Coca Cola and Pepsi - Cola War

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How did the two Cola giants engage across different competitive battlefields? How did the type of market structure in which they operated and industry trends contribute to their choice of strategies and the dynamics of their competitive battles? What type of competitive behavior did they pursue?

MARKET OVERVIEW

For over a century, Coca-Cola and Pepsi-Cola have been arch-rivals, constantly competing for market share in the carbonated soft drink (CSD) industry. Throughout this battle both companies have remained dominant players in the industry and have moved beyond their original products into many new areas. Now, as sales in the CSD industry begin to decline and the consumer market is giving way to more nutritious alternatives. Both, Coca-Cola and Pepsi's have begun to change their strategies, thus they begun expanding into emerging markets, producing and marketing healthier beverages.

The CSD industry currently has no barriers for entry; however, any new company attempting to enter the market will have to understand that this is a risky decision to take. Coca-Cola and PepsiCo are the two major leading companies in the soft drink industry and they have in essence created a duopoly in the market.

COMPETATIVE STRATEGY

Both companies have competed with each other for decades, and they closely monitored each other’s strategic market moves. Nonetheless, Coke was the originator in the CSD industry and has always has maintained the dominant strategy in the domestic and international market. Coke has been the innovator with not only products but strategy capitalizing on their first mover’s advantage in all aspect. Pepsi on the other hand has taken an imitating position, copying all of Coke’s strategies or counteracting Coke. One of the first examples we see of this was in 1980 when Coke switched from sugar to fructose syrup, which lowered their costs, 3 years later Pepsi followed with the same change.  When CSD consumption began to decrease in the late 90’s because it was linked to obesity and other health concerns, Coke launched a new “free-style” fountain machine and upped their marketing & advertising efforts by $830M, Pepsi redesigned their logo, spent $1B in rejuvenating their brand and focused on diversifying their portfolio as a snack and beverage company. Due to the dwindling CSD market both companies opted to use alternative, low calorie sweeteners and explored non-carb drink alternatives such as water, teas, and energy drinks. At this time Coke began to capitalize on the international market, with this Coke had a tremendous first mover advantage over Pepsi, and remains the dominant international soft drink producer. With brand awareness worldwide Coke has been able to place their brand in the minds of consumers all over the globe. However, this advantage is declining as Pepsi seems to reposition itself in the market and gain more international shares. Nonetheless, Coke has a global scope advantage over Pepsi.