Pepsi Cola War

Once upon a time in America, Coca-Cola was born. He was followed thirteen years later by Pepsi Cola. They both lived a very veeeeery happy carbonated childhood in their respective families and grew up to become "The Coca-Cola Company" and "Pepsi Co. Incorporated". Although they were known to be best buddies at school and then in college, they became the two largest and oldest arch-rivals in the soft drink industry, combining 73% of the U.S. market in 1993.

Episode 1 : How would you describe the competition of Pepsi and Coke since 1940? How intense is such a competition, and which are its peculiarities?

Coke, who happened to have a very sharp and quick thinking, ganged up with his bottlers buddies in the US territory. With a clear mission, he wanted to make sure that anyone and everyone could have access to soft drinks whenever and wherever they felt like having one. During World War II, upon Eisenhower request, Coke was positioned as the national patriotic classic drink of the American soldiers giving it a great opportunity to expand his market presence overseas. While Coke was busy with his overseas operations, Pepsi, who was almost bankrupt, saw the opportunity to gain "territory" in the US by growing her presence in supermarket and food-stores. Such strategy signaled the resurgence of Pepsi who slowly crept back up to financial soundness and strong market presence (i.e. market share) in the US market. During this time, the competition between the two old buddies was not fierce as Coke did not see Pepsi as a real threat to is market dominance.

In the 50s, even though Coke's share accounted for 47% of the soft drink market and Pepsi's 10%, Coke's dominance was being increasingly challenged by Pepsi. At this point, Coke started acknowledging the presence and threat of the old lady friend and, very subtly, commenced to counter attack through advertising. But it is in the late 1950's that the real war began with both companies entering in a competitive path characterized by emulation of strategies creating the duopoly that we know today.

Coke and Pepsi had and continue to have one of the most fierce competitions of any industry. While intensively fighting to conquer barren territories, they continue to built their empires by acquiring new infrastructure to support product availability (i.e. backward integration of bottlers, equity investment in other companies). As the battle continues, they were forced to bring new weapons to the battlefield by targeting product differentiation and market segmentation further building their brand equity.

Episode 2: What are Coke & Pepsi's critical capabilities, individually and jointly?

Although the relationship between the two self-made giants couple is predominately competitive, Coke and Pepsi would not be who they are today without each another. Their market presence and the duopoly they exert give them an increasing power of negotiation with buyers and suppliers (see Annex 2) and influence regarding policies and regulations around selling sodas (See Annex 4 - India). They stimulate each other's imagination to product innovation, diversification and brand image. They both posses a strong brand image/loyalty through their long history of advertising which makes impossible for a new entrant to match this scale on the market. They both possess a strong control of the bottlers business (although through different approaches: Pepsi through acquiring assets, Coke through making equity investments). Globally, they are repositioning their strategies towards finding new market and expanding into new market segments becoming total beverage companies and shielding themselves from competition.

Although Coke was late to react to Pepsi in-roads, thanks to a change in top-management in late 80s, he has demonstrated strong capabilities to quickly reposition himself reaffirming his market leadership. Thanks to Eisenhower's mandate during WWII, 64 bottling facilities were opened around the world. Later they were converted to civilian use. This effort significantly increased Coke's international presence

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