I.

Introduction

The soft drink industry has been a profitable one in spite of the “cola wars”
between the two largest players. Several factors contribute to this profitability,
and these factors also help to show why the profitability of the concentrate
production side of the industry has been so much greater than the bottling
side. Over the years the concentrate producers have experimented with
different levels of vertical integration, and although it has not necessarily been
clear which have been more successful historically, some decision criteria can
be developed to help determine if and when complete vertical integration is
necessary.
Coke and Pepsi are two leading brands of beverages that may be classified
as soda, pop or soft drinks. The two leading companies are very well known to
different countries. But when the cola giants, Pepsi and Coke, entered the
Indian market, they brought with them the cola wars that had become part of
global folklore. This case study details the various battles fought in India by the
two rivals with its focus on the publicity campaigns where the two sought to
steal each other’s fizz.

II. Background

Over a century, this Cola war has been a scenario of different strategies
that developed a very interesting case of study for marketing experts, due to a
constant innovation and sometimes aggressive behavior towards brand
building. Pepsi, a brand that suffered twice a bankruptcy but has made
enormous efforts to keep standing, making some important decisions such as
expanding their portfolio in the food industry allying with Frito Lay, has
become Coca Cola’s main competitor and is now positioned as the world’s
fourth-largest food and beverage company. Both brands have established a
differentiated brand image that is well-known around the world but making
evident their rivalry.
Between 1910 and 1930, Pepsi suffers two bankruptcies but keeps on
the game, while Coke keeps gaining market and spreading to new horizons.
Both brands change owners. In 1916 Coca Cola designed its famous bottle to
keep it saves from copies. Coca Cola keeps growing, entering to new continents.
Both brands expand their media investments and try to enforce their link with
consumers through a national spirit after the WWII.
 Coke enlarges his portfolio by acquiring Minute Maid and launching
Sprite. Pepsi gets more active in terms of campaigns, obtaining a more
notorious positioning.
Pepsi and Coke incursion in the Diet Drinks market. Pepsi buys
Mountain Dew and merges with Frito Lay, bringing up a new diverse company,
acquiring more strength opening operations in Eastern Europe and Japan.
Coca-Cola’ advertising was consolidated in 1970, giving the image of a brand
related to fun, friends and good time.
After this, numerous campaigns have been done by both brands. Most of
the time Pepsi appears to attack Coca Cola in their commercials and Coca Cola
started to respond at him, making more interesting this Cola War. Usually their
advertising is supported by famous people. One campaign that had a big
impact was The Pepsi Challenge in 1975, where two cups with no brand were
presented to people to taste them and tell which one they preferred. At the end
it showed that most of the people liked better Pepsi. This move brought a
positive impact in Pepsi’s Market Share, affecting Coke.
In 1981 Coca Cola Company had a new CEO named Roberto Goizueta,
who developed Diet Coke and it was an immediate hit. However, in 1985 he
decided to bring a new taste to the regular Coke, it was commonly called the
New Coke that was very successful in taste tests but in the reality it was a
failure and they were forced to bring again their original recipe as Coca Cola
Classic.
Since the 90’s, their story has been framed in developing new markets
and brands, most of the time through merges and strengthening their different
concepts: Pepsi as a “New Generation” and Coca Cola as “Live Positively”.

III. Alternatives

 Both companies should focus on increasing sales nationally to compete

effectively with one another and they need to focus more on “untapped”
areas.
 Continue to diversify their beverage selection through acquisitions: A
need to ensure that they have properly manage all of these acquired
companies and should divest those that show limited potential
 Develop imaginative and trendy advertising.
 Make socially aware campaigns.
 Capitalize on their aggressive corporate culture in overseas dealings.
 To combat the weakness of their current international strategies.
IV. Proposed Solution

This Market Model Coke VS Pepsi case study solution follows the more
than 100-year “Cola War” between Coke and Pepsi.
When first starting to use the Market Model for market simulation, it is
easier to think about this famous competitive battle when there were only two
competitive products (the 6.5 oz. Coke in their famous bottle, versus Pepsi’s
product). When Coke and Pepsi first started competition head-to-
head, Coke had about an 80% market share, and Pepsi had a 20% market
share – we can ignore the other competition which has since evaporated.
The Market Map at the beginning of the Cola Wars looked like this:

Market Maps can start out to be very simple. In this case, both products
share the same category defining benefit – they are both “Cola Drinks”. If
consumers cannot tell the difference in taste between the two in a blind taste
test, then the only differentiating qualities are the product brands.
 Data from the market already gives us a lot of information that we can
use to tune the Market Model. We know the Price for Coke and Pepsi, we know
their Market Share, and we have a pretty good idea of the Profit Margin (or
Marginal Cost) of both from their public financial reports. With these 6 data
points we can start to tune our model.
If we also have data for another point, say at a time that Pepsi was
offering a substantial discount on their product or from another geography,
then we would have more than enough data to completely tune a model as
simple as the one we are starting with.
Because the Market Model uses a proprietary statistical algorithm to
impute customer distribution data, the data collection problem becomes much
easier and cost effective. Unlike with other statistical techniques, the user does
not have to commission an expensive market research report just to tell them
what they already know about the existing market. The Market Model allows
the user to integrate their own knowledge, and then focus on understanding
just those new changes relative to the existing state of the market. For
example, after setting up an initial Market Model, the user can run very
targeted Conjoint Analysis study to better inform them about what is new to
the market (like a new feature). The new data can then be integrated into the
Market Map. Once the base model has been constructed and tuned the user
can think about how they might change the conditions in the market. Here are
some strategic ideas for Pepsi:

 They might try and add an additional feature, such as a different sized
bottle
 They might try to improve the Pepsi brand
 They might target a different geography
 They may try and improve the taste of the cola
 They might add a product line extension

This is how Pepsi would use the Market Model to simulate the market
outcome from each of these possible strategies.
Adding an Additional Benefit

To test whether adding the additional benefit of a larger bottle would be a

successful strategy, Pepsi could make this adjustment to the Market Map:

In fact, Pepsi did introduce a large 12 oz. bottle early on in the Cola Wars
to compete with Coke’s 6.5 oz. bottle. They accompanied the new product
feature with the advertising jingle “Pepsi-Cola hits the spot / twelve full
ounces, which are a lot / Twice as much for a nickel, too / Pepsi-Cola is the
drink for you”. The campaign was a huge success at the time and allowed Pepsi
to double their profits.
 Coke, which also sold for a nickel (5 cents), had difficulty matching
Pepsi’s new product. Not only would it require changing the size of the Coke
bottle, but it would also require changing the size of all of the Coke
refrigerators which were built to only accommodate the smaller 6.5 oz. bottle.

Target Marketing

To test whether targeting a particular market demographic would be a

successful strategy, Pepsi could make this adjustment to the Market Map:

In fact, Pepsi were pioneers for niche and segmented marketing. In the
1940’s they targeted their marketing directly towards African Americans. Later
they defined the “Pepsi Generation” and took a stand with the young side of the
1960’s generation gap. They described Pepsi drinkers as people who saw the
“young view of things”. The “Pepsi Generation” was one of the first and best
known instances of what came to be known as “lifestyle marketing”.
Geographic Distribution

To test whether adjusting their product distribution strategy would be

successful, Pepsi could make this adjustment to the Market Map:

In fact Pepsi, which had traditionally been sold through drug stores, was
the first to start branching out to alternative distribution channels. They were
also the first to start marketing outside of the United States.
Improved Taste

To test whether improving the perceived taste of Pepsi would be

successful, Pepsi could make this adjustment to the Market Map:

In fact the “Pepsi Challenge”, which was a market strategy centered on

improving the customer’s perception of the taste of Pepsi, was another
enormously successful strategy. In these televised blind-taste challenges, a
Coke drinker was asked to determine whether they actually preferred the taste
of Pepsi. It turns out that a statistically significant majority of Coke drinkers
did, in fact, prefer the taste of Pepsi. This genuine finding, in part, led Coke to
launch its unsuccessful “New Coke” strategy.
Product Line Extension

To test whether making a product line extension to the Pepsi product

would be a successful strategy, Pepsi could make this adjustment to the
Market Map:

Note that the Diet Pepsi product that was added to the Market Map is
just like Pepsi (it is also a Cola Drink with the Pepsi Brand) but it has the
additional benefit of being low in calories.

In fact, Pepsi did launch Diet Pepsi. And today Diet Pepsi is considered to
be Pepsi’s flagship product, with regular Pepsi being considered to be the
product line extension.
Increasingly Complex Environment

Market Models can evolve to be increasingly complex. And they can be

used to simulate very specific market phenomenon. For Pepsi, the Market
Model could evolve to look something like this:

Pepsi could then evaluate whether creating a very broad product

portfolio, and launching each of these products into the market over time,
would be a successful strategy. A dynamic timeline might look something like
this:

V. Recommendation

“According to the case study of Coke and Pepsi both of the companies
have great brand in market but this survey tells us that Pepsi has a great
market demand and high market shares because of its taste and market
developing plans but if they follow these steps they can become more effective
in markets”.

 One solution to increasing market share is to carefully follow consumer

wants in each country.
 The next step is to take fast action to develop a product that meets the
requirements for that particular region. Both companies cannot just sell
one product; if they do they will not succeed. They have to always be
creating and updating their marketing plans and products.
 According to me more important in every market, include color, product
attractiveness visibility, and display quality. In addition, availability
(meeting local demand by increasing production locally), acceptability
(building brand equity), and affordability (pricing higher than local brands,
but adapting to local conditions) are the key factors for both the
companies.
 Focus on advertising and promotion to differentiate from competitor and
to change the image and perception of cola to fit the healthy living trend.
 Each of them need to expand their product distribution, and there is
much more product innovations that definitely attract the consumers.
 Advertisement is one of the aspects that products are being known in the
market. Good advertisement is being exemplified by the consumers and
thus, resulting to have a higher sales and more profit.

VI. Conclusion

The cola wars are no longer about carbonated soft drink industry (CSD)
producers battling for market share solely with CSD sales. In order to be
profitable CSD organizations must show growth beyond CSD products. By
streamlining the organization’s business to be aligned with its strategic goals
especially with respect to its bottling companies, it will produce value to the
consumer within any market segment domestic or international. That value
can best be achieved by the organization’s ability to adapt its products to meet
customer needs and wants. In addition the organization can continuously
evolve so that it is not impacted detrimentally by loss in any one market
segment or decline in one product line. The profitability of the CSD
organization will not only be in sales of CSD’s but other beverages and foods as
these organizations expand into new markets.

VII. References

file://bigdawgserver/Users/Public/to%20print/Global/colawars-casestudy-
161013140414.pdf
https://www.slideshare.net/mohanvenkatvinay/cola-wars-coke-vs-pepsi-
harvard-business-school-case-study?next_slideshow=2
https://www.slideshare.net/VinodhiniGuhesanMBAP/cola-wars-case-study-
analysis/
https://www.scribd.com/doc/37730043/Cola-Wars-Coke-vs-Pepsi
https://www.slideshare.net/PrinsonRodrigues1/case-study-on-coke-vs-pepsi-
rivalry
https://www.slideshare.net/aganieszka87/case-analysis-
cokepepsi?next_slideshow=1
https://player.slideplayer.com/18/5675718/
https://bohatala.com/coke-vs-pepsi-case-study-solution/
https://www.researchgate.net/publication/306281447_Cola_Wars-Case_Study
https://pdfs.semanticscholar.org/a342/9cea48564f62bf8da8085b825ae3b071
d9f4.pdf
https://cdn.socialbakers.com/www/archive/storage/www/pepsi-vs-coca-
cola.pdf
 Global Marketing and
Analysis

Finals Case Study

The Coke VS. Pepsi

Rivalry

Submitted By:
Gene Marie B. Macalincag