Case Study Example: Coca-Cola Versus Pepsi Cola Rivalry

2021-07-12 19:42:45
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Wesleyan University
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Case study
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Coca-Cola and Pepsi Cola are major global players in the soft drinks industry. The two companies were formed over 100 years old. In an attempt to grow and expand market share, both companies have always countered each others strategy. Although the two companies have dominated the industry for long, the 21st century presented new challenges for them. Apart from fighting with each other, the two companies have had to fight with growing popularity of emerging brands in the new century. For example, both companys 2014 financial reports showed that their performance was sliding with Coca-Colas net income dropping by 55%, while Pepsis income dropped by 25% (Berr, 2015).

History of the Rivalry

The rivalry of the Pepsi Cola and Coca-Cola has become a subject of discussion not only for the long time it has taken but also for the intensity in which the two companies have fought for market share and growth. Additionally, the two companies had also dominated global soft drinks industry for long before other brands entered the market. The rivalry between the two companies first began in 1886, when the original recipe for Coke was formulated by John S. Pemberton (Bhasin, 2011). 13 years after Coke recipe was formulated, Caleb Bradham created Pepsi-Cola. By the time Pepsi entered the market, Coca-Cola annual sales had reached a million gallons. In the early 1990s, both companies frequently used adverts to attack one another over which of their drinks had the most effective medicinal properties (Bold, 2014). Since Coke contained cocaine, Pepsi pride itself as the healthier option. With the development of its iconic contour bottle, Cokes major endorsements were followed by increased market expansion in Europe. However, during the same period, the effects of WWI drove Pepsi into bankruptcy. Eight years after declaring bankruptcy, Pepsi went bankrupt again, but it rebounded.

Pepsis major campaign began after WWI. During WWII, the company increased the intensity of its advertising campaign, and it introduced canned sodas in the market. Five years later, the advertising paid off, and the company made huge strides in sales, growth, and market share. While Coke took its ads to the TV in the 1950s, Pepsi responded by rebranding so that it could keep up with the competitor. In 1962, Coke decided to go public with its introduction of Sprite. Sprite became one of the most successful of Cokes brands. In response to Cokes launch of new products which included Sprite, Fanta, and Tab, Pepsi also launched a series of brands such as Teem, Mountain Dew, and Diet Pepsi (Yoffie, 2004). With the merger of Pepsi and Frito Lay to create PepsiCo in the mid-60s, the stage for the war which has continued up to date was set. Within the same time, the popularity of the diet drinks grew, and over time, it created a whole new segment in the soft drinks market.

In an attempt to increase their revenues, PepsiCo diversified with Pepsi introducing snack food. However, Coke has maintained a strict adherence to its beverage business. Although Pepsis beverage brands are not as strong as Cokes its snack business is earning the company a lot of revenues. Whereas Coke has sustained a large cola market share than Pepsi, the latters diversification have been instrumental due to the huge revenues it earns the company.

The long-term rivalry was re-ignited in 1975 when Pepsi launched the famous Pepsi Challenge which featured in most of its advertisings (Castellanos, 2013). Between 1981 and 1984, Coca-Colas increased expenditure on advertising was met by a formidable response by Pepsi (Yoffie, 2004). The two companies took their rivalry to space in 1985 when the two drinks were presented to the astronauts to test their performance in space (Bold, 2014). However, none proved impressive. In the same year, Cokes change of its formula in its core brand to create New Coke backfired when it failed to impress the consumers. Following the dismal performance of the drink, Pepsi announced that it had won the Cola wars and gave its staff a one-week off.

The rivalry has also been taken to world events such as the World Cup. While trying to undermine Coca-Colas FIFA World Cup sponsorship in 2006, Pepsi launched a campaign duped Pepsi Max World Challenge. In 2009, Coke retaliated by running a similar promotion to the Pepsi Challenge in the US. Coke wanted to prove that its drink, Vault, was tastier than Pepsis Mountain Dew. In the same year, the companies took their fight to Twitter. In January 2010, Pepsi also launched a global marketing campaign duped Oh Africa in to coincide with the eve of the World Cup where Coca-Cola was the official sponsor. In the 2014 World Cup tournament, Coca-Coca launched its historical largest marketing program, whereas Pepsi responded by also launching an interactive global TV campaign that was aired in more than 100 countries.

The rivalry between Coca-Cola and Pepsi has been dominated by constant changes in slogans and logos. However, Pepsis logo has changed several times than Cokes. Every time Coca-Cola tries a new logo, the outcome is so unimpressive to the customers that it has to revert to the old logo (Gabriel, 2009). Consequently, its logo has not changed as many times as Pepsis. The challenges that hit the soda industry forced the companies to come up with innovative strategies such as low prices to adapt to the changing market environment (Yoffie, 2004).

References

Berr, J. (2015). Coke, Pepsi and the new front in the cola wars. CNBC News, February 12, 2015. Retrieved from www.cbsnews.com/news/coke-pepsi-and-the-new-front-in-the-cola-wars/

Bold, B. (2014). A history of the Coke vs. Pepsi war in 3 1/2 minutes. The campaign, October 6, 2014. Retrieved from www.campaignlive.co.uk/article/history-coke-vs-pepsi-war-3-1-2-minutes/1315611

Bhasin, K. (2011). COKE VS. PEPSI: The Amazing Story behind the Cola Wars. Business Insider, Nov. 2, 2011. Retrieved from http://www.businessinsider.com/soda-wars-coca-cola-pepsi-history-infographic-2011-11?IR=T

Castellanos, C. (2013). Coca-Cola and Pepsi History. Retrieved from https://cokevspepsibm2013.wordpress.com/2013/11/12/coca-cola-and-pepsi-history/

Gabriel, P. (2009). Branding: Slogan Wars Between Coke and Pepsi. Retrieved from http://abduzeedo.com/node/3488

Yoffie, D. B. (2004). Cola wars continue Coke and Pepsi in the twenty-first century. Harvard Business School. Retrieved from http://ada.bilkent.edu.tr/generic-moodle-var-lib-moodle/blog/attachments/84/Cola_Wars.pdf

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