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Coca-Cola India wins ruling overturning Uttar Pradesh plant closure order

By Ben Bouckley+

20-Jun-2014
Last updated the 20-Jun-2014 at 16:35 GMT

Coca-Cola India's controversial bottling plant in Uttar Pradesh will reopen after a national environmental tribunal today stayed a local pollution control board ruling ordering its closure.

The forced closure of Coca-Cola’s plant in Mehdiganj, Varanasi, North India had caused a ripple of unease within the industry, and led to checks on the water status of other bottlers in a promising soft drinks market.

Authorities in India closed Coke’s bottling plant in Northern India claiming the plant is creating a water shortage in the area, while pollutants released exceed permissible limits.

But the bottler concerned, Hindustan Coca-Cola Beverages (HCCB) appealed the June 6 order demanding its closure to India’s National Green Tribunal, which handles matters of “substantial question relating to environment” under its 2010 establishment act. 

In a statment sent to BeverageDaily.com today, HCCB said: "We welcome today’s ruling of the National Green Tribunal that stays the Uttar Pradesh Pollution Control Board’s order of closure of the Varanasi Plant."

'We're conforming to all applicable laws and regulations' - HCCB

"The order reconfirms HCCB’s conformance to all applicable laws and regulations in course of doing business," the company added.

"HCCB remains committed to work with communities and all other stakeholders in the area of ground water replenishment in the best interests of the communities we serve and our business," the Coke bottler said.

HCCB is part of Coke’s Bottling Investments Group (BIG) and runs 24 bottling plants across India, where it covers around 65% of Coca-Cola’s system in the country.

Local government had claimed the site was illegal because it is built on council land, but HCCB told this website in January that it has documents proving its ownership rights, and said efficiencies at the plant had risen – 2.35 liters of water were used to make one liter of product in 2012.

“Our water efficiency has improved year-over-year and the operation is a very small user of water compared to other water use groups,” HCCB said at the time.

Coke’s wider water prestige suffers blow

But Utter Pradesh Pollution Control Board ordered on June 6 that the plant be closed, insisting that HCCB take measures to replenish depleted groundwater by twice the amount it had extracted and reduce pollutants to below permissible levels.

The ongoing story is a blow to Coke’s wider prestige since it prides itself on smart water management within its system under the terms of its 2020 Vision.

Especially since the incident has occurred in India, where low per capita soft drinks consumption of circa. 4 liters per capita and rural growth is seen as a major opportunity.

We asked one analyst if he, his peers and the market would increasingly start pricing in the risks inherent in high stress water areas (the potential cost of plant closures, cost of shipping water in, negative PR) to a greater extent in future years.

“The wider question of water scarcity is a valid one, but I wouldn’t know to what extent this is priced into emerging market soft drinks bottlers,” he replied.

‘We’re on track to meet 2020 water replenishment goal’ – Coke

Only on June 5 the Atlanta company announced it was on track to meet its 2020 goal by balancing (replenishing) an estimated 68% of water used in finished beverages based on 2013 sales volume.

Beatriz Perez, chief sustainability officer, said 80% of Coke’s business units were on track or ahead of schedule to meet the 2020 goals.

In India specifically, the company claims to have surpassed a 100% replenishment goal by “creating a replenishment potential of more than 130% of the water it uses in India through the support of projects across the country”.

Beyond its operations this includes the building of rainwater harvesting structures and pond restoration, while check dams and other projects focus on improving water efficiency in agriculture.

Analyst checks on status of PepsiCo bottler

Irrespective of Coke's measures, and the situation on the ground in India, HCCB's experience has drawn wider attention to water as an important resource for soft drinks manufacture.

One financial analyst, Damian McNeela from Panmure Gordon told clients this morning in a note that he had sought and gained assurances from PepsiCo’s bottler responsible for Britvic kids drinks brand Fruit Shoot in India that it was not suffering similar water issues.

“The company confirmed that the Pepsi bottler responsible for Fruit Shoot has not encountered any water issues and was confident that it met all the required local as well as Britvic’s own quality standards,” McNeela wrote, adding that the bottler had begun its first Fruit Shoot production runs.

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