Cola Wars Continue

Industry Analysis
The beverage ‘Cola’ is synonymous to two companies throughout the world – Coca-Cola and Pepsi-Cola. These two mega companies have been competing for their share in the beverage market for more than a century. The competition has forced each company to be innovative and active in its sales, production, marketing, and packaging activities, as well as relationship with suppliers and customers, which has led to their success story. As the former CEO of Pepsi puts, ‘Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be.’

The cola beverage industry can be placed under Carbonated Soft Drinks (CSD) industry, comprising of four major participants. The concentrate producers blend raw material ingredients procured from suppliers, package the mixture to plastic canisters, and ship those containers to the bottlers. The bottlers purchase the concentrate, add carbonated water and high-fructose corn syrup, package the product in bottles or cans and deliver to the retail channels. The retail channels, which can range from a supermarket to a vending machine, sell the final CSD to the consumers. These four major participants constitute the overall production and distribution channel of CSDs.

Early history starts with the creation of both drinks in the late 1800s at the fountain counter. Pepsi managed to become a contender by selling 12 ounces of Pepsi for 5 cents, while Coke was selling 6.5 ounces for 5 cents. Pepsi almost went bankrupt twice but finally emerged as a viable competitor in the 1930s. Coke entered the overseas market with the advent of World War II giving the company a huge lead over Pepsi in international markets. Up until the 1970s Coke never referred to its closest competitor by name signal that it did not believe it had any real competition. Pepsi was fighting fiercely for share and managed to double its share between 1950 and 1970.

Brand extension and...