Coca-Cola and Pepsi are comparable in their respective industries, ideal customers, and iconic goods. With dozens of beverage brands available to customers, Coca-Cola and Pepsi are both leaders in the global beverage market. Coca-Cola and Pepsi appear to have comparable business strategies on the surface. However, there are also significant disparities in how the two companies run their operations. Thus, the paper discusses the differences and similarities in the companies’ histories, successes, and business models.
Coca-Cola and Pepsi are intense rivals with slightly different strategies for gaining market share. Since soft drink consumption has increased consistently in the US and worldwide, the soft drink business has historically been very successful. Coke and Pepsi’s products improved due to the battle to outperform their rival. After the 1970s, carbonated soft drinks (CSD) consumption increased by an average of 3% each year, or from 23 gallons per average American to 53 gallons per typical American year (Yoffie & Kim, 2011). Sales and profitability were boosted by introducing flavored and diet versions and decreasing prices. The firms began offering a variety of alternatives, and sales began to increase, but cola continued to dominate the market.
The concentrate manufacturer combined the raw materials, packaged them, and sent them to the bottler. For diet CSDs, concentrate manufacturers frequently add artificial sweeteners. For standard CSDs, bottlers frequently added sugar or high-fructose corn syrup. The machinery, overhead, and personnel costs associated with the concentrate manufacturing process were minimal. The most significant expenses for a concentrate producer were bottler assistance, market research, advertising, and promotion. While bottlers dealt with smaller regional clients, concentrate producers negotiated “Customer Development Agreements” (CDA) (Yoffie & Kim, 2011). The bottling industry required expensive capital equipment and quick manufacturing lines. Bottlers also invested in distribution networks and vehicles, which comprised a sizable portion of their revenues as operating expenses. The high operational costs of bottlers contributed to the disparity in profitability between the two companies.
There was a situation that demonstrated the intense rivalry between the companies. Pepsi began expanding its company, creating a network of 270 bottlers, and lowering the price of its 12-oz bottle to a nickel—the same price that Coke paid for a 6.5-oz bottle (Yoffie & Kim, 2011). Later, Coke initiated a lawsuit against Pepsi, alleging that the Pepsi-Cola brand violated the Coca-Cola trademark. The verdict was favorable to Pepsi. Pepsi started lowering its pricing to compete with Coke and increase market sales, but when it subsequently sought to equal Coke’s prices, it encountered resistance. Pepsi, therefore, pledged to spend that cash on promotions and advertising. Both Coke and Pepsi began experimenting with novel tastes to introduce into the market through either acquisitions or the introduction of new brands.
By promoting their non-CSDs and snacks, Coke and Pepsi can continue to make money. All these two businesses must promote and advertise their existing goods, like Minute Maid and Frito-Lay. To draw in new consumers who are health-conscious and have been avoiding CSDs for no other reason than health, they may switch all of their sweet beverages to stevia-based options. Additionally, the business should execute its current plan to promote its goods abroad and analyze its significant markets in countries like China and India. Promoting non-CSDs like juices might help companies to get back in the game and continue to make money.
Overall, sales and profitability were boosted by introducing flavored and diet versions and decreasing prices. Coke and Pepsi’s products improved due to the battle to outperform their rival. The bottling industry required expensive capital equipment and quick manufacturing lines. Coca-Cola and Pepsi’s bottlers’ operational expenses contributed to the disparity in profitability between the two companies. Promoting non-CSDs like juices might help businesses get back in the game and continue to make money. To draw in new consumers who are health-conscious and have been avoiding CSDs for no other reason than health, they may switch all of their sweet beverages to stevia-based options. The businesses should also analyze their significant markets in countries like China and India.
References
Yoffie, D. B., & Kim, R. (2011). Cola wars continue: Coke and Pepsi in 2010. Harvard Business School Publishing.