Multinational Corporations: Pro or Con?

On Thursday, October 16, while Cadbury India's managers were busy with their fire-fighting mission after a wriggle of worms was found in cocoa powder boxes just down the road from their Mahalaxmi headquarters in Mumbai, they had unannounced guests. Local BJP workers descended on the chocolate giant's mutedly plush headquarters with ink to throw on the walls, screaming anti-Cadbury, anti-MNC and anti-America slogans over megaphones, with generous smiles thrown in for the select media they had quietly invited.

After the cleaning-up operations, managing director Bharat Puri was left wondering aloud what Cadbury, the very British confectionery firm, had to do with America. In fact, he points out that since Cadbury is one of the oldest MNCs operating in India and is nearly synonymous with chocolates, many of his consumers actually think it is an Indian company. But the protesters were screaming at this strongly "warm, fuzzy"-imaged brand as if Cadbury was the caterer at Auschwitz.

First came impurities in bottled mineral water. Then pesticides in soft drinks. Now worms in chocolates. So are MNCs, far from being classy aspiration-inducing outfits, actually just crooks in expensive suits? Or are they misunderstood businessmen who are being meted out punishment far harsher in India than their crimes warrant? Whatever the answer, suddenly MNCs are looking like a band on the run.

Nothing highlights this siege mentality more than the reaction of many MNCs Outlook spoke to in the last few days. A majority of executives thought the debate over whether MNCs were villains or victims was a valid one, but wanted to stay out of it. The most common response: "Shut off the tape recorder, keep the notepad away, then we will speak." Right now, paranoia rules, okay?

In private, they say they are the victims, convenient whipping boys in the name of swadeshi, but it's a feeling that dares not speak its name. "We can't be seen as publicly blaming anyone, even though we feel that there exist dual standards," the communications manager of one transnational complains on the phone. "Nobody cares a damn, for example, about the lassi they drink from the streetside shop, but when it's an MNC product...", he wanders off. One MNC image manager gets agitated at the very mention of the word. "Drop the M, we are a National Company, an Indian company!" he shouts over a long-distance line. "We have always had an Indian ceo!" Yet another asks: "Tell me, would there have been such a hue and cry if worms had been found in, say, an Amul chocolate?"

Persuade them to reply to a questionnaire and what you get is sterile legalese carefully designed to communicate nothing. But the off-the-record tirade does not stop. "Let's not forget that there are MNCs and MNCs. Some ethical, others not so. Please learn to differentiate between them instead of clubbing them together," pleads a senior vice-president of a food and beverage company. Another, when contacted, tries to set the tone of our conversation with a casual "You know...we are soon planning a multi-crore print media campaign...."

However, some corporations like McDonald's and Cadbury were more than willing to share their worldview. McDonald's (northern) India managing director Vikram Bakshi feels that MNCs are visible symbols and hence it is easy to take potshots at them. "And they don't fight back. MNCs can't be seen as aggressive and rude," he says. McDonald's on its part has always had a crisis management manual in place. You don't know what can strike you when. They are not seeing the pesticide controversy as one that has hit someone else. They are on guard. Always.

Says Cadbury India's Puri: "These protest rallies and this tendency to run to the media is happening because Cadbury is a really strong brand." He says infestation in chocolates is not unusual, and a web search reveals several such cases across the world. But in India, he believes, the controversy has taken on a life of its own because of the strength of the brand. He points out that the protests have been staged by political parties and not consumer activists.

Strong brands make a lot of people uncomfortable. Says Dr Roopa Vajpeyi, honorary editor of Consumer Voice magazine, "We see MNCs as supplanting local consumption patterns that were wholly dependent on local and seasonal produce. We are going through social, cultural and economic colonisation by them. Not long back, people served local and homemade sherbets at home, but now the colas have taken over." Even traditional Indian snacks like namkeens are now getting packed under MNC banners, she points out.

Globalisation-wrought lifestyle changes irk many. Huge ad campaigns, the glitz, the glamour, the hype of celebrity endorsements and above all the image make activists worry about the effect on young Indian minds. Says Dr Vajpeyi, "Thanks to our colonised minds, we have an in-built inferiority complex which makes us hanker after foreign goods. MNCs take advantage of this and even the media broadcasts their ideas because they have softened them with advertising money." Varsha Raut, secretary of the Mumbai Grahak Panchayat, which ran a campaign asking consumers to revert to natural drinks like coconut water, says she feels it is a dire turn of events when people today gift chocolates instead of sweets at Diwali. NGOs working in the rural India complain that children there would rather buy a small Coke for Rs 5 than spend that money on bananas.

The relationship between the MNC and the Indian consumer is rather complex. She does not seem to transfer her love for MNC products to the MNCs themselves. Outlook asked a thirtysomething McDonald's regular chomping away at a McChicken burger, Coke in hand. "It is more about the brand than the burger. I am biting into America," he confessed. "I know big business is bad and I don't trust these guys, but can any Indian company give me a bigger brand than McDonald's?" What is unsaid is—if I find the slightest reason to give the MNCs hell, I shall do so. This is a strangely edgy cross-connection.

One explanation for this love-hate relationship that consumers share with MNCs is that they have brought to India the bad along with the good. The best global practices, for one, is a good thing, but these very best practices also include the policy of hire-and-fire, pink slips and vrs. Thanks to transnational companies, the Indian middle class has seen both dollar salaries as well as unprecedented job insecurities. We hate them but we need their jobs—that is the dichotomy.

Our consumer poll too reflects this uneasy relationship (see graphs). The Indian consumer believes MNCs deliver better quality than Indian companies, but at the same time she believes that Coke and Pepsi did carry pesticides. Forty per cent of those surveyed are willing to pay a higher price for an MNC product, but 46 per cent also believe that MNCs bring outdated products to countries like India.What these seemingly conflicting responses appear to indicate is that the Indian consumer has a really low opinion of local products.

But consumer groups rarely ever bother themselves with quality issues when it comes to local manufacturers. However, their logic is quite simple. The local chaatwala is not faceless, nor is the local mithai shop owner. When consumers have a problem they go directly to these shops and sort it out. But when it comes to multinational products, where do you pin down responsibility? The retailer will almost always ask you to get in touch with the company. Says consumer columnist Pushpa Girimaji: "MNCs shortchange third world consumers when it comes to product quality. There is a difference between a product bought abroad and in India. A lax enforcement system emboldens them." Bakshi disagrees. "No brand worth its salt can afford to be lax," he says. Given the price-value equations in India, MNCs say they can't afford to charge a premium for their products, as a result they do scale down their product offering for the mass market that is India. Says Bakshi, "If globally we sell platinum-plated products, in India the external environment is such that we will have to scale it down to gold-plated. But if a manufacturer goes below this, then there is a problem."

Localisation is another key word. Consumer groups argue that MNCs localise to such an extent, using cheap Indian labour and hiring local franchisees, that in the end their product is also of local quality. But big corporations argue that they bring global practices to India. If they are using a 10-step method to clean water, say in Europe, they use the same method here too. However, given the quality of our groundwater, this 10-step method might not be enough and pesticides can still creep in. Says image consultant Dilip Cherian, "We are now trying to impose European Union standards on bottled water and soft drinks. By doing so, we are setting high standards on the end-product but not on groundwater." He argues that while there is no justification for worms being found in Cadbury chocolates, you have to understand that you can only get a product which is the creation of your environment. If there are flies all around, one or two can enter a Kentucky Fried Chicken kitchen.

The Ahmedabad-based Consumer Education and Research Society (CERS), which has a state-of-the-art testing laboratory, receives on average two to three complaints against MNC food companies every year. Says laboratory director S. Yellore, "Most of the complaints we receive are stray individual cases, which do not reflect a trend. Our tests reveal there is no deliberate attempt by the MNCs to push sub-standard material into India."

For instance, CERS is dealing with a complaint from a family which claims its health deteriorated after eating at McDonald's in Ahmedabad. "Now, it is difficult to generalise that food served at McDonald's in Ahmedabad is substandard," says Yellore. "This particular family faced this problem, and this could be for a genuine reason. But should we run down the MNC simply because one family suffered, while nobody else did?" Complaints should be handled on merit, he feels, and the company must be penalised if guilty. Cherian says that Cadbury can argue that they are in the chocolate business and not in the cold-storage or retail business. "For, there is no doubt that when the chocolate left the company's factory it was worm-free."

But consumer activists say that thanks to weak laws and an ineffective redressal system, the MNCs know that whatever they do, they will get away scot-free. According to Mumbai-based consumer activist Ahmed Abdi, "Instances of problems with food products are not unusual, but because Maharashtra has a history of consumer activism and a strong FDA (Food and Drug Administration), these (worms) problems came out."

Not many consumers go to the courts and even if they do and win the case, the compensation they get is a pittance. Says an MNC executive, "The maximum we are required to give is a free sample of the defective product and the cost of the complainant's legal expenses. In the US, of course, we have to pay compensation for things like the trauma the consumer might have gone through, etc." But in spite of weak laws, MNCs are not taking any chances and paying millions of dollars as insurance premia, they claim, for product and public liability cover.

India's Consumer Protection Act came into force only in 1986. Before this, there was only the Prevention of Food Adulteration Act, which could only be invoked by the state health departments. Consequently both these acts have been given more teeth, but consumer activists are still crying for more.

For instance, according to Consumer Voice, something that requires a complete overhaul is nutritional labelling rules. Right now, except for infant food, it is not mandatory for any other product to declare its nutritional information. Activists feel that products like readymade noodles, chocolates and soft drinks need to disclose how many calories, how much fat and caffeine they contain. Says Dr Vajpeyi, "It was only after the controversy regarding the quality of bottled water erupted that the 'Best Before' label was made mandatory for them."

In the absence of the government as watchdog, the consumer groups have assumed that mantle. Coke and Pepsi, according to industry estimates, may have lost over Rs 120 crore in sales in the months since the pesticide story broke.

Economists and corporate strategists may argue that a democracy like India is a far better bet for MNCs than the iron-fisted capitalism of China. But some MNCs operating in India do get this niggling doubt that democracy is a double-edged weapon. "It gives so much freedom of expression that anyone can attack us any time," says an MNC executive. "What we need is a protective arm. The government should be wary of these NGOs; they will frighten away fdi."

Meanwhile, tension is palpable in hushed MNC office corners. What is the next damaging accusation that's going to hit them?

Well, it could be in the form of a consumer wanting to know whether the meat in his burger is halal (the Muslim way of slaughter) or jhatka (the Hindu and Sikh way). Recently, a Sikh diner sought this information at a McDonald's outlet in Delhi and, not satisfied with the answer, sent off an e-mail to the company. Now both the Akal Takht as well as the Shiromani Gurudwara Prabandhak Committee have got involved, and are pushing for a law that would force restaurant owners to display information about how they slaughter the meat they serve.

At Cadbury's, as a damage control initiative, Puri has launched what they are calling Project Vishwas (trust). As a part of this, full-page ads have been taken out in all major national newspapers. Also, Dairy Milk will now be sold in heat-sealed packs, bulk packaging sizes will be reduced and quality controllers will regularly visit retailers.

And for the record, McDonald's has a mechanised system of slaughter.