India May Swallow Coke

Demanding the secret formula

In India last week, Coca-Cola was fast becoming more than the most popular soft drink in the country; it was turning into two four-letter words. Climaxing a four-year campaign against multinational companies in general and Coca-Cola in particular, the government in effect demanded that Coke turn over its secret drink formulas and 60% of its operations to Indian investors by next April or be expelled from the subcontinent. Minister for Industry George Fernandes, a leftist labor leader installed in his post by the new Janata Party government, charged that Coke was taking far more money out of the country than it was putting in, and trifling with India's own soft-drink industry. Said he: "The manufacture of beverages should be Indianized."

The move is mainly a show of force by India's new rulers. They are eager to prove that they can enforce the 1973 Foreign Exchange Regulation Act better than Indira Gandhi's Congress Party, which was thrown out of office last March. The new mood is a far cry from the more tranquil days of 1950, when Jawaharlal Nehru, Prime Minister of newly independent India, sipped Coke as the cornerstone was laid for an Indian Coke-bottling plant, or in the mid-'60s, when the Dalai Lama, in India as a refugee from the Communist takeover of Tibet, happily quaffed Coke.

The Coca-Cola Export Corp. in India now supplies Coke syrup to 22 Indian-owned bottlers employing some 6,000 people, and runs one plant of its own that makes the concentrate. Their growth, snorts Fernandes, is a "classic example" of how a foreign company can amass power by quietly focusing efforts on frills like soft drinks instead of on areas of intense national concern, such as high technology. He claims that Coke reaps 400% profit margins in its dealings with Indian bottlers.

Coke officials have no objection to turning majority ownership of their Indian subsidiary over to Indians. But they insist that Coke must retain firm control of the quality of drink produced and, above all, the syrup-making secrets. The original Coke formula, so goes company gossip, is kept in a vault in a Georgia bank and is known to no more than ten people in the world. The formula contains an ingredient called 7X, which no one has managed to duplicate. The Indian government's view is that the 1973 law obliges all foreign-owned companies--European as well as American--to share all their technology with Indians, that many have complied and that no exception can be made for Coke.

Coke does not stand to lose a lot even if it is kicked out of India. Coke production in India has almost stopped anyway because the government has held up renewal of the company's license to import ingredients for the drink. Indian sales accounted for only one-fifth of 1% of the company's $3.1 billion worldwide revenues last year. Just in case Coke does leave, Indian researchers have come up with a substitute that they hope will be commercially exploited, keep bottling plants running and employment up. But the copied Coke may not work. India's soft-drink fanciers have learned to distinguish between ersatz Coke, which is peddled everywhere on the Indian market, and the Real Thing.

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