Prices, not politics: Why PepsiCo’s in the doldrums

On the 12th of February this year, the United States Chargé d'Affaires in Islamabad, Natalie Baker, wrote a letter addressed to Finance Minister Muhammad Aurangzeb. The letter began with reference to a conversation the two had on the 12th of January regarding taxation and customs issues faced by PepsiCo Pakistan. 

Before we get into the details of the letter, a caveat: There is nothing strange about such communications. PepsiCo is an American company with a significant presence in Pakistan. That means there are American investors behind PepsiCo Pakistan, and when they feel they have concerns, they can raise them through their embassy. Dealing with these sorts of issues is part of an embassy’s job. That is why you have trade representatives. Only recently Pakistan’s trade representative in Moscow managed to get the Russian government to allow the import of potatoes from Pakistan —- something that had been banned earlier because of pest and disease concerns. 

While there is nothing unusual about the US Embassy in Pakistan advocating for American investors, the context does matter. Companies like PepsiCo Pakistan have large regulatory affairs departments. These departments have one dedicated task: dealing with the government. Tax issues? Your regulatory affairs department head knows a guy in the FBR. Flavour mixes are stuck at the port? Someone needs to get a meeting with the commerce minister. Sin tax on sugar being proposed in the upcoming budget? You team up with the regulatory affairs department at Coke Pakistan and deliver a presentation to the Finance Minister. 

Entire lobbying firms are built into these companies, and on top of this they get help from PR firms and the like. Former bureaucrats and military officers are regularly hired by these companies and associations to help navigate Pakistan’s murky regulatory world. And for the most part, these departments are very good at their jobs. Their output cannot quite be measured. Finance and sales departments might have KPIs, and their performance can be quantified. But regulatory affairs depend on personal relationships and behind the scenes advocacy. 

That is why if PepsiCo has reached out to the finance minister through the United States Embassy in Pakistan, it means they are doing so after exhausting all other possibilities. The embassy route is a trump card.