Professional Documents
Culture Documents
Coke
The cola wars had become a part of global folklore -
something all of us took for granted. However, for the
companies involved, it was a matter of 'fight or
succumb.' Both print and electronic media served as
battlefields, with the most bitter of the cola wars often
seen in form of the comparative advertisements.
Media reports claimed that the rivalry between Coke and Pepsi had ceased to generate
sustained public interest, as it used to in the initial years of the cola brawls worldwide. They
added that it was all just a lot of noise to hardsell a product that had no inherent merit.
The Players
Coke had entered the Indian soft drinks market way
back in the 1970s. The company was the market
leader till 1977, when it had to exit the country
following policy changes regarding MNCs operating in
India. Over the next few years, a host of local brands
emerged such as Campa Cola, Thumps Up, Gold Spot
and Limca etc. However, with the entry of Pepsi and
Coke in the 1990s, almost the entire market went
under their control.
Coke was mainly a franchisee-driven operation with the company supplying its soft drink
concentrate to its bottlers around the world. Pepsi took the more capital-intensive route of
owning and running its own bottling factories alongside those of its franchisees. Over half of
Pepsi's sales were made by its own bottling units.
Though Pepsi had a lead over Coke, having come in before the era of economic liberalization
in India, it had to spend the early years fighting the bureaucracy and Parle's Ramesh
Chuahan every step of the way. Pepsi targeted the youth and seemed to have struck a right
chord with the market. Its performance was praiseworthy, while Coke had to struggle to a
certain extent to get its act right. In a span of 7 years of its operations in the county, Coke
changed its CEO four times. Media reports about the troubles faced by Coke and the
corrective measures it adopted were aplenty.
Towards the end of 1997, bottling agreements between Coke and many of its bottlers were
expiring. Coke began pressurizing its bottlers to sell out and threatened them that their
bottling agreements would not be renewed. Media reports claimed that Coke's bottlers were
not averse to joining hands with Pepsi. They said they would rather offer their services to
Pepsi than selling out to Coke and discontinuing a profitable business. In November 1997,
Pepsi made a bid to gain from the feud between Coke and its franchised bottlers. It declared
that it was ready to join hands with 'any disgruntled Coke bottler, provided the latter's
operations enhanced Pepsi's market in areas where Coke was dominant.' Pepsi was even
willing to shift to a franchisee-owned bottling system from its usual practice of focusing on
company-owned bottling systems supplemented by a few franchisee-owned bottling
companies, provided it found bottlers who would enhance both the quantity and quality,
especially in areas where Coke had a substantial marketshare. Pepsi won over Goa Bottling
Company, Coke's bottler in Goa and became the market leader in that city.
II - ADVERTISING
When Coke re-entered India, it found Pepsi had
already established itself in the soft drinks market.
The global advertisement wars between the cola
giants quickly spread to India as well. Internationally,
Pepsi had always been seen as the more aggressive
and offensive of the two, and its advertisements the
world over were believed to be more popular than
Coke's. It was rumored that at any given point of
time, both the companies had their spies in the other
camp. The advertising agencies of both the companies
(Chaitra Leo Burnett for Coke and HTA for Pepsi) were
also reported to have insiders in each other's offices
who reported to their respective heads on a daily
basis. Based on these inputs, the rival agency
formulated its own plans. These hostilities kept the
rivalry alive and healthy. However, the tussle took a
serious turn at times with complaints to Advertising
Standards Council of India, and threats of lawsuits.
The severe damage caused by the 'Nothing Official About It' campaign prompted Coke to
shift its advertising account from McCann Erickson to Chaitra Leo Burnett in 1997. The 'Eat-
Sleep-Drink' series of ads was born soon after. Pepsi responded with ads where cricket stars
'ate a bat' and 'slept on a batting pad' and 'drank only Pepsi.' To counter this, Coke released
a print advertisement in March 1998, in which cricketers declared, 'Chalo Kha Liya!' Another
Thums Up ad showed two apes copying Pepsi's Azhar and Ajay Jadeja, with the line, 'Don't
be a bunder (monkey), Taste the thunder.' For once, it was Pepsi's turn to be at receiving
end. A Pepsi official commented, "We're used to competitive advertising, but we don't make
fun of the cricketers, just the ad." Though Pepsi decided against suing Coke, the ad
vanished soon after the dissent was made public. Commenting on this, a Pepsi official said,
"Pepsi is basically fun. It is irreverent and whacky. Our rival is serious and has a 'don't mess
with me' attitude. We tend to get away with fun but they have not taken it nicely. They
don't find it funny."
Coke then launched one of its first offensive ads, ridiculing Pepsi's ads featuring a monkey.
'Oye! Don't be a bunder! Taste the Thunder', the ad for Thums Up, went with the line,
'issued in the interest of the present generation by Thums Up.'
The 1998 Football World Cup was another event the cola majors fought over. Pepsi
organized local or 'para' football matches in Calcutta and roped in Indian football celebrity
Bhaichung Bhutia to endorse Pepsi. Pepsi claimed it was the first to start and popularize
'para' football at the local level. However, Coke claimed that it was the first and not Pepsi,
to arrange such local games, which Coke referred to as 'pada.'
While Pepsi advertisements claimed, 'More football,
More Pepsi,' Coke utilized the line, 'Eat football, Sleep
football, Drink only Coca-Cola,' later replaced by 'Live
football, dream football and drink only Coca-Cola.'
Media reports termed Pepsi's promos as a 'me-too'
effort to cash in on the World Cup craze, while Coke's
activities were deemed to be in line with its
commitment and long-term association with the
game.
Coke claimed that it was passing on the benefit of the 5% cut in excise duty to the
consumer. Industry experts, however, believed that the price cut had more to do with piling
up inventories. Diet drinks in cans had a rather short shelf life (about two months) and the
cola majors were simply clearing stocks through this price cut. However, by 2001, the diet-
cola war had almost died out with the segment posting extremely low growth rates.
IV – POACHING
Pepsi and Coke fought the war on a new turf in the late 1990s. In May 1998, Pepsi filed a
petition against Coke alleging that Coke had 'entered into a conspiracy' to disrupt its
business operations. Coke was accused of luring away three of Pepsi's key sales personnel
from Kanpur, going as far as to offer Rs 10 lakh a year in pay and perks to one of them,
almost five times what Pepsi was paying him. Sales personnel who were earning Rs 48,000
per annum were offered Rs 1.86 lakh a year. Many truck drivers in the Goa bottling plant
who were getting Rs 2,500 a month moved to Coke who gave them Rs 10,000 a month.
While new recruits in the soft drinks industry averaged a pay hike of between 40-60% Coke
had offered 300-400%. Coke, in its reply filed with the Delhi High Court, strongly denied the
allegations and also asked for the charges to be dropped since Pepsi had not quantified any
damages. Pepsi claimed that this was causing immense damage as those employees who
had switched over were carrying with them sensitive trade-related information. After some
intense bickering, the issue died a natural death with Coke emerging the winner in another
round of the battle.
Pepsi also claimed that its celebrity endorsers were lured into breaking their contracts with
Pepsi, and Coke had tried to pressure the Board of Control for Cricket in India (BCCI) to
break a sponsorship deal it had signed for the Pepsi Triangular Series. According to Pepsi's
deal with BCCI, Pepsi had the first right of refusal to sponsor all cricket matches played in
India where up to three teams participated. The BCCI, however, was reported to have tried
to break this contract in favor of Coke. Pepsi went to court protesting against this and won.
Pepsi also alleged that Coke's Marketing Director Sanjiv Gupta was to join Pepsi in 1997.
But within days of his getting the appointment letter, Coke made a counter offer and
successfully lured Gupta away.
V – OTHER FRONTS Contd...
• Coke also turned its attention to Pepsi's stronghold -
the retail outlets. Between 1996-98, Coke doubled its
reach to a reported 5 lakh outlets, when Pepsi was
present at only 3.5 lakh outlets. To reach out to
smaller markets, interceptor units in the form of
mobile vans were also launched by Coke in 1998 in
Andhra Pradesh, Tamil Nadu and West Bengal.
However, in its rush to beat Pepsi at the retail game,
Coke seemed to have faltered on the service front. For
instance, many shops in Uttar Pradesh frequently ran
out of stock and there was no servicing for Coke's
coolers. Though Coke began servicing retail outlets on
a daily basis like Pepsi, it had to wait for a while
before it was able to match Pepsi's retailing strengths.
The wars seemed to have settled down into a pattern. Pepsi typically won a market,
sustained itself for a few years, and then lost to a very determined Coke. In the earlier
years, Coke was content with advertising its product to build a strategic positioning for its
product. With Pepsi's offensive moves getting stronger and stronger, Coke had no option
but to opt for the same modus operandi. Though the market share debates would not have
any conclusions, it would be safe to infer that the cola wars were a major factor in keeping
customer interest alive in the segment so far. However, in the late 1990s, questions were
raised about the necessity and more importantly, about the efficacy of these wars. Answers
for this would be too difficult to ascertain and too shaky to confirm.