Buisness Ethics

UNETHICAL PRACTICES IN THE

CARBONATED SOFT DRINKS INDUSTRY

SUBMITTED BY

NAME-Shirshak Ghosh

REG No- 0342/51

SEC- F

Business Ethics Page 2

Table of Contents

Acknowledgement3

Introduction..4

History of Carbonated Soft Drinks

Industry.5

Coca Cola.6

Pepsi.8

Unethical Practices by organizations in relation with ethical theories9

Corrective Measures and Practices.13

Conclusion..14

References...15


ACKNOWLEDGEMENT:

I would like to express my special thanks of gratitude to my teacher Professor Ranjan

Mitter who gave me the golden opportunity to do this wonderful project on the topic

of Business Ethics: Carbonated soft Drinks Industry, which also helped me in

doing a lot of Research and i came to know about so many new things I am really

thankful to them.

Secondly I would also like to thank my friends who helped me a lot in finalizing this

project within the limited time frame.


INTRODUCTION:

In todays competitive world, many organizations have resorted to unethical practices

for an increase their productivity and profit without a thought towards the

consequences of their actions.

All sectors today have made the use of unethical means very conducive for the

players. In order to stay ahead of their competitors many organization overlook the

moral and ethical aspects of their actions and their main focus remains on increasing

profit and getting competitive advantage.

One such sector would be the sector of carbonated soft drinks where players have

been allegedly trying to maximize their gains by getting involved in such unethical

practices. This report intends to evaluate the unethical practices prevalent in this

sector and also what the sector has been trying as of late to prevent them.


HISTORY OF CARBONATED SOFT DRINKS INDUSTRY

The first marketed soft drinks in the Western world appeared in the 17th century.

They were made of water and lemon juice sweetened with honey. In 1676, the

Compagnie des Limonadiers of Paris was granted a monopoly for the sale of

lemonade soft drinks. Vendors carried tanks of lemonade on their backs and dispensed

cups of the soft drink to thirsty Parisians.

In the late 18th century, scientists made important progress in replicating naturally

carbonated mineral waters. This went on to lead the foundations for the carbonated

soft drink industry. It all began in 1886, when a tree legged brass kettle in Hohn Styth

pembertons backyard in Atlanta was brewing the first P of marketing legend.

Unaware the pharmacist has given birth to caramel colored syrup, which is now the

chief ingredient of the worlds favorite drink. The syrup combined with carbonated

the soft drink market. It is estimated that this drink is served more than one thousand

million times in a day.

Equally oblivious to the historic value of his actions was Frank Ix. Robinson, his

partner and book keeper. Pemberton & Robinson laid the first foundation of this

beverage when an average nine drinks per day to begin with, upping volumes as sales

grew.

In 1894, this beverage got into bottle, courtesy a candy merchant from Mississippi. By

the 1950s Colas was a daily consumption item, stored in house hold fridges. Soon

were born other non- Cola variants of this product like orange & Lemon.

Today the Carbonated soft drinks industry consists of many players globally with

operations in almost 49 countries.

Now, the soft drink industry has been dominated by three major player (1) The New

York based Pepsi co. Inc.(2) The Atlanta based Coca Cola co.


COCA COLA

HISTORY OF COCA COLA:

Coca cola was established by john Pemberton himself. After the discovery of Coca

Cola in 1891 a businessmen Griggs Candler bought coca cola rights for just $2300.

Candler was the first president of coca cola. Candler was a very successful

businessman due to his innovation and marketing skills. He knew that there was a

very good scope for the beverage industry in United States. He started promoting coca

cola by giving away free samples and advertising it in many different ways. By 1895

Candler had built beverage plants in Chicago, Los Angeles and Dallas. By that time

soda drinks got huge reputation in United States.

In 1899 Benjamin Thomas and Joseph whitehead bought rights from Candler to Bottle

and sell coca cola.

As the drink got reputation with the passage of time many new competitors came in

the market, basically copying the coca cola idea. Coca cola responded this thread by

introducing unique bottle shapes, just to differentiate their product from the

competitors. Coca cola then went international by introducing its product in Canada,

France, Cuba, and some other countries.

Robert Woodruffs father bought Coca cola from Candler in 1919. Woodruff is

considered to be the main person behind the success of coca cola. He introduced coca

cola to the word by taking coca cola to the Amsterdam Olympics with the US team.

He introduced Six-pack and open top cooler, to make the drink available to the

customer in home or outside. This was a great innovation done by Woodruff. This

gave Coca cola a huge opening in the market and gave the company a huge success.

In 1941 when the United States entered into the World War, Woodruff introduced

announced that soldiers can buy coca cola for just 5 cents. Coca cola was quite liked

in those areas and when the war finished coca cola was already established in those

areas. Coca Cola then got global; they had their plants all around the world.


After a success story of 70 years coca cola decided that its the time to diversify their

product and introduce something new. This led them to the introduction of Fanta and

Sprite.

In 1981 Robert Goizuta took over as the chairman of Coca cola. He made the Coca

cola as a public company known as Coca cola enterprises Inc.

In 1990s coca cola saw a vast growth in the beverage industry. This era is known as

the emerging advertisement competition. Man other companies were trying to take

competitive advantage over their competitors by applying new marketing strategies.

Coca cola was no different from others. They lined up with various players and teams

to promote their products. They associated with football world cup, Olympics games,

NBA, Rugby world cup and NASCAR competitions. They started the famous

Always coca cola advertising promotion and the coca cola polar bear campaign.

Many new markets like Germany and India were found by coca cola. At the moment

Coca cola has more than 500 brands and is being love all around the world. They have

brands like Diet coke, thumps up, Minute maid, Sprite etc. they have many flavors

like lemon cola, green tea and orange cola etc.

Coca cola collected around 28 billion dollars in revenues and their profit was around 6

billion in 2007. They spent 2.2 billion dollars on advertisement in 2007. They spent

around 60 million dollars for recycling the plastic bottles in United States.


PEPSICO:

Pepsi cola was established by Caled Bradham in 1898 in North California. In 1902 he

properly announced his company known as Pepsi-cola Company. Then Pepsi started

to get attention of people of California and Bradham saw some prospect in this

business so he started Pepsi in bottles. And with the passage of time business got

bigger and bigger and they registered the patent for Pepsi-cola in 1903. In 1903 the

company sold 7968 gallons of Pepsi. Pepsi is believed to be the first company in the

United States to use a motor vehicle instead of horse-drawn vehicle. And in 1907

Pepsi went international by introducing its drink in Mexico. And in 1909 Pepsi signed

racing driver Barney Oldfield as their brand ambassador and went into a marketing

race with other competitors like coca cola. And in 1932 Pepsi increased its

international market by introducing the drink in Argentina and then in Russia in 1938.

Pepsi is considered to be the first company to use a jingle for their advertisement in

1940.

At the moment Pepsi is one of the worlds largest soft drinks company which is all

over the world and has got a huge number of customers. They spent millions of dollars

on research and marketing their product. According to an estimate Pepsi collected

revenue of 14.80 billion dollars by 2010. And at the moment Pepsi have brands like

Pepsi max, Pepsi one, diet Pepsi, Pepsi cherry etc.


UNETHICAL PRACTICES BY ORGANISATIONS IN RELATION

WITH ETHICAL THEORIES:

Firms in this sector have been noticed to be involved in various unethical practices

like:

1: Child labor

2: Water wastage

3: Unethical labor practices

4: Harmful ingredients

The above issues have been discussed in detail below:

CHILD LABOR:

Sugar is the basic ingredient for making soft drinks. Coca cola and Pepsi have been

blamed of buying sugar from sugar farms in Latin America who use child labors for

producing sugar. So indirectly they are encouraging the child labor. They illegally hire

the children to manufacture the sugar. Children are mainly used for planting

sugarcanes in very miserable conditions in Latin America. And before cutting the

sugarcane the leaves are burnt which cause tremendous smoke, which affect the

children health.

If we apply this act using ethical theory this act is against act utilitarianism theory as a

large number of children get affected by child labor and harms are more than the

benefits. So it can be proved that the act of buying sugar from Latin American fields is

unethical.


WATER WASTAGE:

Coca cola is one of the worlds largest beverage manufacturers. Besides their success

in United States they have always been involved in growing their business around the

world. For this they have entered in many global markets around the world. India is

one of those countries, where every multinational company sees a huge prospect due

to their population and growing economy. Coca cola entered in India market in early

1990s.

India is coca colas top international investor. Coca cola has invested around one

billion dollars in India in previous years.

Residents of Kerala (south India) have been facing a tremendous shortage of drinking

water since 1998. When the matter got the attention of higher authorities, an

investigation was conducted and it was found out that the reason behind the shortage

of water was coca cola plant in Kerala. Coca cola was accused of using around one

million liters of water daily to operate. Local people complained that plant since the

plant arrived there was a shortage of water and people stopped working in farms due

to shortage of water. But on the other hand coca cola explained their case by saying

that they didnt cause shortage of water in the state, but the shortage is due to shortage

of rain. And to compensate the local people coca cola started providing drinking water

in those areas which were facing the shortage.

Coca cola has also been blamed for drawing clean drinking water from wells in

remote areas of Kerala. Local people suffered a lot from this as they were force to

bring drinking water from other areas.

The act of coca cola by drawing community water from the ground without the

permission of the local residents is unethical. If we see this from the prospect of act

Utilitarianism Theory, this behavior is clearly unethical. As more number of people is

suffering and only few people are getting benefits.


As coca cola, Pepsi is also accused of affecting the local inhabitant and the local

population in India. Like coca cola Pepsi is also blamed for drawing and wasting

community water for their bottle plant in Kerala, severely affecting the local

population.

UNETHICAL LABOR PRACTICES:

Coca cola is accused of being involved in awful labor practices in Colombia. They are

accused of being involved in violent activates against the labors. Coca cola took the

advantage of poverty in Colombia, as they knew that Colombia is a poor country with

most of its people living in miserable conditions without any means of income, so

they built their plant in Colombia for accessing cheap labor.

International labor rights and united steel workers filed a case against coca cola in a

court in Miami asking for 500 million dollars as compensation. They accused coca

cola for killing some major union leaders for their benefits. But this allegation could

not be proved in the court and the case was discharged.

This act of coca cola by being involved in horrible activates like killing and abusing

the employees is wrong as it clearly defy the theories of ethics.

In 2012, PepsiCo was charged with something more morbid. It was accused of using

the bodies of aborted children to make its productsnot for cannibalism but in product

testing. According to the accusations PepsiCo had been has been contracting with a

research firm that uses fetal cells from babies victimized by abortions to test and

produce artificial flavor enhancers.


HARMFUL INGREDIENTS:

Coca cola is a kind of brand, which always tries to focus on its quality and customer

care in their marketing crusades, but the reality is that coca cola has been accused for

using highly toxic and harmful chemicals in their beverages in recent years, with

caring about the health and safety of their potential customers.

Centre of science and environment believes that coca cola uses such kind of

ventilated water in their manufacturing process that contains very harmful pollutants

and chemicals that can be the main reasons for cancer and break down of the immune

system. Furthermore CSE reveals that coca cola products uses more amount of

chemicals then the suitable level, which are highly harmful and are against the

regulation of European Union.

While on the other hand coca cola refused to accept any of the allegations and said

that they filter the water and they make sure that they use appropriate amount of

chemical in their beverages which is not harmful for human health and safety. And

coca cola announced that the lab test conducted by CSE is not dependable to monitor

the level of chemical in beverages.

As mentioned above that coca cola uses 30 percent of harmful chemicals in their

drinks and on the other hand Pepsi uses more amount of harmful chemical in their

drinks than Coca Cola. These chemical are very harmful for human health and when it

was proved in the lab, both Pepsi and coca cola rejected the labs report telling them

that those reports are unreliable.

As competition is increasing day by day, everybody looks like that he is competing in

a race; they are ready to go to any extreme to win that race. They wont care about

other people and the Ethical norms set by the society. Same is the case with Coca

Cola.

In order to increase their profit and productivity they tried to risk many human lives

by using such harmful chemical in their ingredients, which is wrong and unethical.


CORRECTIVE MEASURES AND PRACTICES TO INTEGRATE

ETHICAL BEHAVIOR IN THE INDUSTRY

1. Coca Cola: Coca Cola has recently been awarded the Pollard award for being

the company which has been the most innovative in implementing ethical

practices in its working culture. Coca Cola is said to have appointed ethical

officers in each of its business unit who audit and maintain the ethical code of

the company.

Also Coca Cola is also leveraging its resources to conserve and protect natural

resources throughout the world. For example, through its partnership with the

World Wildlife Federation, Coca-Cola is working to measurably conserve

seven key watersheds; improve the efficiency of the its water use, including its

agricultural supply chain; decrease its carbon dioxide emissions and energy

use; and inspire a global movement by uniting industries, conservation

organizations and others in the conservation and protection of freshwater

resources around the world. By reducing and recycling the water used in

manufacturing and replenishing water as a vital resource these efforts are

yielding important social, environmental and economic benefits

2. PepsiCo: PepsiCo has also started recognizing the importance of social

responsibility by making efforts to introduce the recycling and treatment of

water and striving to reuse the water as much as possible in their process.

The Pepsi Refresh Project in 2010 was also an attempt by PepsiCo to prove

itself as an ethical organization.

Due to its efforts in conserving water and its attempts to facilitate clean water

supply to communities who are affected by severe water crises it was awarded

as one of the most ethical organization in Munich in the year 2010.


CONCLUSIONS:

We see that earlier Coca cola and PepsiCo had been both involved in many unethical

activities like drawing the community water, without the permission of local

population, therefore causing many difficulties for the local population.

Coca cola had been blamed for using child labor for their operation. They use the

child labor for getting sugar in very miserable conditions which is against the theories

of ethics. And it was also accused of trying to benefit from the poverty of people and

its employees in Colombia work in very miserable condition and they are also accused

of killing some union leaders. This is against moral rights and is considered unethical.

Both the organizations have also been blamed for using unhygienic and harmful

chemicals in their drinks which is very harmful for the health of the people and is very

unethical.

However in these past few years we have seen them becoming more active in

implementing ethical practices not only in their own organization and employees but

also benefitting the consumer and surroundings through them. We can thus understand

and take inference from this trend that today sticking to ethical practices is very

important in this segment. There can be many reasons for these developments. I

believe that one of the major reason that these are organizations have chosen to take

up the path of being ethical is because they have realized that though such unethical

means have their short term benefits but sustainability and profits in the long run by

being more ethical in your organizational practices. Todays consumer has also

become more informed and owing to this effect it is the building of an ethical culture

that can promote the flourishing bond of trust between an organization and its

consumers.


REFERENCES:

1. Tejomoortula, 2006

2. Martinez, 2006

3. Biz/Ed, 2010

4. killercoke.org, 2004

5. Narayanan, 2007

6. Human Rights Watch, 2004

7. sirpepsi.com, 2010

8. Corporation-free.org, 2010

9. Coca-cola.com, 2010

10. Scribd

11. Wikipedia.com

Documents

Buisness Ethics