the coke pepsi rivalry

7/18/2019 The Coke Pepsi Rivalry

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The Coke Pepsi Rivalry

Our real competition is water, tea, nimbupani and Pepsi... inthat order."

- Coke sources in 1!.

"hen you#re $o % and you#re stru&&lin&, you have to bemore innovative, work better, and be more resilient. '( webecame $o 1, we would rede)ne the market so we became$o %* The (act is that our competition with the Coca-Cola

company is the sin&le most important reason we#veaccomplished what we have. +nd i( they were honest, they

would say the same thin&."

- Pepsi sources in 1.

"oth companies did not really concentrate on the(undamentals o( marketin& like buildin& stron& brand euity

in the market, and thus had to resort to such tactics to&arner market shares."

- usiness 'ndia in 1.

The Coke Pepsi Rivalry/ Pepsi 0s. Coke

The cola wars had become a part of global folklore -something all of us took for granted. However, for thecompanies involved, it was a matter of 'ght or succumb.'Both print and electronic media served as battleelds,with the most bitter of the cola wars often seen in form of the comparative advertisements.

In the earl !"#$s, the %& soft-drinks market was on theverge of maturit, and as the maor plaers, (oke and)epsi o*ered products that 'looked the same and tasted

the same,' substantial market share growth seemedunlikel. However, (oke and )epsi kept reuvenating themarket through product modications andpricing+promotion+distribution tactics. s the competition



was intense, the companies had to freuentl implementstrategic changes in order to gain competitive advantage.

The onl wa to do this, apart from introducing cosmeticproduct innovations, was to ght it out in the marketplace.

This modus operandi was followed in the Indian marketsas well with (oke and )epsi resorting to more innovativetactics to generate consumer interest.

In essence, the companies were tring to increase the whole market pie, as the market-shares war

seemed to get nowhere. This was because both the companies came out with contradictor

market share gures as per surves conducted b their respective agencies - /0 1(oke2 and

I3/B 1)epsi2. 4or instance, in ugust 5$$$, )epsi claimed to have increased its market share for

the rst ve months of calendar ear 5$$$ to 6"7 from 6#.87, while (oke claimed to have

increased its share in the market to 9#7, in the same period, from 997.

3edia reports claimed that the rivalr between (oke and )epsi had ceased to generate sustained

public interest, as it used to in the initial ears of the cola brawls worldwide. The added that it

was all ust a lot of noise to hard sell a product that had no inherent merit.

(oke had entered the Indian soft drinks market wa backin the !"#$s. The compan was the market leader till!"##, when it had to e:it the countr following policchanges regarding 3;(s operating in India. ver the ne:tfew ears, a host of local brands emerged such as (ampa(ola, Thumps %p, 0old &pot and <imca etc. However, withthe entr of )epsi and (oke in the !""$s, almost theentire market went under their control.

3aking billions from selling carbonated+colored+sweetenedwater for over !$$ ears, (oke and )epsi had emerged astrul global brands. (oke was born !! ears before )epsi

in !==# and, a centur later it still maintained its lead inthe global cola market. )epsi, having alwas been numbertwo, kept tring harder and harder to beat (oke at its owngame. In this never-ending duel, there was alwas a newbattlefront opening up somewhere. In India the battle wasmore intense, as India was one of the ver few areaswhere )epsi was the leader in the cola segment. (oke re-entered India in !""8 and soon entered into a deal with)arle, which had a >$7 market share in the soft drinkssegment with its brands <imca, Thums %p and 0old &pot.

4ollowing this, (oke turned into the absolute market leader overnight. The compan also acuired

(adbur &chweppes' soft drink brands (rush, (anada ?r and &port (ola in earl !""".

(oke was mainl a franchisee-driven operation with the compan suppling its soft drinkconcentrate to its bottlers around the world. )epsi took the more capital-intensive route of owningand running its own bottling factories alongside those of its franchisees. ver half of )epsi's saleswere made b its own bottling units.

Though )epsi had a lead over (oke, having come in before the era of economic liberali@ation inIndia, it had to spend the earl ears ghting the bureaucrac and )arle's /amesh (huahan everstep of the wa. )epsi targeted the outh and seemed to have struck a right chord with themarket. Its performance was praiseworth, while (oke had to struggle to a certain e:tent to get itsact right. In a span of # ears of its operations in the count, (oke changed its (A four times.3edia reports about the troubles faced b (oke and the corrective measures it adopted wereaplent.

' - OTT'$2



Bottling was the biggest area of conict between )epsiand (oke. This was because, bottling operations held theke to distribution, an e:tremel important feature forsoft-drink marketing. s the wars intensied, bothcompanies took pains to maintain good relationships withbottlers, in order to avoid defections to the other camp.

maor stumbling block for (oke was the conict with itsstrategic bottling partner, /amesh (hauhan of the )arlegroup of companies. (oke alleged that (hauhan hadsecretl manufactured (oke's concentrate. (hauhan, inturn, accused coke of backtracking on commitments togrant him bottling rights in )une and Bangalore andthreatened legal action. The matter almost reached thecourts and the strategic alliance showed signs of comingapart. Industr observers commented that for a companlike (oke that was so heavil franchisee driven,antagoni@ing its chief bottler was suicidal.

Chile all this was going on, )epsi wasted no time in moving in for the kill. It made huge inroads inthe north, particularl in ?elhi where (hauhan had the franchise and also snapped up theopportunit to bu up (oke's bottler )inakin &hah in 0uarat. Ironicall, the 0uarat Bottling(ompan owned b &hah, also belonged in part to (hauhan for whom the sell-out was a strategiccounter-move in his battle with (oke. (oke moved court and obtained an order enforcing itsbottler's agreement with the 0uarat compan, e*ectivel free@ing )epsi's right to use theacuired capacit for a ear. <ater, (oke made a settlement of D!$ million in e:change for(hauhan foregoing bottling rights in )une and Bangalore.

Towards the end of !""#, bottling agreements between (oke and man of its bottlers weree:piring. (oke began pressuri@ing its bottlers to sell out and threatened them that their bottlingagreements would not be renewed. 3edia reports claimed that (oke's bottlers were not averse to

oining hands with )epsi. The said the would rather o*er their services to )epsi than selling out

to (oke and discontinuing a protable business. In ;ovember !""#, )epsi made a bid to gain fromthe feud between (oke and its franchised bottlers. It declared that it was read to oin hands with'an disgruntled (oke bottler, provided the latter's operations enhanced )epsi's market in areaswhere (oke was dominant.' )epsi was even willing to shift to a franchisee-owned bottling sstemfrom its usual practice of focusing on compan-owned bottling sstems supplemented b a fewfranchisee-owned bottling companies, provided it found bottlers who would enhance both theuantit and ualit, especiall in areas where (oke had a substantial marketshare. )epsi wonover 0oa Bottling (ompan, (oke's bottler in 0oa and became the market leader in that cit.

'' - +304RT'5'$2Chen (oke re-entered India, it found )epsi had alreadestablished itself in the soft drinks market. The global

advertisement wars between the cola giants uicklspread to India as well. Internationall, )epsi had alwasbeen seen as the more aggressive and o*ensive of thetwo, and its advertisements the world over were believedto be more popular than (oke's. It was rumored that atan given point of time, both the companies had theirspies in the other camp. The advertising agencies of boththe companies 1(haitra <eo Burnett for (oke and HT for)epsi2 were also reported to have insiders in each other'soEces who reported to their respective heads on a dailbasis. Based on these inputs, the rival agenc formulatedits own plans. These hostilities kept the rivalr alive andhealth. However, the tussle took a serious turn at times

with complaints to dvertising &tandards (ouncil of India,and threats of lawsuits.

Chile )epsi alwas relied on advertisements featuring



lms stars, pop stars and cricket plaers, (oke had initialldecided to focus on Indian culture and ingles based onIndian classical music. These were also supported b cokeadvertisements that were popular in the Cest.

&omehow, (oke's advertisements missed the Indian pulse b a wide margin. )epsi soon came to

be seen as a 'defender' who had humiliated the 'invader' with its superior creative strengths.Chen (oke bagged the oEcial sponsorship rights to the !""# (ricket Corld (up, )epsi createdmedia histor b unleashing one of the countr's most successful advertisement campaigns - the';othing Ecial bout It' campaign . )epsi took on (oke, even when the latter sponsored thereplas of the matches, through the campaign, '%ncork a (ola.' 3edia coverage of the war evenhinted that the e:clusion of /ahul ?ravid 1)epsi's model2 from the Indian team had something todo with the war. However, (oke had its revenge when it bagged the television sponsorship rightsfor the !""# )epsi sia (up. (onseuentl, )epsi, in spite of having branded the event was notable to sponsor it.

The severe damage caused b the ';othing Ecial bout It' campaign prompted (oke to shift itsadvertising account from 3c(ann Arickson to (haitra <eo Burnett in !""#. The 'Aat-&leep-?rink'series of ads was born soon after. )epsi responded with ads where cricket stars 'ate a bat' and

'slept on a batting pad' and 'drank onl )epsi.' To counter this, (oke released a print advertisementin 3arch !""=, in which cricketers declared, '(halo Fha <iaG' nother Thums %p ad showed twoapes coping )epsi's @har and a adea, with the line, '?on't be a bunder 1monke2, Taste thethunder.' 4or once, it was )epsi's turn to be at receiving end. )epsi oEcial commented, Ce'reused to competitive advertising, but we don't make fun of the cricketers, ust the ad. Though)epsi decided against suing (oke, the ad vanished soon after the dissent was made public.(ommenting on this, a )epsi oEcial said, )epsi is basicall fun. It is irreverent and whack. urrival is serious and has a 'don't mess with me' attitude. Ce tend to get awa with fun but thehave not taken it nicel. The don't nd it funn.

(oke then launched one of its rst o*ensive ads, ridiculing )epsi's ads featuring a monke. 'eG?on't be a bunderG Taste the Thunder', the ad for Thums %p, went with the line, 'issued in theinterest of the present generation b Thums %p.'

The !""= 4ootball Corld (up was another event the cola maors fought over. )epsi organi@ed localor 'para' football matches in (alcutta and roped in Indian football celebrit Bhaichung Bhutia toendorse )epsi. )epsi claimed it was the rst to start and populari@e 'para' football at the locallevel. However, (oke claimed that it was the rst and not )epsi, to arrange such local games,which (oke referred to as 'pada.'

'' - +304RT'5'$2 Contd...Chile )epsi advertisements claimed, '3ore football, 3ore)epsi,' (oke utili@ed the line, 'Aat football, &leep football,?rink onl (oca-(ola,' later replaced b '<ive football,dream football and drink onl (oca-(ola.' 3edia reports

termed )epsi's promos as a 'me-too' e*ort to cash in onthe Corld (up cra@e, while (oke's activities were deemedto be in line with its commitment and long-termassociation with the game.

(oke's rst o*ering in the lemon segment 1not countingthe acuired market leader brand <imca2 came in the formof &prite launched in earl !""". 4rom the ver beginning,&prite went on the o*ensive with its tongue-in-cheekadvertisements. The line 'Baki &ab Bakwas' 1ll the rest isnonsense2 was clearl targeted at )epsi's claims in its ads.

The advertisement made fun of almost all the )epsi and3irinda advertisements launched during !""=. )epsi

termed this as (oke's foll, claiming it was giving &prite a'wrong positioning,' and that it was a case of an ant tringto ght a tiger.



&prite received an encouraging response in the market, aided b the high-decibel promotions andpop music concerts held across the countr. But )epsi was condent that # %p would hold its ownand its ads featuring lm stars would work wonders for 3irinda <emon in the lemon segment.

Chen )epsi launched an advertisement featuring &achin Tendulkar with a modied Hindi moviesong, '&achin la /e,' (oke responded with an advertisement with the song, '(oke la /e.'4ollowing this, )epsi moved the dvertising &tandards (ouncil of India and the dvertisinggencies ssociation of India, alleging plagarisation of its '&achin la /e' creation b (oke's

advertising agenc, (haitra <eo Burnett, in its '(oke la /e' commercial. The rivals were alwasengaged in the race to sign the most popular Bollwood and cricket celebrities for theiradvertisements. 3ore often than not, the companies pitched arch-rivals in their respective eldsagainst each other in the cola wars as well. 1/efer Table I2

Table 'Celebrity 4ndorsers 6

'ndian )lm industry Cricket players

CokeFarisma Fapoor, Hrithik /oshan,

Twinkle Fhanna, /ambha, ?aler3ehndi, amir Fhan, ishwara /ai. JJ

/obin &ingh, nil Fumble, avgal&rinath.

Pepsi

amir Fhan, ishwara /aiJJ, kshaFumar, &hahrukh Fhan, /ani3ukheree, 3anisha Foirala, Faol,3ahima (haudhar, 3adhavan, mrish)uri, 0ovinda, mitabh Bachchan.

@haruddin, &achin Tendulkar, /ahul?ravid, &ourav 0angul.

* The list is not exhaustive.**Aamir and Aishwarya had switched from Pepsi to Coke.

In ctober 5$$$, following (oke's 'o (haaho Ho aae' campaign, the brand's 'branded cut-through mark, ' reached an all-time high of >".97 as against )epsi's 5>.57. In terms of stochasticshare, (oke had a 87 lead over )epsi with a 59.97 share. )epsi retaliated with a campaignmaking fun of (oke's advertisements. The advertisement had a mi:ed response amongst themasses with fans of both the celebrities defending their idols. In 3a 5$$$, (oke threatened to sue)epsi over the advertisements that ridiculed its own commercials. midst wide media coverage,)epsi eventuall stopped airing the controversial advertisement. In 4ebruar 5$$!, (oke went onthe o*ensive with the '0row up to the Thums %p (hallenge' campaign. )epsi immediatel issued alegal notice on (oke for using the 'Keh ?il 3aange 3ore' phrase used in the commercial. (okeoEcials, however, declined to comment on the issue and the advertisement continued to be aired.

''' - PRO37CT +7$C845)epsi beat (oke in the ?iet-(ola segment, as it managedto launch ?iet )epsi much before (oke could launch ?iet(oke. fter the 0overnment gave clearance to the use of spertame and cesulfame-F 1potassium2 in combination1&F2, for use in low-calorie soft drinks, )epsi oEcials lostno time in rolling out ?iet )epsi at its /oha plant andsending it to retail outlets in 3umbai. dvertisements andpress releases followed in uick succession. It was a maorvictor for )epsi, as in certain parts of the world, (oke's?iet (oke sold more than )epsi (ola itself. Brand visibilitand taste being e:tremel important in the soft drinkmarket, )epsi was glad to have become the rst-moveronce again.



(oke claimed that )epsi's one-upmanship was nothing toworr about as (oke alread had a brand advantage. ?iet(oke was readil available in the market through importchannels, while ?iet )epsi was rarel seen.

Hence, ?iet (oke has a brand advantage. (oke came up later with a high-prole launch of ?iet(oke. However, as e:pected, diet drinks, as a percentage of the total cola demand, did not emergeas a maor area of focus in the ears to come. Though the price of the cans was reduced from /s!= to /s !9 in ul 5$$$, it failed to catch the fanc of the buers. In &eptember 5$$$, both thecompanies again slashed the price of their diet cans b over 887 per cent to /s !$. Both thecompanies were losing /s 9-> per can b selling it at /s !$, but e:pected the other products toabsorb these losses. )epsi oEcial said that the diet cola constituted onl about $.67 of the totalmarket, hence its contribution to revenue was considered insignicant. However, both companiesviewed this segment as having immense potential and the price-cuts were part of a long-termstrateg.

(oke claimed that it was passing on the benet of the 97 cut in e:cise dut to the consumer.Industr e:perts, however, believed that the price cut had more to do with piling up inventories.

?iet drinks in cans had a rather short shelf life 1about two months2 and the cola maors weresimpl clearing stocks through this price cut. However, b 5$$!, the diet-cola war had almost diedout with the segment posting e:tremel low growth rates.

'0 9 PO+C8'$2)epsi and (oke fought the war on a new turf in the late !""$s. In 3a !""=, )epsi led a petitionagainst (oke alleging that (oke had 'entered into a conspirac' to disrupt its business operations.(oke was accused of luring awa three of )epsi's ke sales personnel from Fanpur, going as far asto o*er /s !$ lakh a ear in pa and perks to one of them, almost ve times what )epsi waspaing him. &ales personnel who were earning /s 6=,$$$ per annum were o*ered /s !.=> lakh aear. 3an truck drivers in the 0oa bottling plant who were getting /s 5,9$$ a month moved to(oke who gave them /s !$,$$$ a month. Chile new recruits in the soft drinks industr averaged apa hike of between 6$->$7 (oke had o*ered 8$$-6$$7. (oke, in its repl led with the ?elhi

High (ourt, strongl denied the allegations and also asked for the charges to be dropped since)epsi had not uantied an damages. )epsi claimed that this was causing immense damage asthose emploees who had switched over were carring with them sensitive trade-relatedinformation. fter some intense bickering, the issue died a natural death with (oke emerging thewinner in another round of the battle.

)epsi also claimed that its celebrit endorsers were lured into breaking their contracts with )epsi,and (oke had tried to pressure the Board of (ontrol for (ricket in India 1B((I2 to break asponsorship deal it had signed for the )epsi Triangular &eries. ccording to )epsi's deal with B((I,)epsi had the rst right of refusal to sponsor all cricket matches plaed in India where up to threeteams participated. The B((I, however, was reported to have tried to break this contract in favorof (oke. )epsi went to court protesting against this and won. )epsi also alleged that (oke's3arketing ?irector &aniv 0upta was to oin )epsi in !""#. But within das of his getting the

appointment letter, (oke made a counter o*er and successfull lured 0upta awa.

0 9 OT84R :RO$T5 Contd...L (oke also turned its attention to )epsi's stronghold - theretail outlets. Between !"">-"=, (oke doubled its reach toa reported 9 lakh outlets, when )epsi was present at onl8.9 lakh outlets. To reach out to smaller markets,interceptor units in the form of mobile vans were alsolaunched b (oke in !""= in ndhra )radesh, Tamil ;aduand Cest Bengal. However, in its rush to beat )epsi at theretail game, (oke seemed to have faltered on the servicefront. 4or instance, man shops in %ttar )radesh

freuentl ran out of stock and there was no servicing for(oke's coolers. Though (oke began servicing retail outletson a dail basis like )epsi, it had to wait for a while beforeit was able to match )epsi's retailing strengths.



ne of (oke's victories on the retail front was in the formof its tie up with Indian il to set up dispensing units at itspetrol pumps. )epsi responded b striking a deal withBharat )etroleum, whose network was far smaller thanIndian il's. f the estimated 5,9$,$$$ retail outlets in thecountr that sold soft drinks, )epsi was stocked onl at

5,$$,$$$.

In the late !""$s, )epsi and (oke kept tring to outdo each other in sponsoring music concerts bleading artists in order to reach out to outh. )epsi also tied up with 3TM to hold a series of popconcerts across the countr. (oke on the other hand, tied-up with 3TM's rival (hannel M for asimilar venture. There were freuent skirmishes regarding movie sponsorships and vending rightsat leading cinema halls.

In 3a !""", the companies were involved in a 'freebies war' - promotional schemes designed tohelp grow the overall cola market besides the usual market share enhancement. (oke was runningas man as !5 volume-building, national-level consumer promotions, while )epsi had = schemesfor its brands. (oke's schemes ranged from crown e:changes to under the crown pri@es, which

included tos, cars, free travel, consumer durables etc. )epsi had crown e:changes and under thecrown pri@es as well, it also o*ered free gifts like cards and tattoos. huge outla was involved inpromoting these schemes, with freuent media splashes.

's The Rivalry 8ealthy;

In a market where the product and tastes remained virtuall indistinguishable and fairl constant,brand recognition was a crucial factor for the cola companies. The uest for better brandrecognition was the guiding force for (oke and )epsi to a large e:tent. (olorful images, livelwords, beautiful people and places, interesting storlines, innovative+attractive packaging andcatch ingles have made sure that the cola wars, though often sco*ed at, rarel go unnoticed.nd that's what it has all been about till now. The management of both the companies had toconstantl adapt to the changing attitudes and demands of their consumers or lose market share.

The wars seemed to have settled down into a pattern. )epsi tpicall won a market, sustaineditself for a few ears, and then lost to a ver determined (oke. In the earlier ears, (oke wascontent with advertising its product to build a strategic positioning for its product. Cith )epsi'so*ensive moves getting stronger and stronger, (oke had no option but to opt for the same modusoperandi. Though the market share debates would not have an conclusions, it would be safe toinfer that the cola wars were a maor factor in keeping customer interest alive in the segment sofar. However, in the late !""$s, uestions were raised about the necessit and more importantl,about the eEcac of these wars. nswers for this would be too diEcult to ascertain and too shakto conrm.

the coke pepsi rivalry

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