There are few markets in the world as clearly dominated by two companies as it is the soft-drinks one. In this business, “The Coca-Cola Company” and “PepsiCo, Incorporated” hold most of the market share in virtually every region of the world. This is why a big rivalry between them has been growing throughout time. In the present essay I am going to develop the main characteristics of this global battle. For a better understanding, let's take first a look to the principal features of both companies.
The Coca-Cola Company dominates the market by owning four of the global top five soft-drink brands: Coca-Cola, Diet Coke, Fanta and Sprite. Its main activity consists on producing syrup concentrate which is then sold to various bottlers throughout the world who hold a Coca-Cola franchise. The firm makes or licenses more than 400 drink products in more than 200 nations. In 2006, sales hit $24,088 million and net income $5,080 million. 71,000 employees work in the company.
PepsiCo, Incorporated is the biggest snack maker and the second biggest soft-drinks maker in the world. The company manufactures, markets and sells beverages and snacks in approximately 200 countries. In 2006, sales hit $35,137 million and net income $5,642 million. 168,000 employees work in the company. Historical rivalry
In a hypothetical 0% growth market with only two competitors, the only way to increase sales is to go after competitor's clients. Reality, although different, doesn't differ very much in some national soft-drinks markets (particularly the United States, Canada and the United Kingdom). This is the main cause of the rivalry between Coca-Cola and Pepsi: head-to-head battle is not only habitual in many markets, but also unavoidable in the desire for growth of the companies.
The term “cola wars” was first used to describe the mutually-targeted marketing campaigns in the 1980s and 1990s between Coca-Cola and Pepsi. One famous chapter of these campaigns was the “Pepsi Challenge”, that showed most of people choosing Pepsi over Coca-Cola in blind taste tests. The campaign, along with the unfortunate flavor change of Coca-Cola, led to a boom in Pepsi's market share of soft-drinks in the United States, from 6 to 14 percent (Hartley, 2004).
Another episode of direct confrontation action between the two rivals was a complaint of Pepsi against Coca-Cola, defending that “Coke was illegally trying to force competitors out of the market” in some European countries (Hartley, 2004). The European Competition Commission sentenced: “The company will be banned from offering volume-linked rebates as well as signing exclusivity deals with retailers. It will also have to hand over as much as 20% of the room in its coolers and vending machines to rivals such as PepsiCo, Inc. to stock their own brands” (Boles, 2005). New battlegrounds
“A decade ago, the companies' lineups consisted primarily of their flagship drinks, diet colas, citrus drinks and a few flavored colas. A glance at the companies' product lines shows that the cola wars are not just about colas anymore” (Sanders, 2007).
The battle between Coca-Cola and Pepsi has not only spread out to virtually every territory in the world, but also to an appreciable variety of products. Apart from colas, both companies produce juices, ready-to-drink coffees, teas and green teas, milk-based drinks, energy drinks and bottled water.
Acquisitions have turned out to be a basic tool for fast growth in those new markets. Coca-Cola's acquisitions include Planet Java, Mad River Traders Inc. and Odwalla Inc. Pepsi's acquisitions include Tropicana, Quaker Oats Co. and South Beach Beverage Company.
The shift of consumers to healthier drinks has widened the scope of product lines to functional beverages as well. Aims include weight loss, mental acuity, clearer skin, physical strength or even sexual endurance (Lempert, 2007). Different models
Despite direct competition of their products in many markets,...