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Pepsi v Coca-Cola war turns hot

The ongoing cola war between global rivals Pepsi and Coca-Cola has taken a weird twist in India with the former dragging the latter to court. The charge: Coca-Cola has snatched employees, bottlers, and agents, all of whom are bound to Pepsi by a contract.

Pepsi has charged Coke with having entered into a conspiracy to disrupt its business operations by inducing key employees and associates to break existing contracts illegally.

Pepsi has sought a permanent injunction and an ex parte order against coke, restraining it from taking away Pepsi's employees and business associates. Pepsi has also reserved the right to seek financial damages from Coke at a later date if necessary.

Pepsi has claimed that a dozen middle-level managers and three territory managers broke their contracts with Pepsi to join Coke in recent months, while during the last year and half, seven managers quit Pepsi to join Coca-Cola.

Justice C M Nayar of the Delhi high court on April 17 issued notices and summons to Coca-Cola and 15 others for May 6. However, Justice Nayar refused to grant the ex parte injunction sought by Pepsi India to stop the alleged inducements by Coke in offering employment to Pepsi's employees while the suit was pending in court.

On behalf of Pepsi, Ashok Desai and Arun Jaitley contended that Coca-Cola had been "rattled by the huge success of Pepsi in India entered into a conspiracy during the last six months to cause loss and damage to Pepsi's business interests by adopting unfair and illegal means."

It added that Coca-Cola had approached many key managers and had successfully lured a commercial manager of its bottling business Gaurav Duggal, and a manager in Surat Sailesh Joshi, besides others.

Pepsi charged that while initially these approaches were sporadic, over the last six months it is clear that Coca-Cola has changed its strategy and has decided to consciously target and approach key employees of Pepsi at various locations in India.

The company has alleged that in most cases, the employees have not been given time to adhere to the 90-day notice period and the one-year confidentiality agreement. The latter deal bars employees joining its rivals for at least a year.

Desai claimed Coke's actions would directly harm the business interests of Pepsi, which had invested over $300 million in the country in establishing business infrastructure.

In its defence, Coke is expected to seek relief in the Indian Constitution which states that there can be no restriction on the movement of labour. Besides, any effort by a company to restrict its employees from joining other companies might fall foul of the Monopolies and Restrictvie Trade Practices Act as an unfair trade practice.

Pepsi has cited the instance of Coke snapping up cricketer Javagal Srinath in spite of the latter signing a contract with Pepsi's sports consultant, 21st Century Media. However, media reports, quoting sources, said that Srinath's contract had been only in the verbal stage.

Similarly, Pepsi has charged Coke with inducing the Board of Control for Cricket in India to give the sponsorship of the recently concluded Pepsi Triangular Cricket Series to Coke, as acknowledged in the BCCI submission before the Bombay high court, even while a contract was signed with Pepsi.

Pepsi has listed the case of Coke trying to induce its music consultant DNA Networks Private Ltd, which organised the Yanni show, to snap its ties with Pepsi and join Coke.

Incidentally, in results announced for the first three months of the year, Pepsi has swept Coca-Cola aside. Pepsi has reported a growth of 27 per cent compared to Coke's 21 per cent during the same period. In the first three months of last year, Pepsi grew by 18 per cent only.

Coca-Cola India chief executive Donald Short had announced that Coke would grow by at least 20 per cent for the whole of 1998. Coca-Cola, along with the Parle brands it acquired when it came into India -- Thums Up, Limca, and Gold Spot -- continue to dominate India with a 55 per cent market share to Pepsi's 43 per cent. But in the cola segment, Coke comes a poor third after Thums Up and Pepsi.

The current summer season is the most important for the cola giants, with consumption at its peak.