An oversight agency looking at environmental health has found that PepsiCo Inc (New York Stock Exchange: PEP) contains elevated levels of the carcinogen, 4-methylimidazole, also called 4-Mel. A carcinogen is a material that causes cancer.

The high levels were found in a study, despite Pepsi’s affirmations a year ago that these levels would be reduced. The research was conducted independently in March.

Apparently, the soft drink gets its colour from the chemical during the caramel colouring stage in manufacturing. Pepsi sees a higher market share in the soda industry and has tried to make its brand more appealing than rivals Coca Cola.

However, Coca Cola was in line with guidelines after it was told to curb the use 4Methyl.

In response to the study by the Centre for Environmental Health (CEH), Pepsi said that it has been trying to work with its caramel distributor to lower the levels of the substance.

California has enacted a law that forces soda makers like Pepsi to label bottles with a warning that it contains 4Methyl, a known cancer-causing chemical.

While Pepsi and Coca Cola reformulated the composition of their popular sodas, only Coke has done the same in other states.

“This shows how California’s Proposition 65 law can make products safer for all Californians, and in some cases for all Americans,” Michael Green, Executive Director of CEH said. “We applaud Coke for taking this health protective action for consumers nationwide. Pepsi’s delay is inexplicable. We urge the company to take swift action to provide all Americans with the same safer product they’re selling in California.”

According to UPI, Diet Pepsi, Pepsi, Pepsi Throwback Made with Real Sugar, Pepsi One-Zero Calories, Pepsi Max Zero Calories and Miniature Pepsi were the products tested.

In a related story, Pepsi is trying to buy an Israeli soda maker, Soda Stream, for $2 billion. Soda Stream has machinery that can make sodas from tap water, reports financial newspaper Calcalist.

Coca Cola shares were up by 0.3% on Wednesday, with Pepsi taking a hit of 1.16 percent as of 1PM AEST.