Cola Wars

CASE STUDY MEMORANDUM

Subject: COLA WARS

For more then a century Coca-Cola and Pepsi Co, the two giants in carbonated soft drink production market (CSD), have been in intense competition for the ‘throat share’ of Americans. As the domestic market demand appeared to have plateaued, arena of this fierce competition was shifted to emerging nations and other major international markets. History shows that both giants benefited from the war that is still continuing. But does the past success guarantee a better future? And should the fundamentals of the war or competition change? This memorandum intends to address the effects of this competition in the consolidated industry of non alcoholic beverages, dominated by Coca-Cola and Pepsi Co and their future.

In order to attract the attention of the customers, both Pepsi Co and Coca-Cola used diverse strategies. Each successful tactic by one company would be copied by the opponent almost in the same manner or countered in a different fashion. For example Pepsi Challenge launched in 70s was a great success for Pepsi Co and Coca -Cola countered with rebates, rival claims and retail price cuts. Using popular figures, like Britney Spears, Harry Potter was another strategy, a strategy followed by both companies in 80s and 90s. As both of the companies were aware that they were in a consolidated industry, they always tried to differentiate their products. First Coke introduced Fanta(1960), Pepsi countered with Teems(1960). In similar fashion they have tried to lure customers with diet Pepsi and diet coke. With the change of consumer demand and taste the companies expanded there brand portfolio further to include non cola beverages like tea based drinks. In fact this was a strategy, which to an extent diverted the focus from there core products: regular cola. Shortly, for the giants, the sector of non cola beverages was an expansion opportunity and no one wanted to loose the market. This bold strategy took the cola war into a different label. What’s more interesting is that both the companies did not realize the potential of the international and the emerging market until the turn of the century. Although expansion of the companies in the in the international arena started as early as 1950, it took almost a half century to realize the potential of foreign market. In late 90’s both Coca Cola and Pepsi-Co for the first time realized that private