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Over the past decades, several corporations have scrambled for a fraction of the bigger global market. Across most industries, companies have witnessed cut throat competitions that have predisposed some to the edge of bankruptcy. The emerging markets in Africa and Asia have formed the contemporary fronts for such fierce competitions. According to Hartley (31), of all marketing wars a cross the globe, none has witnessed such vicious struggles like one between coca-cola and Pepsi. The two soft drink giants have for long spells engaged each other in ferocious marketing battles. The coming of the new millennium and the recent global fiscal recession does not seem to have quelled the war amidst the two rivals, (Dahlen, Lange & Smith 25). This write up looks at the emergence of these two soft drink conglomerates, their struggles over the past years and their continuing battles on the present day global market front.
Brief History of the two Giants
Gillespie, Jeannette & Hennessey (155) observes that the dominance of the soft drink market by coca cola is attributable to its principle brands, coca cola, Fanta, diet coke and sprite. The company chiefly manufactures syrup concentrates which it sells to its subsidiaries a round the globe where bottling of the products take place. Additionally, they have managed to license over 400 products in slightly more than 200 nations globally. They enjoy billions of profits and employ thousands of individuals either directly or indirectly. Their rival Pepsi is reputable for its leadership in the snack market while currently trails them in the soft drink marketplace. The corporation has presence in over 200 nations globally. It enjoys huge profits and employs a bout 170000 employs, (Gillespie, Jeannette & Hennessey 155).
According to Hartley (31), by the seventies, the coca-cola company was a dwindling giant with growth rate falling from a record 13% to a low of 2% towards the end of the decade. While coca-cola was experiencing this market blow, Pepsi continued to gain foothold in the soft drink market. Hartley (31) reports that this achievement became possible through the launch of their famous advertisement campaign dubbed the Pepsi generation. The advert captured the attention of many by its youthfulness and romanticism. Moreover, its association with liveliness endeared it to many and firmly cemented Pepsi in the minds of the bigger soft drink market.
While this event played a significant role in Pepsi’s market advancement, it was not until the launch of the Pepsi challenge that the marketing confrontation officially showed in the limelight. According to Hartley (31), the results of the challenge showed that Pepsi had a much more superior taste compared to it s rival. A similar consumer taste exercise independently performed by a team from coca-cola confirmed a similar result. These results were evident on the foregoing market statistics which showed a progressive shrunk in Coca-cola’s market, (Hartley 32). To fuel the ensuing confrontation, there was a revelation that Coca-cola spent much more on advertisements compared to the advancing Pepsi. Similarly, they took note of the fact that they were leading in the numbers of soft drink vending machines and had better prices compared to their rivals. Hartley (31) notes that, these revelations compelled coca cola to rethink their marketing strategies.
Gillespie, Jeannette & Hennessey (155) denote that the best way to measure the effects of advertisement lies in the determination of subsequent market performance by the company. While numerous methods reflect on the realized changes inn sales, some lay emphasis on the effects the promotion had periods after the promotion period. Hartley (32) observes that the image an advertisement leaves in the minds of the potential market is exceedingly significant in formation of a formidable product market. Possibly, this explains the vicious fight back mounted by coca cola in view of the shrinking market brought by the steadily advancing Pepsi.
Dahlen, Lange & Smith (32) denotes that the coca cola launched its fight back by first breaking the company’s traditions in the appointment of a new chairman who had no links to the famed company top leadership echelon. After his appointment, Roberto Goizueta broke the second tradition by changing the original coke formula for the first time in a century. Market findings showed superiority of the new brand over the original coke and this influenced the decision to replace the original brand with the newly developed brand.
Hartley (35) observes that the removal of the original brand from the market fuelled huge consumer complaints and a major product boycott across the U.S. The persistence of such revolts compelled the return to the market of the old coke brand now named coke classic. Notably, during this period, Pepsi gained much ground in the soft drink market. However, the spoils were short lived as the return of the old coke and the maintenance of the two brands of coke in the market increasingly buoyed the coca cola sales. At the close of 1989, coca cola had regained a bit of its lost market and it now commanded about 40% of the ,market compared to Pepsi’s 31%.
Earlier Global Competitions
Kirby (24) observes that over the time, the marketing battle field shifted to the international stage, noting the almost zero percentage domestic market growth. Domestically, the two corporations resorted to going after each other’s regulars to improve sales. Internationally, the one on one battle extended to major soft drink markets like Canada and the UK. In the early nineties, Pepsi mounted severe challenge to coca-cola’s global dominance in several countries around the globe. Such cut throat strategies witnessed in countries like Brazil and Argentina helped coin a percentage of the market for Pepsi. Hartley (36) reports that until 1994, Pepsi’s attempts to enter the Brazilian market had met fierce resistance. However, in 1994, through a company called Baesa, they ultimately penetrated the South American Market. Reportedly, through Baesa, they acquired diminutive bottlers across the region surmounting the market obstacles presented by coca-cola. In approximately three years, Pepsi had acquired about 34% of the South American soft drink market.
Coca cola reacted to the Pepsi invasion by launching a massive advertisement campaign and providing cold drink facilities to its retailers. These actions considerably reduced the involvement of Pepsi in the business of small retail outlets which was their most profitable venture. The reduction of tax on cola products by the argentine government, under influence by coca cola, massively enhanced their market size. However, this event tended to progressively reduce Pepsi’s influence as they realized much of their earnings from non cola drinks. By 1995, over 70% of Pepsi’s beverage profits resulted from domestic sales while coca cola enjoyed a massive 80% of its total revenue from foreign markets, (Hartley 37). This reflected coca cola’s global supremacy while Pepsi’s predicaments in South America mirrored in virtually all its global ventures, (Hartley 37).
Coke’s domination of the global market was not without fault. The year1999 saw the burning of several coca cola products in numerous European nations following reports of sickness among school children who had taken a variety of coca cola products. The year also witnessed the invasion of major coca cola bottling plants across Europe on suspicion of illegal practices aimed at shutting out competitors, (Dahlen, Lange & Smith 58). These allegations tarnished coca cola’s image and massively reduced their dominance across the European market. Hartley (42) reports that coca cola lost an approximate 3.4 million dollars per day during the European circus. However, Pepsi did not gain exceedingly from the coke’s predicaments citing change in consumer preference from cold munchies to bottled water. Reportedly, they made some inroads especially in fast expanding markets of china and other Asian continent.
The Modern Day Competition
Gillespie, Jeannette & Hennessey (155-210) denote that the war between coca cola and Pepsi continues. However, Pepsi has never won the war and does not seem much troubled by it anymore. Following dismal performance across the globe, it resorted to diversifying its production other than the one to one confrontation with coca cola. Hartley (43) observes that since the turn of the millennium, coke’s growth has slowed down. It has experienced a stagnant growth with an income growth of 4% in the year 2004. On the other hand, Pepsi has continued to experience a consistent growth.
According to Hartley (35), Coca cola’s progressively shrinking earnings are attributable to their reluctance to diversify. Hartley (44) notes that this led to their 2004 failure in purchasing of the south beach beverage. Pepsi which bought the company within weeks of negotiations now revels as the market leader in the emerging profitable energy drink business. Similarly, the two old rivals have fought in such other areas as the bottled water enterprise.
In 2003, both giants announced their big entry into the business. However, over the proceeding years, Pepsi’s Aquafina has emerged as the market leader while coke’s brands like Dasani have faltered following controversies with the brand. Similarly, coca cola’s attempts to diversify have experienced less success. This is notable in their introduction of noncarbonated products which failed terribly leading to the abolishment of their production in the year 2003, (Hartley 44).
Gillespie, Jeannette & Hennessey (155-210) note that the shrinking profits experienced by coca cola are attributable to the steadily developing resentment to carbonated drinks. This follows their association with such conditions as obesity and other associative medical conditions. The acknowledgement of this fact could have motivated the introduction of the product named C2 in 2003. Hartley observes that this new drink had less calorie content and carbon cola and deemed an alternative to the other resented products. However, the new product failed terribly in spite of the huge finances laid out for its advertisement. Reportedly, many consumers found its taste flat and with a disturbing aftertaste.
Hartley (47) observes that the shrinking market experienced by Coca cola is associable to the sluggish manner in which the corporation dealt with the Belgium problem. Additionally, they failed to make Dasani a global bottled water brand. This follows the detection of a cancer casing chemical in a Dasani bottle in Britain. In spite of a board of directors rich in experience but quite aged, coca cola has found itself in tighter economic situations in the past decade. Firstly, the plunging share price came as a surprise to many while the continuing reluctance by the board to take advantage of favorable investment opportunities has lead to little growth. On the other hand, Pepsi has continued to flourish, taking advantage of Coke’s reluctance to snap up lucrative trade opportunities.
Evidently, despite the global fiscal troubles, the two giants have continued to flourish. This is associable to their ability to contain major competitions from local rivals at the global stage. Their famed brands such coke and Pepsi, over the years, have built huge pool of loyal consumers. These pools of clientele are likely to push coke through its evident stagnation while hoping to find profitable ventures for diversification. The failure of coke with some of its recent products is attributable to biased media reports. A good example is the Dasani’s case. The company will find it exceedingly had to convince consumers to rethink about the product. This follows its association with elements that are cancer causatives. The on going diversification by Pepsi is likely to ensure their steady growth in the foreseeable future.
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