Cola Wars Continue: Coke and Pepsi in the Twenty- First Century

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Cola Wars Continue: Coke and Pepsi in the Twenty- First Century

As given in exhibit 1. Per capita consumption of carbonated soft drinks has rose from 1970 to 1999 but in year 2000 there has been a slight drop in per capita consumption. However if we see the similar data for other drinks, there has either been a slight rise or fall in per capita consumption in the year 2000. So the per capita consumption data reveals that other drinks are not necessarily eating up the market share of carbonated soft drinks.

Exhibit 3 shows that from 1966 to 1975 coca cola is ahead of Pepsi by about 13-14% in market share but between 1975 and 1985 this gap has declined to as low as 8% mainly because of the effect of the Pepsi challenge. However coca cola has gained the lead and the difference is ticking around 14% again. Maybe Pepsi needs another blockbuster to narrow the gap or take the lead.

Exhibit 4: Financial statements show that Pepsi has been a better and consistent performer as compared to coca cola. Net profit per sales of Pepsi was far behind coca cola in the year 1975 but by the year 2000 the gap had been eliminated and both is having almost the same level of net profit per sales (Pepsi leading by 0.1%). Similarly net profit per equity of coca cola rose from 21.0% in 1975 to 56.7% in 1996 and declined to 23.4% in 2000. For Pepsi the similar figures have changed only for good during the same phase and had a net profit per equity ratio of 30.1% in the year 2000.

Exhibit 2 & 6 is an indicator of cut throat competition in the carbonated soft drinks industry. Retail price has rose only by 0.3% from 1988 through 2000 but also keeping in mind that consumer price index rose by 3.2 percent during the same period shows a downward trend in retail price. Also concentrate price has rose by 4.2% during 1988 to 2000. From exhibit 2 we can see an increase in advertisement spending (between 1999 and 2000) of both companies. All these factors lead to declining profits per...
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