Ethic Issue of Pepsi

1. Introduction

Pepsi; one of a global leading soft drink manufacturer and brand, established in 1893, North Carolina, the United States by Caleb Bradham. Its product-Pepsi cola is a key competitor of world-famous brand Coca Cola. The product was officially named Pepsi on 28th August 1898 and became world-famous in 1959 by introduced into the Soviet market (Bhasin, 2013). Pepsi, nowadays, developing into many operational and world leader food, beverage companies with serval famous brands like Pepsi Diet, Lipton, Tropicana, Lay’s, etc. Their products are sale in almost 200 countries worldwide. Each profit of Pepsi’s 18 sub-brands is above billion US dollar a year. The company was list 144 on fortune global 500 in 2018 with $63,525 million revenues and $4857 million profit (Fortune media, 2018). Even a lot of investors said Pepsi is too big to feed everyone on the earth.

Ethic, a key element for a modern company operates. Ethical behavior can help business attract customers, increase loyalty of employees, and attract investors (CISI UK, 2017). The nature and objective of this paper are to evaluate and analysis the main ethic issues our case company-Pepsi faced, what kind of characters that company and stakeholders play, forecast the future potential issue could appear and how ethic success can make business going concern.

1. Ethic issues

1. Environment

As a corporation including food, snack, and beverage, Pepsi is typically involved in environment issues referring to water usage, energy usage as well as carbon footprint (Wikipedia,2019). Recently, the majority of companies lay emphasis on sustainability, which bases on environmentalism and ethics (Closs&Meacham, 2010). To maintain the relationship between customers, the profit of the company and environment conditions, the enterprise supply chain must satisfy the sustainability criteria, no matter from rational utilization of water resources or the recycling of plastic. Otherwise, some serious ethical challenges in its business and operations may be incurred.

There is data indicates that 60 percent of people in developing countries are not able to drink clean water (Tariq* et al.,2006). For example, India is a typical country. With the increasing population in India, Pepsi faced the issue of exacerbating water shortages, as most of the ingredients are produced by the water. Moreover, It was accused that the pesticides in soft drinks excess normal standards, which damaged customers’ health and polluting plants. (Debapratim& Adapa, 2014). Thus, not only the sales of Pepsi decreased dramatically, but also the reputation destroyed by this case. On the other hand, in order to offset customers and recover its reputation, it supplied more water than it used and devoted to water conversation in 2009 (Ferrell et al., 2018). In terms of people in India, they got access to pure drinking water. Meanwhile, as far as Pepsi, it invested plenty of money in water resources construction in the short term and benefited in the long-term. In addition, since Pepsi is regarded as a high-quality product, the government in India would afford more pressure to force them to improve legal system and water quality regulation, by detecting excessive levels of pesticides in Pepsi’s beverages(VEDWAN, 2007).

( Plastic waste collected along shorelines worldwide in 2018, by the company)

[pic 1]

(Source: Statista)

Another challenge that Pepsi faces is plastic pollution. It is obvious that Pepsi Co is the second-largest plastic manufacture corporation worldwide. The number of plastic waste items from Pepsi collected along shorelines amounted to approximately 5800 in 2018. In India, the framers also complained that plastic waste is harmful to their land, making it harder to grow crops effectively (Ferrell et al., 2018).

1. healthcare  

As the world is paying more attention to health, PepsiCo must also consider this factor when conducting business operations. It has been argued that chronic diseases are associated with excessive intake of trans fatty acids and sugar in the human body (Derek et al., 2007).

It is estimated that if the consumption of industrial trans fatty acid reduces by 4.5 grams per day, coronary heart disease issues can be prevented by 30000 to 130000 in South America, Mexico, and Central America. If the consumption can reduce by 9 grams per day, the incidence of coronary heart disease can be prevented by 62000 to 225000 every year (Rafael et al., 2010). In 2009, the WHO invited several giant company delegates to participate in reformulation and reduction in trans fatty acid content in food. PepsiCo showed their effort in cookies and crackers in Mexico and the Caribbean, which decreased to 0-0.3 grams per 100 grams of fat. Meanwhile, in North America, there has been no change in the use of trans fatty acids (Rafael et al., 2010).

[pic 2]

(Source: SciELO)

In addition, reports by the Eurostat(2018), sugar in foods and beverages have an impact on obesity. In Europe, it affected 15.9% of adults. From 2008 to 2014, the obesity rate increased gradually. In order to resist the obesity episode, some EU countries have implemented obesity campaigns and interventions. There have been arguments about pre-obesity because pre-obesity diet patterns could probably lead to obesity. In response to these trends, PepsiCo has promoted Max Coke and baked Lays have enabled more consumers to join in the low-calories lifestyle, but it is still not enough. PepsiCo is investing more money in the development of low-sugar and sugar-sweetened beverages. Although Pepsi's classic formula has gradually become criticized, more and more new beverages have also brought profits to the company.

2.3 advertising

The advertising of PepsiCo brought ethic problems to the company, which included videos, product packaging, jingle, and so forth. Good advertisements helped PepsiCo get through the difficulties and enhance the competitiveness of products. For example,  PepsiCo’s brand colors showed patriotism in 1945(Ferrell, Fraedrich & Ferrell, 2017) and sponsored pop stars to bring products to young people. (Findlay, 1988)

However, improper advertising may damage the corporate image and cause enormous economic loss. PepsiCo’s advertisement of celebrity Kendall Jenner showed a negative response on social media in the 1970s. (Ferrell, Fraedrich & Ferrell, 2019) PepsiCo removed the advertisement in only 24 hours and apologized on social media. (Bond, 2017) These conflictions not only harmed the development of PepsiCo but also damaged the corporate image between different cultures. In 2007, PepsiCo’s bottled water used a "snow mountain" in packaging which misled consumers. (Ferrell, Fraedrich & Ferrell, 2019) In this case, advertising could guide a particular culture in the industry. There were more fake photo packaging at that time. Although the quality of Aquafina is good, PepsiCo took time to clarify what happened and repair its reputation on Aquafina.