Student’s Name: Maksim Gonchar
11th November 2011.
Marketing War between Pepsi and Coca-Cola
Virtually every corner you turn to in major U.S cities, there is an advert of coca cola or Pepsi daringly inviting you to sample a few of its present crazy offers. It is amazing the words used to the drinks like the coca cola's reach for greatness. You wonder what greatness is inevitably possible in the common drink. Sometimes I walk down the streets and try to imagine the reasons for the constantly changing marketing slogans amid these two soft drink giants. This write up will therefore be very useful as it will reveal the place of marketing in business and how it affects us. We will also be able to know some of the reasons behind the forms of marketing hatred which we witness every now and then between different competitors. The paper will also give the readers insight on the uncovered ethical issues that accompany such competition. It is such possible lessons that ultimately influenced my choice of this topic.
Over the past decades, several corporations have scrambled for a fraction of the global market. Across most industries, companies have witnessed very stiff and demanding competition that has led to many of them being faced out because of bankruptcy. The battle has been very tough especially in the emerging markets in Africa and Asia. According to Hartley (31), of all marketing wars a cross the globe, none has witnessed such vicious struggles like the one between Coca-Cola and Pepsi. The two soft drink giants have for a long period of time engaged each other in ferocious marketing battles. This write up looks at the emergence of Coca-Cola and Pepsi, their struggles over the past years and their continuing market battles as well as the possible benefits by the traders, consumers, and other stakeholders from such marketing wars.
Brief History of the Two Giants
Gillespie, Jeannette & Hennessey (155) observe that the dominance of the soft drink market by Coca-Cola is attributable to its principle brands, Coca-Cola, Fanta, Diet Coke and Sprite. The company chiefly manufactures syrup concentrates which it sells to its subsidiaries a round the globe, where the bottling of the products take place. Additionally, they have managed to license over 400 products in slightly more than 200 nations globally, (Gillespie, Jeannette & Hennessey, 155). They enjoy billions of profits and employ thousands of individuals either directly or indirectly. Their rival Pepsi is reputable for its leadership in the snack market while currently trails them in the soft drink marketplace. The corporation has presence in over 200 nations globally. It enjoys huge profits and employs a bout 170000 employs, (Gillespie, Jeannette & Hennessey 155).
According to Hartley (31), by the 1970’s, the Coca-Cola Company was initially not performing well as a giant with growth rate falling from a record 13% to a low of 2% towards the end of the decade. While Coca-Cola was experiencing this market blow, Pepsi continued to gain foothold in the soft drink market. Hartley (31) reports that this achievement became possible through the launch of their famous advertisement campaign dubbed the Pepsi generation. The advert captured the attention of many by its youthfulness and romanticism. Moreover, its association with liveliness it appealing to many and enabling it to gain favor over the competitors in the bigger soft drink market.
While this event played a significant role in Pepsi’s market advancement, it was not until the launch of the Pepsi challenge that the marketing confrontation officially showed in the limelight. According to Hartley (31), the results of the challenge showed that Pepsi had a much more superior taste compared to it s rival. A similar consumer taste exercise independently performed by a team from Coca-Cola confirmed a similar result. These results were evident on the foregoing market statistics which showed a progressive slow down in Coca-Cola’s market, (Hartley 32). What fueled this confrontation further was a revelation that Coca-Cola spent much more on advertisements compared to the advancing Pepsi. Similarly, Pepsi took note of the fact that they were leading in the numbers of soft drink vending machines and had better prices compared to their rivals. Hartley (31) notes that, these revelations compelled Coca-Cola to rethink their marketing strategies.
Hartley (32) observes that the image an advertisement leaves in the minds of the potential market is exceedingly significant in formation of a formidable product market. Possibly, this explains the vicious fight back mounted by coca cola in view of the shrinking market brought by the steadily advancing Pepsi.
Dahlen, Lange & Smith (32) denotes that the Coca-Cola launched its fight back by first breaking the company’s traditions in the appointment of a new chairman who was not among the long time serving company top leadership. After his appointment, Roberto Goizueta broke the second tradition by changing the original coke formula for the first time in a century. Market findings showed superiority of the new brand over the original coke and this influenced the decision to replace the original brand with the newly developed brand.
Hartley (35) observes that the removal of the original brand from the market fuelled huge consumer complaints and a major product boycott across the U.S. The persistence of such revolts compelled the return to the market of the old coke brand now named coke classic. Notably, during this period, Pepsi gained much ground in the soft drink market. However, the gains were short lived as the return of the old Coke and the maintenance of the two brands of Coke in the market increasingly increased the Coca-Cola sales. At the close of 1989, Coca-Cola had regained a bit of its lost market and had commanded about 40% of the, market compared to Pepsi’s 31%.
Earlier Global Competitions
Kirby (24) observes that over the time, the marketing battle field shifted to the international stage, noting the almost zero percentage domestic market growth. Domestically, the two corporations resorted to going after each other’s regulars to improve sales. Internationally, the one on one battle extended to major soft drink markets like Canada and the UK. Hartley (36) reports that until 1994, Pepsi’s attempts to enter the Brazilian market had met fierce resistance. However, in 1994, through a company called Baesa, they ultimately penetrated the South American Market. Reportedly, through Baesa, they acquired some small scale bottlers across the region enabling them overcome the market obstacles presented by coca-cola. In approximately three years, Pepsi had acquired about 34% of the South American soft drink market.
Coca-Cola reacted to the Pepsi invasion by launching a massive advertisement campaign and providing cold drink facilities to its retailers. These actions considerably reduced the involvement of Pepsi in the business of small retail outlets which was their most profitable venture. The reduction of tax on cola products by the argentine government, under influence by coca cola, massively enhanced their market size. However, this event tended to progressively reduce Pepsi’s influence as they realized much of their earnings from non coca-cola drinks. By 1995, over 70% of Pepsi’s beverage profits resulted from domestic sales while coca cola enjoyed a massive 80% of its total revenue from foreign markets, (Hartley 37). This reflected coca cola’s global supremacy while Pepsi’s predicaments in South America were reflected in virtually all its global ventures, (Hartley 37).
The year1999 saw the burning of several Coca-Cola products in numerous European nations following reports of sickness among school children who had taken a variety of coca cola products. The year also witnessed the invasion of major Coca-Cola bottling plants across Europe on suspicion of illegal practices aimed at shutting out competitors, (Dahlen, Lange & Smith 58). These allegations tarnished Coca-Cola’s image and massively reduced their dominance across the European market. However, Pepsi did not gain exceedingly from the coke’s predicaments citing change in consumer preference from other cold drinks to bottled water. However, they made some inroads especially in fast expanding markets of china and other Asian continent.
The Modern Day Competition
Gillespie, Jeannette & Hennessey (157) denote that the war between coca cola and Pepsi continues. However, Pepsi has never won the war and does not seem much troubled by it anymore. Following dismal performance across the globe, it resorted to diversifying its production other than the one to one confrontation with coca cola. Hartley (43) observes that since the turn of the millennium, Coke’s growth has slowed down. It has experienced a stagnant growth with an income growth of 4% in the year 2004. On the other hand, Pepsi has continued to experience a consistent growth.
According to Hartley (35), Coca-Cola’s progressively shrinking earnings are attributable to their reluctance to diversify. Hartley (44) notes that this led to their 2004 failure in purchasing of the south beach beverage. Pepsi which bought the company now enjoys as the market leader in the emerging profitable energy drink business. Similarly, the two old rivals have fought in such other areas as the bottled water enterprise.
In 2003, both giants announced their big entry into the business. However, over the proceeding years, Pepsi’s Aquafina has emerged as the market leader while Coke’s brands like Dasani have faltered following controversies with the brand. Similarly, Coca-Cola’s attempts to diversify have experienced less success. This is notable in their introduction of noncarbonated products which failed terribly leading to the abolishment of their production in the year 2003, (Hartley 44).
Gillespie, Jeannette & Hennessey (194) note that the shrinking profits experienced by Coca-Cola are attributable to the steadily developing resentment to carbonated drinks. This follows their association with such conditions as obesity and other associative medical conditions. Hartley notes that the C2 drink introduced in 2003 by Coca-Cola had less calorie content and carbon and deemed an alternative to the other resented products. However, the new product failed terribly in spite of the huge finances laid out for its advertisement. Reportedly, many consumers found it not preferable to them especially because of its poor taste.
Hartley (47) observes that the shrinking market experienced by Coca-Cola is associable to the sluggish manner in which the corporation dealt with the Belgium problem. Additionally, they failed to make Dasani a global bottled water brand. This follows the detection of a cancer casing chemical in a Dasani bottle in Britain. Coca-Cola has thus found itself in tighter economic situations in the past decade. Firstly, the plunging share price came as a surprise to many while the continuing reluctance by the board to take advantage of favorable investment opportunities has lead to little growth. On the other hand, Pepsi has continued to flourish, taking advantage of Coke’s reluctance to snap up lucrative trade opportunities.
Despite the global fiscal troubles, the two giants have continued to flourish. This is associable to their ability to contain major competitions from local rivals at the global stage. Their famed brands have built huge pool of loyal consumers. These pools of clientele are likely to push coke through its evident stagnation while hoping to find profitable ventures for diversification. Following the Dasani’s case, Coca-Coal will find it exceedingly had to convince consumers to rethink about the product. This follows its association with elements that are cancer causatives. On the other hand the on going diversification by Pepsi is likely to ensure their steady growth in the foreseeable future.
- Dahlen, Micael, Lange Fredrick and Smith, Terry. Marketing Communication: A brand Narrative Approach. New Jersey, NJ: John Wiley and Sons, 2009.
- Gillespie, Kate, Jeannette Jean-Pierre and Hennessey, David. Global Marketing. New York, NY: Cengane Learning, 2010.
- Hartley. Cola Wars: Coca-Cola vs. PepsiCo. September 2005. Web. Retrieved 5 Nov, 2011 from: <://media.wiley.com/product_data/excerpt/16/04717432/0471743216-3.pdf>
- Kirby, John. S. Coke vs. Pepsi: The Cola wars in South Africa during The Anti-Apartheid Era. August 2009. Web. Retrieved 5 Nov, 2011: <http://digitalarchive.gsu.edu/cgi/viewcontent.cgi?article=1034&context=history_theses>