Lay off the potatoes: PepsiCo India faces backlash over farmer suit

30-Apr-2019 - Last updated on 30-Apr-2019 at 10:36 GMT

PepsiCo India hold IP rights over the FC5 potato variety used exclusively in its Lay's chips. Pic: PepsiCo/©GettyImages/mariusFM77

PepsiCo India has taken legal action against four Gujarat farmers for allegedly illegally cultivating a proprietary potato variety.

The Indian arm of the $64bn global snack giant is suing the farmers for violation of intellectual property (IP) rights of a plant variety registered by the company in 2016 under the Protection of Plant Varieties and Farmers’ Rights (PPV&FR) Act, 2001.

It is seeking Rs 1.05 crore (approximately $143k) from each allegedly infringing farmer.

However, PepsiCo is willing to ‘amicably settle’ the issue if the farmers either sell their potatoes to the company or stop cultivating the FC5 variety it uses for its Lay’s potato chips.

Collaborative farming program

A spokesperson for the company told BakeryandSnacks PepsiCo has proposed the farmers join its collaborative potato farming program.

Genesis of FC5

PepsiCo entered India in 1989 and a decade later, set up a tissue culture & mini-tuber facility in Zahura, Punjab, to develop seeds and plantings of its own varietals for production in India. The facility also exports mini-tubers to Saudi Arab, Egypt, Turkey and Russia.

The company claims 100% of the process grade potatoes it uses in its snacks are locally sourced from farmers across the country.

Potatoes are one of the primary crops in which PepsiCo has a direct relationship with farmers through its collaborating farming network, which it plans to double in the next five years, including expansion into new geographies.

The FC5 – also known as the FL 2027 – was put to commercial use in 2009. It is considered superior because of its lower water content – 80% compared with 85% for other varieties – making it more suitable for processing. Potato Solanum tuberosum L. is one of the 151 crop species that are open for registration under India’s PPV&FR Act.

She said the program “is built on strong backward and forward linkages that improve livelihoods by using protected seeds.

“This program gives [farmers] access to higher yields, enhanced quality, training in best-in-class practices and better prices.”

PepsiCo currently has licensing deals with thousands of farmers around India to grow the FC5 variety and maintains it has to police its IP to protect the cultivators who have entered into legal agreements to grow them.

“The company was compelled to take the judicial recourse as a last resort to safeguard the larger interest of thousands of farmers [who] are engaged with its collaborative potato farming program,” said the company’s spokesperson.

“In case [the four Gujarat farmers] do not wish to join this program, they can simply sign an agreement and grow other available varieties of potatoes.

“PepsiCo India remains deeply committed to resolving the matter and ensuring adoption of best farming practices.”

David and Goliath

Solidarity towards the farmers is pouring in from all corners, including government and on social media from as far away as the US and Brazil.

They claim to be unaware of any wrongdoing, following an age-old practice of exchanging seeds among farmers.

All India Farmers’ Forum (AIFF) announced its support, claiming Indian agricultural laws protect their rights to grow and sell registered crops. It has demanded PepsiCo withdraw the lawsuits or face a nationwide boycott of all Lay’s products.

Government has joined the fray, with a group close to India’s ruling party accusing the multinational of coercion.

The Swadeshi Jagran Manch (SJM) – a Hindu nationalist group with close ties to Prime Minister Narendra Modi's Bharatiya Janata Party – has accused PepsiCo of using legal action to force the farmers to sell their output to the company or to stop growing the FC5 potato variety.

Judge MC Tyagi has given the farmers under June 12 to make a decision. He has also extended the restrictions on the farmers against producing and selling the disputed variety until then.

According to the Ministry of Food Processing Industries, India’s savory snacks market is expected to reach Rs 141,094 crore ($2.02bn) by 2020.

PepsiCo India is the market leader of the category, with a 31% share. The company’s two key brands are Lay’s and Kurkure, to still prevalent taste for ethnic Indian snacks.