Case study: “Cola Wars Continue: Coke and Pepsi in the Twenty-First Century”
Overview and the central question of the case
Two American giants had fought each other for over 100 years. New challenges of the 21st
century included boosting flagging domestic cola sales and finding new revenue streams. Both
firms also began to modify their bottling, pricing, and brand strategies. They looked to emerging
international markets to fuel growth and broaden their brand portfolios to include non-carbonated
beverages like tea, juice, sports drinks, and bottled water. For over a century, Coca-Cola and Pepsi-
Cola had vied for the ‘throat share’ of the world’s beverage market. The most intense battles of the
cola wars were fought over the $60 billion industry in the United States, where the average
American consumes 53 gallons of carbonated soft drinks (CSD) per year. In a ‘carefully waged
competitive struggle, from 1975 to 1995 both Coke and Pepsi had achieved average annual growth
of around 10% as both US and worldwide CSD consumption consistently rose. This cozy situation
was threatened in the late 1990s, however, when US CSD consumption dropped for two
consecutive years and worldwide shipments slowed for both Coke and Pepsi. They faced new
challenges: Could they boost flagging domestic cola sales? Where could they find new revenue
streams? Was their era of growth and profitability coming to a close? Or it was just Coke’s and
Pepsi’s enviable performance?
CSDs consumption is 23 gallons per person in 1970 and grew more than double to 53
gallons averagely in 2000. In the 1990s, Cola had market share in CSDs industry around 60-70 per
cent, followed by lemon/lime, citrus, pepper, root beer, orange and other flavors. CSD consisted of a
flavor base, sweetener, and carbonated water. Four major participants were involved in the
production and distribution of CSDs: concentrated producers, bottlers, retail channels, and
suppliers.
Company profiles
Coca-Cola is a manufacturer, distributor and marketer of the soft drinks. The beverage
company is a worldwide known brand that together with its 250 bottling partners and 23 million
customer outlets prides itself on “refreshing” the world more than 1.8 billion times of day with its
diverse portfolio of more than 500 brands, including 16 brands worth over 1 billion. Coca-
Cola’s biggest market is Latin America, which accounts for 29% of sales. North America has 22%
of sales, the Pacific region 18%, Eurasia and Africa 16% and Europe 15%. Coca-Cola’s sale was
over $48 billion in 2012 and profits reached $10.8 billion. In 2011 Coca-Cola’s worldwide market
share was 25.90%.
PepsiCo is an iconic and globally recognized food and beverage company that has a
portfolio of 22 strong brands that in 2012 alone each generated more than $1 billion in retail sales.
This includes famous brands such as Pepsi Cola, Tropicana and Lays. PepsiCo brands are sold in
over 200 countries around the world. In 2011 PepsiCo had worldwide market share was 11.50%.
Q1: Was the fundamental nature of the cola wars changing?
According to globalization which makes the world change significantly compare to the
world in last 50 years. So, the culture in one country will not be maintain and being pure culture
anymore the whole world had mixed and combined with the influence from another country which
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situate further than in the past. So, Coke and Pepsi have to catch up with the world’s trend not just
focus on CSDs but also Non-CSDs which is the trend that people consider more about their health
and want to have longer, more effective life.
Q2: Would the parameters of this new rivalry include reduced profitability and stagnant growth
inconceivable under the old form of rivalry?
Generally, there are no major competitors for Coke and Pepsi because they are enormous
and have huge advantage with economy of scale so, the barrier of new entry is quite high and also
Coke and Pepsi were sold in many parts of the world and seem to be able for every human on earth
can afford their product easily which highly market share of 37.4% totally in 2011. However, health
care trend can minimize their profitability because people nowadays will be more care about living
with good help so they tend to consume another kind of drink which is healthier such as tea, sport
drink, fruit juice, and etc. So, with high reputation and effective production Coke and Pepsi and just
maintain their advantage like merge with smaller drink producers or set up new brand or try to
invest in innovation to make new kind of carbonated drink which is better for consumers’ health.
Case analysis: marketing strategies and brand positioning
Marketing Strategies
The Coca-Cola Company and PepsiCo employ similar strategies in their marketing. In the
past decades the two companies have been in a so-called cola war for market share. Coke has
always had the bigger market share, but by developing innovative and aggressive advertising
campaigns, Pepsi has had its impact. However, in the last 5-10 years, Pepsi has had to face a defeat
