environmental regulations that are still being formalized. What’s more, the report came three years after another CSE study found higher-than-allowable pesticide levels in Coke and Pepsi soft drinks, although the Minister of Health issued a statement saying that the conclusions were not warranted by the tests that CSE had done.

Coke and Pepsi are to be commended for their willingness to confront the issue directly and, in so doing, provide a fundamentally salutary example for other companies. Their primary response was to have their products tested by one of the world’s most respected laboratories, the Central Science Laboratory, an Executive Agency of the UK Government Department for Environment Food and Rural Affairs. Test reports detected no residues of the four pesticides allegedly found in the products by the Centre for Science and Environment (CSE).

However, Coke and Pepsi made an unfortunate timing error. CSE’s accusations had already fired the public imagination and the crisis swept the nation. Subsequent attacks, far from quelled, were unrelenting and ferocious, in some cases led by publicly hostile local bureaucrats. Members of the Hindu nationalist Bharatiya Janata Party called for a nationwide ban, as outraged activists staged mock funerals that focused on “tainted” colas.

Problems grew from there. Seven of India’s states refused to lift partial bans on the drinks. One state, Kerala, a left-leaning state government in the south, has totally banned the production and sale of the drinks (a ban which the Kerala High Court would rule against just a month later). Environmentalists are still planning nationwide protests.

No doubt, CSE had succeeded in part because it is viewed as being credible and is considered a well-respected voice in the marketplace of ideas. Just last year it won a $150,000 Stockholm Water Prize presented by King Carl XVI Gustaf of Sweden for its research and advocacy in rainwater harvesting. CSE had also campaigned successfully against air pollution in the 1990s, finally getting Delhi buses, taxis, and “autorickshaws” to use compressed natural gas.

Coke and Pepsi’s troubles illustrate the problem of doing business in an argumentative grassroots democracy, where controversy can spell trouble for big brands and where multinational corporations are victimized by easily slighted nationalism. NGOs may have credibility in the United States, but here – in a nation that counts a socialist like Nehru among its revered founders, and where governments like Kerala’s are strongly entrenched – they enjoy a particularly emphatic legitimacy.

The “Other” Governments

The cola companies first resorted to textbook communications plans, commissioning independent lab tests and working out coordinated public relations responses. So far, so good, but their public response was bogged down in technicalities, waiting for the lab results before aggressively addressing accusations. The delay fanned the flames of suspicion.

Many NGOs, including small ones, have proven that their own brands have all the cachet and global reach of multinational corporations. Some NGOs are critical players in national development, often channeling individual, institutional, and government funding to communities. Others see their mission as hunting down corporate malfeasance, most often non-Indian corporations.

According to Joseph Nye, dean of the Kennedy School of Government at Harvard, many NGOs claim to act as a “global conscience,” representing broad public interests beyond the purview of individual states. While they may not wield the “hard power” of government, they can still coerce by persuasion rather than compulsion.

Some NGOs make the world more democratic, while others act irresponsibly and with little accountability, Nye adds.

Good or bad, NGOs are a fact of life and companies must strategize accordingly.

What the Major Media Missed

There are many types of NGOs – consultancy or research organizations, training or capacity building groups, grassroots organizations, city-based organizations that restrict their focus to cities, national and international organizations, self-help groups, and religious NGOs. Although chartered as Not for Profit, they can still turn a profit.

The rise of the NGO – particularly in India – is a story the major media seem to have missed. IndianNGOs.com estimates there are 1.5 million NGOs at work in India, some 55,000 registered in Bombay alone, including places of worship, sports associations, hospitals, and educational institutions. The Society for Participatory Research in Asia estimates 19.4 million people work in India’s NGO sector, many of them volunteers.

For every corporation doing business in India, there’s an NGO to match. NGOs seemingly know how to cut conglomerates down to size by captivating the public imagination with stories that reach the “Indian heart.” They bear witness to an intrinsic truth – the truth behind every sensational headline – that a news item is first and foremost a story.

The best news stories, those that go national and last for days or months on end, contain three basic elements: a victim, a villain, and a vindicator. It’s easy to see that CSE painted the cola kings as villains, Indian consumers as victims, and itself as vindicator. They know the law of KISS – “Keeping it Simple, Stupid.”

The cola wars underscore their strategies to a tee. CSE’s prior study found pesticide residues in bottled water brands sold in India and in everything from milk and baby milk powder to honey, fruit jam, and fresh fruit. But milk and bottlers almost certainly would have made for lousy national villains. They’re too small, and big stories demand big villains.

Not just Coke and Pepsi, other multinationals have gotten caught in the crosshairs of India’s “other government.” Fast-food chain KFC was reduced to a single restaurant three years ago after Bangalore farmers ransacked a restaurant and accused the company of selling chickens tainted with carcinogens. (KFC has since made a comeback with a menu tailored for a vegetarian culture. It will soon have 30 outlets in India.)

Fighting Back

Coke and Pepsi were armed with an unprecedented resolve to work with each other. They were both ready to fight. They were both ready to be responsive, and the fact patterns were on their side. They had even started the ball rolling with a colorful and persuasive metaphor. Then came the crucial delay, the loss of momentum, and the proliferation of inimical messages nationwide and Internet-wide.

Central Science Laboratory had a national press conference announcing the results of their tests on August 14, 2006 attracting more than 100 journalists – a strong response, but one that occurred nearly two weeks after the CSE pushed their story into the mainstream. The Cola companies acted forcefully and with speed, but not as fast as the proactive NGOs. For large companies, acting as rapidly as their own internal decision making and uncovering of the facts will allow, often puts them at a disadvantage in the media.

Run toward a crisis, rather than from it. The earlier one meets a crisis head-on, the better. When the cola crisis began, Coke referred journalists to supportive blogs and the phone numbers of interest groups, including the Centre for Sanity and Balance in Public Life, whose message points were widely quoted: “What is all the fuss about? Yes colas have pesticides [but] the amount is so low compared to other things Indians consume that they can be ignored.”

The message may have been substantively accurate but it was interpreted to mean, “Don’t worry. Just be happy.” It was an unfair interpretation by the media, but it was one repeated frequently.

A pro-company blog strategy is as essential as it is brilliant. But for it to be effective as an echo chamber, there must be a central controlling voice. The beverage companies – or any companies under attack – need to provide that initial voice. The blogs and third parties will then provide the reverberations that form public opinion. They cannot be left on their own to do it or you will lose control. Unfortunately, in the early days of this crisis, the cola companies, while highly active, were fairly quiet publicly.

Running toward a crisis means confronting the other side’s ostensible messages head-on, but without legitimizing them.

Publish passionate pictures. Controversial business stories are ultimately battles involving visuals. Some pictures are worth a thousand words; others millions. While the cola kings did many things right in responding to this crisis, including print ads and commercials which focused on pictures and emotions -- they lost time at the outset of the story, when emotional opinions were being formed.

Pepsi, in particular, allowed a propitious moment to pass when it had the ultimate weapon at hand – its own freshly minted CEO, Indra Nooyi, a woman as comfortable in a sari as in a business suit. Born and raised in India, Nooyi is 28th on this year’s Forbes list of the world’s most powerful women in industry. She has maintained close ties over the years with Indian government officials and visited the country frequently to grow Pepsi’s market share.

What’s more, she is regarded as a “people person,” a plainspoken executive who isn’t above singing pop tunes and who has merged her Hindu faith with the lifestyle of a busy CEO.

The Indian public no doubt would have been fascinated and maybe won over by visuals of her chatting with farmers, hip urban shoppers, Bollywood starlets, and leading bureaucrats. Pepsi could have flown its CEO to India for photo ops of her in flowing sari drinking Pepsi with farmers or, better yet, children.

In the search for great visuals, corporations needn’t counter-attack NGOs and should, in fact, resist that temptation. If the pictures are good enough, the high ground is the best place to be. Banal photos, the kind corporations often use in their day-to-day marketing, sometimes work, but usually do not.

In crisis, the goal is pictures that communicate both compassion and urgency. In other words, capture the collective imagination.

Perception always trumps reality.Truth is in the eyes of the perceiver even when the “facts” have no basis in reality. Truth is determined by who tells the story and how soon they tell it. Perceived truth may actually be inversely proportionate to the volume of detail presented by one or the other side.

As we’ve seen, CSE came out with the reputed facts first: pesticide residues in Coke and Pepsi are up to 24 times the acceptable standards found in the West. Perception is always guided by the first message we hear. The defense can win, but not by simply battling the facts.

Adverse and inaccurate messages must be boxed out, which is done by introducing new messages into as many news sources as possible, thereby isolating the residual negative reports. Hostile reporters must be identified and contacted on a one-on-one basis to ferret out their individual concerns. Opinion leaders must begin to articulate your position. New messages must be substituted in place of the original reports.

CSE’s lab tests were called into question in tests commissioned by Coke and Pepsi and even by the Minister of Health. But the damage had already been done. Coke and Pepsi were forced to react – to be in the near-impossible situation of having to disprove a negative.

When you’re explaining, you’re losing. Coke and Pepsi executives in India knew consumers would be easily confused, because the subject of pesticides in groundwater and soil is technical and difficult to explain. But explain they did, or tried, for the handfuls of people who cared.

By its very nature, the act of explaining is reactive and reaction is always an uphill battle. Human nature determines that an accepted fact cannot be supplanted by argument; only by another, equally prepossessing fact. Indeed, the best practices of crisis management are interlinked. Indra Nooyi talking to children and drinking cola does not explain or argue. It generates a wholly separate fact in the mind’s eye, and it’s only that fact, or equally simple ones like it, that could have won the day in India before the tipping point - the moment when the momentum of evolving news stories take on a life of its own - occurred.

CSE has a staff of 100; Coke and Pepsi employ 12,500 people in India directly and support more than 200,000 indirectly by virtue of purchases of India-made sugar, packaging material, and shipping services.

In the end, however, India’s new cola war has little to do with cola itself. The story here is the rise of NGOs, especially in developing markets like India. Many activists feel this is the most direct and economical way they can take a shot at a global marketplace that they believe threatens and overwhelms them, and to which they are instinctively hostile. Take a shot at the leading brands in that marketplace and they will rise to the national and potentially global stage.

One billion consumers in India are still at play. Even more important, the Coke and Pepsi crisis is a template for NGOs everywhere to do battle and win -- or at least temporarily wound -- given corporate vulnerabilities that need only be alleged, not proven.

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Richard S. Levick, Esq., President and CEO of Levick Strategic Communications, protects brands and reputations during the highest-stakes global crises and litigation. Honored as Crisis Firm of the Year by the Holmes Report in 2005, the Firm wins the hearts and minds of key audiences with comprehensive campaigns on behalf of clients targeted by regulators, embroiled in litigation, or confronted by grassroots movements. Find a comprehensive arsenal of vital communications tools at www.levick.com, including books, newsletters, and helpful articles.