Pepsi V/S Coke

Introduction:

History of Coca-Cola (Coke):

Coca-Cola was formulated by John S.Pemberton, originally as a cocawine called Pemberton's French Wine Coca, and originally sold as a patent medicine for five cents a glass at soda fountains, which were popular in America due to a contemporary view that soda water was good for your health. Coca-Cola is the trademarked name, registered in 1893, for a popular soft drink sold in stores, restaurants and vending machines around the world.

History of Pepsi:

Caleb Bradham, a New Bern, North Carolina pharmacist, renamed "Brad's Drink," a carbonated soft drink he had created to serve his drugstore's fountain customers. The new name, Pepsi-Cola, was first used on August 28, 13 years after Coca-Cola. In 1902 Bradham applied for a trademark to the U.S. Patent Office, issued stock and began selling Pepsi syrup. By 1923, Pepsi-Cola Company was declared bankrupt and its assets were sold to a North Carolina concern, Craven Holding Corporation, for $30,000. Roy C. Megargel, a Wall Street broker, bought the Pepsi trademark, business and goodwill from Craven Holding Corporation for $35,000, forming the Pepsi-Cola Corporation and in 1932 the trademark was registered in Argentina.

The beginning of the Cola war:

1975 heralded the 'Pepsi Challenge', a landmark marketing strategy, which convinced millions of consumers that the taste of Pepsi was superior to Coke. Simultaneously, Pepsi Light, with a distinctive lemon taste, was introduced as an alternative to traditional diet colas. In 1983 Coke launched aspartame/saccharin blend Diet Coke. In response in 1989 Pepsi-Cola introduced an exciting new flavor, Wild Cherry Pepsi. Thus Diet Pepsi's 'The Other Challenge' campaign was based around a 54-46% lead over Diet Coke in independently researched taste tests in Australia. It was only in 1996 that Pepsi unveiled a revolutionary 'blue' look worldwide 'to transform the image and attitude' of one of the world's best-known brands. 'Pepsi Blue represents a quantum leap into the future and redefines how the Cola Wars will be fought and won in the 21st Century.'

Purpose of the case study:

Control of market share is the key issue in this case study. The situation is both Coke and Pepsi are trying to gain market share in this beverage market, which is valued at over $30 billion a year. Just how is this done in such a competitive market is the underlying issue. The facts are that each company is coming up with new products and ideas in order to increase their market share. The creativity and effectiveness of each company's marketing strategy will ultimately determine the winner with respect to sales, profits, and customer loyalty.

Not only are these two companies constructing new ways to sell Coke and Pepsi, but they are also thinking of ways in which to increase market share in other beverage categories. Although the goal of both companies is exactly the same, the two companies rely on somewhat different marketing strategies. Pepsi has always taken the lead in developing new products, but Coke soon learned their lesson and started to do the same. Coke hired marketing executives with good track records. Coke also implemented cross training of managers so it would be more difficult for cliques to form within the company. On the other hand, Pepsi has always taken more risks, acted rapidly, and was always developing new advertising ideas.

Both companies have also relied on finding new markets, especially in foreign countries. In the foreign markets, Coke has been more successful than Pepsi. For example, in Eastern Europe, Pepsi has relied on a barter system that proved to fail. However, in certain countries that allow direct comparison, Pepsi has beat Coke. In foreign markets, both companies have followed the marketing concept by offering products that meet consumer needs in order to gain market share. For instance, in certain countries, consumers wanted a soft drink that was low in sugar, yet did not have a diet taste or image. Pepsi responded by developing Pepsi Max.

These companies in trying to capture market share have relied on the development of new products. In some cases the products have been successful. However, at other times the new products have failed. For Coke, changing their original formula and introducing it as "New Coke" was a major failure. The new formula hurt Coke as consumers requested Classic Cokes' return. Pepsi has also had its share of failures. Some of their failures included: Pepsi Light, Pepsi Free, Pepsi AM, and Crystal Pepsi.

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. The companies must be willing to accommodate their "target markets". Gaining market share occurs when a company stays one-step ahead of the competition by knowing what the consumer wants.

Lucrative Markets and the Strategies adopted by the Cola giants:

Chinese Market:

The Chinese soft drink market is one of the fastest growing and both the cola makers have tailored their strategies to make the most of this boom.

Coca-Cola's long time strategy has been to make its product inexpensive, widely available and tasty. As far as taste is concerned, the company had to develop various drinks tailored to Chinese palates. During the China International Beverage Festival held in September, Coca-Cola invited Chinese folk artists to make paper-cuts and mold clay dolls, so as to better combine traditional Chinese art with a foreign brand.

Pepsi also developed its market strategy according to the unique tastes of Chinese customers. They spent huge amounts of money to invite famous singers, stars and soccer players to promote its products. The company called this its "soccer & music" promotional strategy.

The Chinese market presents unique problems. For example, 2,800 local soft-drink bottlers, many of whom are state-owned, control nearly 75% of the Chinese market. Those bottlers located in remote areas have virtual monopolies. The battle for China will take place in the interior regions. These areas are unpenetrated as most of the foreign soft-drink producers have set up in the booming coastal cities. China's high transportation and distribution