Back to top

Analyst Blog

Zacks Equity Research

Racism Charges Cost Pepsi $3.13mn

KO PEP

Trades from $3

PepsiCo Inc. (PEP - Free Report) will now have to shell out $3.13 million as a price for alleged racial discrimination. Pepsi Beverages Company – the manufacturing, sales and distribution operating unit of Pepsi in United States, Canada and Mexico – allegedly carried irrelevant criminal background checks on several African American applicants, and thereafter denied them jobs in the organization.

The racial discrimination charge was filed in the Minneapolis Area Office of the U.S. Equal Employment Opportunity Commission (EEOC), and upon investigation it "found reasonable cause to believe" that Pepsi’s criminal background check discriminated the ‘black people’ and affected more than 300 ‘black applicants’. Pepsi has agreed to pay the aforementioned amount and will also provide job offers and training to the applicants, or the victims of the former criminal background check policy, who still want jobs at Pepsi and are qualified for the jobs for which they apply.

According to EEOC, if a person is denied employment on the basis of irrelevant criminal backgrounds, it goes against the states’ labor laws and is illegal under Title VII of the Civil Rights Act of 1964. Moreover, the EEOC notes that such a policy can prove to be detrimental to the backward classes of the society.

However, Pepsi worked together with EEOC and has modified its hiring policy after it was accused of the racial charges. Pepsi claims that the new policy aims "to create a workplace that is as diverse and inclusive as possible."

Pepsi’s Tropicana Faces Ire?

Separately, according to The Wall Street Journal, Coca Cola Company (KO - Free Report) alerted The Food and Drug Administration (FDA) saying that it had detected low levels of an unapproved fungicide, called ‘carbendazim’, in the company's own orange juice and also in its competitors' juice that were shipped from Brazil.

Coca-Cola’s Minute Maid and PepsiCo’s Tropicana held almost a two-third share of the U.S. orange-juice market in the past year

The regulatory authority has henceforth increased its accuracy of testing the orange juices imported from Brazil and is geared up to block or remove any potentially contaminated orange juice from the U.S. market.

PepsiCo has also been accused of making false claim to its customers of providing "100% pure and natural" juice through its Tropicana. The plaintiff, who is a Californian woman, claims that “PepsiCo actually puts the juice through extensive processing, adding aromas and flavors that change its essential nature and give it a longer shelf life.”

Currently, we prefer to be Neutral on Pepsi’s stock. Furthermore, Pepsi holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.




In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Coca-Cola Company (The) (KO) - free report >>

Pepsico, Inc. (PEP) - free report >>