Coke and Pepsi have dominated the soft drink market for over a century and both have been fighting to stay at the top to acquire the monopoly in the market. These both soft drink giants are at each other’s throats since they entered the soft drink beverage market. Coke and Pepsi are a fine example of the biggest market rivalry in the history of soft drinks globally. These two chief rivals have had their fair share of winning and losing the battle on and off in the market. From innovation in the bottle designs to creating attention-grabbing ads, the Pepsi Cola market rivalry has created huge buzz in the soft drink beverage industry.
One introduces a new unique product in the market and the other follows it launching its rival product to give a tough competition. Be it snatching the top position in terms of annual sales, both the soft drink giants have been close to the final line. The competition and the pressure generated due to Pepsi Cola market rivalry has also given a huge advantage of both of them and they both have managed to stay on the top of taste and demand. This truly highlights how a worthy opponent can be a wonderful motivator.
In the year 2009, Pepsi registered a net income of $ 1.12 Billion which was somewhat lesser to the previous year which was $ 1.15 billion. The other side, Coca Cola made $1.51 billion in 2008, falling by 10% in 2009 at $ 1.36 billion. Pepsi further stated that it would control its biggest bottlers. This was a good move as it could smooth the distribution of the beverage boosting it. To acquire stakes in PAS (PepsiAmericas) and PBG (Pepsi Bottling Group), the company made an offer of $6 billion. Mind that Pepsi has already acquired 43% stakes of PAS and 33% stakes in PBG. In the 1980s and 1990s, both the soft drink giants spun off their bottlers.
Looking at the pages of history, we will find that the Pepsi Cola market rivalry has existed years ago for ages. Looking at both the beverage giants, it is clearly understood that they are trying their every possible efforts to be crowned as the leader of the soft drink industry.
Coca Cola is however the largest company in the soft drink, non –alcoholic beverage industry. With more than 500 brands, Coca Cola owns 17 brands which make over $ 1 billion. The other side, Pepsi owns a range of market-leading brands and snack foods with 22 iconic brands giving company revenue of over $ 1 billion. According to a report by Beverage Digest
“Coca Cola and PepsiCo Inc. has a combined share of around 70% in the entire carbonated soft drink market (CSD) of the United States.”
The global market share of both the company is more than 200 countries. The Pepsi Cola market rivalry which is also known as cola wars have made both the companies spend a huge amount of money on advertisements targeting each other publicly to grab customer’s attention. Be it in print media or electronic media, the car wars are fought everywhere.
The Pepsi Cola Market Rivalry – A Case Study of how the beverage giants acquired market monopoly
Looking at the market rivalry of both the soft drink industry giants, it has been noticed that in recent years, both the companies have shifted their attention from soft drinks to other products, giving less attention to their main products. As per a report by Beverage Digest,
“Consumption of carbonated soft drinks fell to 31 year low in the US in 2016.”
While the main rivalry product remained the centre of cola war, PepsiCo further moved to explore new markets, focusing on snacks. The then CEO of PepsiCo Inc, Indra Nooyi stated,
”The key thing is, this is a business that’s highly competitive in North America. It’s a profitable business.”
There has been a time when both the companies enjoyed a great and loyal fan following. Every fridge from homes to hotels, restaurants had one or both of the drinks. These drinks still find that space but over the time the rivalry has been affected by new entrants in the market. However, none of the new products has been able to create enough room to kick out these market giants.
Since both the companies have their well-established distribution network along with bottling channels, the new entrants doesn’t impose any serious threat on the soft drink market dominance shared by both the companies. Coca Cola has around 900 plants all over the world, whereas it has around 250 bottling partners. If a new market entrant has to compete such vast reign, it has to put or a substantial investment of capital.
Huge Investments made to expand and explore market
Both the companies are known for showering huge amount of money on their R&D, promotion, marketing and advertising. This has strengthened its distribution network worldwide so much that it has become really hard for any other company to break it. PepsiCo is said to have spent around 5.3% of its total revenue of the year. Coca – Cola on the other side along with its bottling partners is said to have spent around $50 billion in equipment, distribution infrastructure, retail customer activations and facilities.
Looking at the developed markets, there are challenges to non – alcoholic beverage industry. The developed markets however have experienced a fall in terms of beverage volume consumption. According to Beverage Digest, the US experienced a 3% fall in overall carbonated soft drink in the year 2003. This marked as the 9th year straight in the row where the demand has fallen. The fall in the year 2011 was registered at 1% while it as 1.2% in 2011.
With a profit margin increase, the Pepsi Cola market rivalry has been here for generations. Back then, when both the soft drink market leaders were trying to surpass each other, both the companies were acquiring bottling companies. It is a known fact that both the companies are making huge investments in branding and R&D as compared to any other company and the reason is pretty clear, to win the battle. Not to forget that this Pepsi Cola market rivalry has kicked out several competitors from the race over the years.
Pepsi was greatly criticized for its recent ad with Kendall Jenner and seems to have made itself stand in the room of debate. Coke too failed when the company came up with New Coke and tried to project itself in a trendy manner. Flipping the pages of history, Pepsi tried to become the only market giant in the soft – drink industry by dethroning the ruler – Coke. The company introduced a taste – test campaign and compared the taste of both companies. No doubt, Pepsi was going to stand at the top here. This fired up the Pepsi Coke market rivalry. Both the soft drink giants then started to surpass each other and started to ridicule each other through their marketing and advertising campaigns.
The Pepsi Cola Market Rivalry in India
During the 1970s, Coke entered the Indian market of soft drinks and this established its dominance. The company experienced and enjoyed a great dominance and monopoly in the market of Indian soft drinks until 1977. Coke had to leave India due to some changes in the policies for the MNCs having their operations in the Indian market.
Coke was out of the Indian market and this gave enough space to other brands which mushroomed over a few years. Local brands like Gold Spot, Campa Cola, Limca and Thumbs UP entered the market considering the demand. But when Coke and Pepsi came in Indian market in the 1990s, they both captured the market again. After all, both companies have made billions of dollars from selling carbonated water for more than 100 years.
Coke entered the market before Pepsi and perhaps this is the reason it is on the number one position. Pepsi on the other hand consistently kept on trying hard to reach to the top, though being on second position in the race. However, if we talk about the Indian soft drink market, it was Pepsi who was leading at the front.
Coke came back in the year 1993. The very first step it made was to establish a business deal with Parle. Now Parle had acquired almost 60% of the soft drink market segment in India. It launched some iconic brands including Gold Spot, Limca and Thumbs Up. The deal was a historic one and made Coke a strong market leader in very less time. The second move it made in 1999 was to acquire the soft drink brands owned by Cadbury Schweppes such as Sport Cola, Canada Dry and Crush. Coke chiefly depended on a company which was driven by franchisee – operation.
According to Registrar of Companies, Hindustan Coca – Cola Beverages has accounted for Coca – Cola’s two-thirds of revenue, showing an 11% growth at Rs 9,472crores whereas PepsiCo India Holdings could only make growth of 0.2% at Rs 6,540 crores in during the year to March 2017. In the fiscal year of 2016, market observed a loss in the demand of aerated drinks and both the soft drink titans has to face a lot during the last two fiscal years. Pepsi registered a fall of 15% in its growth while Hindustan Coca Cola Beverages experienced an 8% drop in its revenue in the year.
A Brief History of Market Rivalry of Pepsi Cola
One of the most talked about rivalries in the history of the soft drink industry was again started when PepsiCo launched Pepsi True, a Stevia based drink in 2014. This time, Pepsi used Amazon to sell it. The sparkling feature was that its green packing was similar to Coca Cola Life. This move again started the battle in the market.
During the 1900s, both the soft drink giants were heavily relied on ads to get an edge over each other. Back then, Coke was prepared with cocaine whereas Pepsi had some medicinal features. In the year 1975, Pepsi came up with the Pepsi Challenge, a taste test. This was done at shopping centres and malls. The representatives of Pepsi were seen asking people to taste both the drinks blindly and asked them which tasted better. Well, a majority of people favoured Pepsi in this blind taste test.
However, Coke didn’t stay silent though it took a long to approach the customer for something similar which Pepsi did way back in 1975. In the year 2009, Coke launched a campaign which reminded of Pepsi Challenge and persuaded the people to differentiate whether Vault tasted better than Mountain Dew of Pepsi.
The Pepsi Cola market rivalry wasn’t just limited to the ground but it even reached the space reached to the space. Yes, in the year 1985, both the soft drink companies took off into space with the Space Shuttle Space. Well, the astronauts couldn’t appreciate the drinks in the space though special cans for zero gravity and several other innovations were made. As per the report, Pepsi spent around $14 million in research and development of their unique can whereas a total of $250,000 was invested in making a zero-gravity can by Coke.
Coke then created controversy by renaming its core product as New Cola and by changing the formula. It referred the New Cola as New Taste of Coca Cola. As per the reports, this new product was better in taste as compared to Pepsi or Coke.
Reports also stated that the executives of Pepsi got some samples even before it was launched officially. They were highly disappointed when they tried the new formula. This made Pepsi announced that it won the cola wars of Pepsi Cola market rivalry. It also declared a complete week off for its employees. The other side, Coke had to come up with the original recipe and renamed New Coke as Coca – Cola Classic.
There have been several news which reported that Pepsi tried to hijack the FIFA World Cup sponsorship owned by Coke. Pepsi ran its Pepsi Max World Challenge in 2006 so that it could take over the presence of Coca Coke in the World Cup 2006 being held in Germany. In the year 2010, Coke’s publicity was again attempted to be hijacked. In January 2010, Pepsi came up with a charity song “Oh Africa” as its global marketing campaign.
Pepsi and Coke again went parallel with 2014’s tournament. While Coca Cola came up with its largest marketing program, Pepsi started a global TV campaign. This campaign was aired on around 100 countries to enter Rio de Janeiro.
Pepsi Cola market rivalry even reached the White House. The senators gave their opinions, picking up what they liked. Ronald Reagan preferred Pepsi whereas Jimmy Carter picked Coke.
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