Coke And Pepsi: Dominating the market

In both the overall soda and soft drink category and the more specific cola arena, Coca-Cola and Pepsi maintained their dominant standing as the leading drinks in DSN’s annual Top Brands Survey of consumers. The two colas were also the only beverages to qualify as Power Brands. Coke ranked fifth and Pepsi seventh in this listing of leading brands. Coke was developed in 1886 and its too old brand and later on bottlers are increased in 1910 to 370. In the beginning it had problems with duplicate brands with similar names and after court barred then Coke introduced its patent. The Robert Woodruff CEO of Coke worked with franchised bottlers to make coke available whenever consumers want it. He also initiated life style advertising for coca-cola emphasizing the role of Coke in consumer’s life. Coke also expanded its business at the international levels. Coke in world war 2 at the request of General, he promised that “every man in the uniform gets a bottle of Coke for five cents whenever he is and whatever it costs to the company. Coca Cola bottling plants followed the movements of the American troops, 64 bottling plants were set up during the war . This contributes to the Coke’s dominant market shares in Europe countries and Asian countries like India, China, Indonesia, Japan, and Vietnam. Coke first entered in to international market and growing shares in market at international level. Coke spend millions of dollars in the advertisement of their products later on it became the taste of whole America. Coke entered in to non carbonated drink industry to increase the growth of the company after decrease in the consumption of the carbonated soft drinks like minute maid. Later on coke develop different flavors like diet coke, cherry coke sprite products and caffeine. Coke purchases the weaker bottlers and sold them to the CCE (Coca Cola Enterprise) and strengthen the bottling network.

Pepsi was developed in 1893 in New Burn. Like Coke Pepsi adopted Franchise bottling system, and by 1910 it had built network of 270 franchise bottlers. Pepsi struggled too much because of bankruptcy in 1023 and again in 1932 . Pepsi lowered the price of its 12 ounce bottle then of Coke. When Pepsi tried to expand its bottling network in late 1930, its choices were small bottlers striving to compete with wealthy coke franchises. Pepsi also spends millions of dollars in advertisement following to the Coke also merged with company of snack food giant Frito-Lay at the same time coke purchased Minute Maid, Duncan foods, Belmont Spring Water.

Coke and Pepsi began to experiment with new cola and non-cola flavors and variety of packaging options. Before then, the two companies had adopted a single product strategy selling only their flagship brand. Coke introduced Fanta, Sprite and Low Calories tab. Pepsi countered with Teem , Mountain Dew and Diet Pepsi. Each introduced non returnable glass bottles and 12 ounce metal canes in various packages. Thus Pepsi and Coke are working hard since last 100 years to attract their consumers with advertising and serving high quality. They also developed new non CSD to increase popularity in the company name. So do you think that anybody has dared to overtake two biggest soft drink industries!!

Who do you think has been winning the cola wars?

Of course Coke…

The soft drink industry is very competitive for all corporations involved, with the greatest competition being that from rival sellers within the industry. All soft drink companies have to think about the pressures; that from rival sellers within the industry, new entrants to the industry,

Substitute products, suppliers, and buyers. The competitive pressure from rival sellers is the greatest competition that Coca-Cola faces in the soft drink industry. Coca-Cola, Pepsi Co., and Cadbury Schweppes are the largest Competitors in this industry, and they are all globally established which creates a great amount of Competition. Though Coca-Cola owns four of the top five soft drink brands (Coca-Cola, Diet Coke, Fanta, and Sprite), it had lower sales in 2005 than did PepsiCo according to survey. However, Coca-Cola has higher sales in the global market than PepsiCo. In 2004, PepsiCo dominated North America with sales of $22 billion, whereas Coca-Cola only had about $6.6 billion, with more of their sales coming from overseas. PepsiCo is the main competitor for Coca-Cola and these two brands have been in a power struggle for years. Substitute products are those competitors that are not in the soft drink industry. Such substitutes for Coca-Cola products are bottled water, sports drinks, coffee, and tea. Bottled water and sports drinks are increasingly popular with the trend to be a more health conscious consumer. There are progressively more varieties in the water and sports drinks that appeal to different consumers’ tastes, but also appear healthier than soft drinks. In addition, coffee and tea are competitive substitutes because they provide caffeine. The consumers who purchase a lot of soft drinks may substitute coffee if they want to keep the caffeine and lose the sugar and carbonation. Specialty blend coffees are also becoming more popular with the increasing number of stores that offer many different flavors to appeal to all consumer markets.

Coke was more successful internationally compared to Pepsi due to its early lead as Pepsi had failed to concentrate on its international business after the world war and prior to the 70’s. Pepsi however sought to correct this mistake by entering emerging markets where it was not at a competitive disadvantage with respect to Coke as it failed to make any heady way in the European market.

On the bases of soft drink market analysis Coke have stronger bottling network then any other brands of soft drinks. Spending on advertisement is more than any other brands. Brand quality and loyalty also affect the selling. Coca-Cola’s bottling system also allows the company to take advantage of infinite growth opportunities around the world. This strategy gives Coke the opportunity to service a large geographic, diverse, area. Brand recognition is the significant factor affecting Coke’s competitive position. Coca-Cola’s brand name is known well throughout 90% of the world today. The primary concern over the past few years has been to get this name brand to be even better known. Packaging changes have also affected sales and industry positioning, but in general, the public has tended not to be affected by new products Additionally, according Coca-Cola’s bottling system is one of their greatest strengths. It allows them to conduct business on a global scale while at the same time maintain a local approach. The bottling companies are locally owned and operated by independent business people who are authorized to sell products of the Coca-Cola Company. Because Coke does not have outright ownership of its bottling network, its main source of revenue is the sale of concentrate to its bottlers.

Other factors which are important for success of Coke are very high market share both nationally and internationally, strong market campaign, a unique and globally appreciated product and apart from Pepsi there is not any strong competitor. Coke have high profit margin by shifting some cost to the bottlers. Coke have expanded manufacturing and distribution system that keeps prices low and available when it is needed.

What strategies are appropriate for Coke and Pepsi in the 21st century?

There is no doubt that both company will not have any problems to sustain profit through next decade but important question is whether they can sustain their historical growth. To do so they have to find new markets and increasing production and distribution and consumption in developing markets of Asian countries like China, India, Japan. Looking towards the future, the most important recommendation to Coca-Cola is continuing product innovation and expansion of their product line. Coke should focus on its developing international market and expand their offering. The soft-drinks industry is fully saturated with competitors. Also, the industry is no longer expanding, and market share is actually decreasing as more consumers are looking to healthier options. By continually introducing new products, Coca-Cola will be able to increase their profits and allow the company to continue to grow. Also, having a diverse product line will make the corporation very stable, which is appealing to investors and creditors. A second recommendation would be to sustain or increase the global market share. Coca-Cola is very well-established globally, and is the global soft-drinks leader. This is very important to sustain because it is the source of the majority of their profits. If they lose global market share, their profits will decline dramatically. A final recommendation for Coca-Cola is to maintain and try to increase their brand loyalty. Diet Coke has the second highest brand loyalty of all the soft-drink competitors’ brands, and solid advertising campaigns will help maintain the brand loyalty. They can also strive to obtain higher brand loyalty in all other brands, not solely Diet Coke. The brand loyalty is important because it will allow Coca-Cola to sustain profits and maintain their market share. Different types of beverages can keep the Coke’s overall profit when there is shift in consumer choice such as shift from soft drinks to healthier alternatives and other products. Product development, improve research and development, market development and create awareness among customers about hygiene are important recommendations to Coke.

Like same as Coke, my recommendation for Pepsi is to grow up their international market in different countries. They should work on market and product development, market penetration, Continuous campaign and advertisement for product quality and brand name. Pepsi should revise their price strategy due to strong competition the competitors are focusing more on pricing and so they are leading the market. Lowering down the operational cost and diversifying in to other foods and beverages are another strategy that I would recommend to Pepsi because it owns Gatorade, Frito-Lay, Tropicana and Quaker.

So these are the recommendations for both Coke and Pepsi to sustain their growth and popularity in the next decade.