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Losing trust, the MNC way
A K Bhattacharya |
August 20, 2003
The final judgement on the cola controversy is not yet out. Senior officials of Pepsi and Coke are hoping against hope that the test results of the Central Food Technology Research Institute will give them a clean chit.
A couple of state governments have already come out with their reports exonerating the multinational cola giants of the charge that their soft drinks contained pesticides and other harmful elements much beyond the permissible levels.
This has emboldened the top management in both the cola companies. They are now questioning the methods used by the Centre for Science and Environment to test the cola samples.
Earlier, they had pointed out how the European standards should not be applied in developing countries like India. They had even gone to the Supreme Court, but their case was dismissed as withdrawn.
They came out with their own advertisements claiming that their products followed all the norms prescribed in the book.
The CSE findings, however, made a deep impact on the consumers of cola drinks.
In the first few days after the findings were made public, the sales of cola drinks were reported to have dropped substantially and forced the manufacturers to cut their production by about 30 per cent.
Even today, many people prefer to avoid cola drinks because they believe that these may contain pesticides that would harm them.
What did the cola giants do? They first tried to counter the charges. Then they wanted to challenge the findings in the court of law, but later changed their mind and chose to move the court with a different petition.
They wanted the courts only to disallow CSE to conduct tests of their drinks in any laboratory that is not accredited and does not have adequate equipment.
Was such a response adequate when their huge market was threatened and the consumers began distrusting their product?
A comparison with an automobile company may not be appropriate, but it is worth a close examination. During the heavy rains in Kolkata a few years ago, Hyundai received several complaints from users of its Santro cars.
The complaints pertained to the malfunctioning of an electronic component.
Hyundai mechanics made an inspection and found out that the component was fixed in the lower part of the car and was coming in contact with water whenever there was waterlogging on the roads after rain.
What did Hyundai do? There was no need for it to do anything. There was no CSE investigation against the Korean company.
An easy option for the company was to repair the components as and when the complaints were received.
But Hyundai chose the difficult path. It decided to recall all the Santro cars in Kolkata and refitted the electronic components at a level in the car where they would not get wet due to waterlogging on the roads.
Santro customers were overjoyed by this gesture from the company. It cost Hyundai some money. But in return it built trust and loyalty.
The same car company (today it has become the country's second largest car manufacturer) can now afford to petition the government against some foreign automobile companies' attempt to import into the Indian market semi-knocked down cars instead of establishing a full-fledged manufacturing base.
Hyundai now feels that foreign automobile giants should be encouraged to establish manufacturing plants in India because that is how the country's components industry can grow and a higher industrial growth rate can be achieved.
True, its arguments are completely unlike a multinational company. But they do not lack credibility because Hyundai has invested in the Indian market and built a consumer loyalty that few other foreign companies have achieved in the recent past.
In fact, it is companies like Hyundai which can improve prospects for foreign investments in this country. There are sections within the Bharatiya Janata Party and its affiliates which still have serious reservations about foreign investment in India.
Such fears go away when companies like Hyundai look at the Indian market from a long-term perspective. They not only invest in plants and machinery to produce and sell cars. They also build a relationship of trust with the consumers.
It is a pity that the cola giants failed to see this basic point about building trust and relationship with their customers. What harm would have been caused if Pepsi and Coke had decided to recall all the cola drinks from the market?
They could have continued to challenge the CSE findings. But by recalling the cola drinks from the market, they would have displayed concern for the consumers and, more importantly, diverted the focus of the controversy.
They could have also announced that they would introduce new tests and standards before marketing the drinks. In this way, they would have lost some money. But they also would have rebuilt the trust of their customers, which they now seem to have lost for good.