Cola Wars
Why and how can Coke and Pepsi sustain their profits in the wake of flattening demand and the growing popularity of non-carbonated drinks?
The ‘Cola Wars’ have through the years shown the intense competition between Coca-Cola and PepsiCo. While the competition to gain new market share may no longer be as intense, the two companies are still fighting to remain relevant with a continued demand of their products. As the U.S. has shown an interest in non-carbonated drinks, domestic demand for carbonated soft drinks has slowed. When this first happened, and as it continues to occur, both companies looked into diversification.
Expanding overseas into new markets help(ed) alleviate the strains seen in the U.S. and foster healthy growth for each company. The ‘colas’ have built a presence in emerging markets where the consumption has been low but the potential for growth, high.5 As John Huey said about emerging market, Indonesia – “They sit on the equator and everybody´s young. It´s soft drink heaven.”
The diversification is also seen in brand portfolio development. In the last two decades – both Coke and Pepsi have expanded to include noncarbonated drinks. Brand equity and loyalty assisted with success in diversification, as for example, Pepsi evolved into a ‘total beverage company’. Marketing promotions and spending have increased as efforts are directed towards ready to drink teas, juices, sports drinks and bottled water.4
In addition, campaigns that include partnerships and advertisements relevant to the everyday consumer have made a difference. Coca-Cola partnered with YouTube sensation Kurt Hugo Schneider to produce unique renditions of two of today’s most popular songs using “Coca-Cola bottles, glasses and cans”. Pepsi launched their global “Live for Now” campaign with a digital component and the “Dance for a Chance” contest to learn from and meet pop sensation Beyoncé.
The advertising dollars that Coke has invested in marketing seems to be working.
The ‘Cola Wars’ have through the years shown the intense competition between Coca-Cola and PepsiCo. While the competition to gain new market share may no longer be as intense, the two companies are still fighting to remain relevant with a continued demand of their products. As the U.S. has shown an interest in non-carbonated drinks, domestic demand for carbonated soft drinks has slowed. When this first happened, and as it continues to occur, both companies looked into diversification.
Expanding overseas into new markets help(ed) alleviate the strains seen in the U.S. and foster healthy growth for each company. The ‘colas’ have built a presence in emerging markets where the consumption has been low but the potential for growth, high.5 As John Huey said about emerging market, Indonesia – “They sit on the equator and everybody´s young. It´s soft drink heaven.”
The diversification is also seen in brand portfolio development. In the last two decades – both Coke and Pepsi have expanded to include noncarbonated drinks. Brand equity and loyalty assisted with success in diversification, as for example, Pepsi evolved into a ‘total beverage company’. Marketing promotions and spending have increased as efforts are directed towards ready to drink teas, juices, sports drinks and bottled water.4
In addition, campaigns that include partnerships and advertisements relevant to the everyday consumer have made a difference. Coca-Cola partnered with YouTube sensation Kurt Hugo Schneider to produce unique renditions of two of today’s most popular songs using “Coca-Cola bottles, glasses and cans”. Pepsi launched their global “Live for Now” campaign with a digital component and the “Dance for a Chance” contest to learn from and meet pop sensation Beyoncé.
The advertising dollars that Coke has invested in marketing seems to be working.
References: ¹Frank, L. (November 2, 2009) How the Brain Reveals Why We Buy. Scientific American ²Moye, Jay (2013, August 14). Behind the Bottles: 5 Questions With Kurt Hugo Schneider. Coca-colacompany.com. Retrieved August 19, 2013, from http://www.coca-colacompany.com. ³Vulpala, L.G. 18 October 2007. Cola wars: five forces analysis. Retrieved from: http://goutham.wordpress.com/2007/10/18/cola-wars-five-forces-analysis. 4Wolinsky, J. 2, January 2013. Pepsi’s diversified revenue stream gives it an advantage over Coke. Retrieved from: http://beta.fool.com/valuewalk/2013/01/22/pepsis-diversified-revenue-stream-gives-it-an-adva/22190/ 5Yoffie, D. B. (January 27, 2004). Cola wars continue: Coke and Pepsi in the Twenty-first Century.Harvard Business School.