The Coke Pepsi Rivalry: Pepsi Vs.
Coke
The cola wars had become a part of global folklore -
something all of us took for granted. However, for
the companies involved, it was a matter of 'fight or
succumb.' Both print and electronic media served as
battlefields, with the most bitter of the cola wars
often seen in form of the comparative
advertisements.
In the early 1970s, the US soft-drinks market was
on the verge of maturity, and as the major players,
Coke and Pepsi offered products that 'looked the
same and tasted the same,' substantial market
share growth seemed unlikely. However, Coke and
Pepsi kept rejuvenating the market through product
modifications and pricing/promotion/distribution
tactics. As the competition was intense, the
companies had to frequently implement strategic
changes in order to gain competitive advantage. The
only way to do this, apart from introducing cosmetic
product innovations, was to fight it out in the
marketplace. This modus operandi was followed in
the Indian markets as well with Coke and Pepsi
resorting to more innovative tactics to generate
consumer interest.
In essence, the companies were trying to increase the whole market pie, as the market-
shares war seemed to get nowhere. This was because both the companies came out with
contradictory market share figures as per surveys conducted by their respective agencies
- ORG (Coke) and IMRB (Pepsi). For instance, in August 2000, Pepsi claimed to have
increased its market share for the first five months of calendar year 2000 to 49% from
47.3%, while Coke claimed to have increased its share in the market to 57%, in the
same period, from 55%.
Media reports claimed that the rivalry between Coke and Pepsi had ceased to generate
sustained public interest, as it used to in the initial years of the cola brawls worldwide.
They added that it was all just a lot of noise to hardsell a product that had no inherent
merit.
Coke had entered the Indian soft drinks market way
back in the 1970s. The company was the market
leader till 1977, when it had to exit the country
following policy changes regarding MNCs operating
in India. Over the next few years, a host of local
brands emerged such as Campa Cola, Thumps Up,
Gold Spot and Limca etc. However, with the entry of
Pepsi and Coke in the 1990s, almost the entire
market went under their control.
Making billions from selling
carbonated/colored/sweetened water for over 100
years, Coke and Pepsi had emerged as truly global
brands. Coke was born 11 years before Pepsi in
1887 and, a century later it still maintained its lead
in the global cola market. Pepsi, having always been
number two, kept trying harder and harder to beat
Coke at its own game. In this never-ending duel,
there was always a new battlefront opening up
somewhere. In India the battle was more intense,
as India was one of the very few areas where Pepsi
was the leader in the cola segment. Coke re-entered
India in 1993 and soon entered into a deal with
Parle, which had a 60% market share in the soft
drinks segment with its brands Limca, Thums Up
and Gold Spot.
Following this, Coke turned into the absolute market leader overnight. The company also
acquired Cadbury Schweppes' soft drink brands Crush, Canada Dry and Sport Cola in
early 1999.
Coke was mainly a franchisee-driven operation with the company supplying its soft drink
concentrate to its bottlers around the world. Pepsi took the more capital-intensive route
of owning and running its own bottling factories alongside those of its franchisees. Over
half of Pepsi's sales were made by its own bottling units.
Though Pepsi had a lead over Coke, having come in before the era of economic
liberalization in India, it had to spend the early years fighting the bureaucracy and
Parle's Ramesh Chuahan every step of the way. Pepsi targeted the youth and seemed to
have struck a right chord with the market. Its performance was praiseworthy, while Coke
had to struggle to a certain extent to get its act right. In a span of 7 years of its
operations in the county, Coke changed its CEO four times. Media reports about the
troubles faced by Coke and the corrective measures it adopted were aplenty.
I - BOTTLING
Bottling was the biggest area of conflict between
Pepsi and Coke. This was because, bottling
operations held the key to distribution, an extremely
important feature for soft-drink marketing. As the
wars intensified, both companies took pains to
maintain good relationships with bottlers, in order to
avoid defections to the other camp.
A major stumbling block for Coke was the conflict
with its strategic bottling partner, Ramesh Chauhan
of the Parle group of companies. Coke alleged that
Chauhan had secretly manufactured Coke's
concentrate. Chauhan, in turn, accused coke of
backtracking on commitments to grant him bottling
rights in Pune and Bangalore and threatened legal
action. The matter almost reached the courts and
the strategic alliance showed signs of coming apart.
Industry observers commented that for a company
like Coke that was so heavily franchisee driven,
antagonizing its chief bottler was suicidal.
While all this was going on, Pepsi wasted no time in moving in for the kill. It made huge
inroads in the north, particularly in Delhi where Chauhan had the franchise and also
snapped up the opportunity to buy up Coke's bottler Pinakin Shah in Gujarat. Ironically,
the Gujarat Bottling Company owned by Shah, also belonged in part to Chauhan for
whom the sell-out was a strategic counter-move in his battle with Coke. Coke moved
court and obtained an order enforcing its bottler's agreement with the Gujarat company,
effectively freezing Pepsi's right to use the acquired capacity for a year. Later, Coke
made a settlement of $10 million in exchange for Chauhan foregoing bottling rights in
Pune and Bangalore.
Towards the end of 1997, bottling agreements between Coke and many of its bottlers
were expiring. Coke began pressurizing its bottlers to sell out and threatened them that
their bottling agreements would not be renewed. Media reports claimed that Coke's
bottlers were not averse to joining hands with Pepsi. They said they would rather offer
their services to Pepsi than selling out to Coke and discontinuing a profitable business. In
November 1997, Pepsi made a bid to gain from the feud between Coke and its
franchised bottlers. It declared that it was ready to join hands with 'any disgruntled Coke
bottler, provided the latter's operations enhanced Pepsi's market in areas where Coke
was dominant.' Pepsi was even willing to shift to a franchisee-owned bottling system
from its usual practice of focusing on company-owned bottling systems supplemented by
a few franchisee-owned bottling companies, provided it found bottlers who would
enhance both the quantity and quality, especially in areas where Coke had a substantial
marketshare. Pepsi won over Goa Bottling Company, Coke's bottler in Goa and became
the market leader in that city.
II - ADVERTISING
When Coke re-entered India, it found Pepsi had
already established itself in the soft drinks market.
The global advertisement wars between the cola
giants quickly spread to India as well.
Internationally, Pepsi had always been seen as the
more aggressive and offensive of the two, and its
advertisements the world over were believed to be
more popular than Coke's. It was rumored that at
any given point of time, both the companies had
their spies in the other camp. The advertising
agencies of both the companies (Chaitra Leo Burnett
for Coke and HTA for Pepsi) were also reported to
have insiders in each other's offices who reported to
their respective heads on a daily basis. Based on
these inputs, the rival agency formulated its own
plans. These hostilities kept the rivalry alive and
healthy. However, the tussle took a serious turn at
times with complaints to Advertising Standards
Council of India, and threats of lawsuits.
While Pepsi always relied on advertisements
featuring films stars, pop stars and cricket players,
Coke had initially decided to focus on Indian culture
and jingles based on Indian classical music. These
were also supported by coke advertisements that
were popular in the West.
Somehow, Coke's advertisements missed the Indian pulse by a wide margin. Pepsi soon
came to be seen as a 'defender' who had humiliated the 'invader' with its superior
creative strengths. When Coke bagged the official sponsorship rights to the 1997 Cricket
World Cup, Pepsi created media history by unleashing one of the country's most
successful advertisement campaigns - the 'Nothing Official About It' campaign . Pepsi
took on Coke, even when the latter sponsored the replays of the matches, through the
campaign, 'Uncork a Cola.' Media coverage of the war even hinted that the exclusion of
Rahul Dravid (Pepsi's model) from the Indian team had something to do with the war.
However, Coke had its revenge when it bagged the television sponsorship rights for the
1997 Pepsi Asia Cup. Consequently, Pepsi, in spite of having branded the event was not
able to sponsor it.
The severe damage caused by the 'Nothing Official About It' campaign prompted Coke to
shift its advertising account from McCann Erickson to Chaitra Leo Burnett in 1997. The
'Eat-Sleep-Drink' series of ads was born soon after. Pepsi responded with ads where
cricket stars 'ate a bat' and 'slept on a batting pad' and 'drank only Pepsi.' To counter
this, Coke released a print advertisement in March 1998, in which cricketers declared,
'Chalo Kha Liya!' Another Thums Up ad showed two apes copying Pepsi's Azhar and Ajay
Jadeja, with the line, 'Don't be a bunder (monkey), Taste the thunder.' For once, it was
Pepsi's turn to be at receiving end. A Pepsi official commented, "We're used to
competitive advertising, but we don't make fun of the cricketers, just the ad." Though
Pepsi decided against suing Coke, the ad vanished soon after the dissent was made
public. Commenting on this, a Pepsi official said, "Pepsi is basically fun. It is irreverent
and whacky. Our rival is serious and has a 'don't mess with me' attitude. We tend to get
away with fun but they have not taken it nicely. They don't find it funny."
Coke then launched one of its first offensive ads, ridiculing Pepsi's ads featuring a
monkey. 'Oye! Don't be a bunder! Taste the Thunder', the ad for Thums Up, went with
the line, 'issued in the interest of the present generation by Thums Up.'
The 1998 Football World Cup was another event the cola majors fought over. Pepsi
organized local or 'para' football matches in Calcutta and roped in Indian football
celebrity Bhaichung Bhutia to endorse Pepsi. Pepsi claimed it was the first to start and
popularize 'para' football at the local level. However, Coke claimed that it was the first
and not Pepsi, to arrange such local games, which Coke referred to as 'pada.'
II - ADVERTISING Contd...
While Pepsi advertisements claimed, 'More football,
More Pepsi,' Coke utilized the line, 'Eat football,
Sleep football, Drink only Coca-Cola,' later replaced
by 'Live football, dream football and drink only
Coca-Cola.' Media reports termed Pepsi's promos as
a 'me-too' effort to cash in on the World Cup craze,
while Coke's activities were deemed to be in line
with its commitment and long-term association with
the game.
Coke's first offering in the lemon segment (not
counting the acquired market leader brand Limca)
came in the form of Sprite launched in early 1999.
From the very beginning, Sprite went on the
offensive with its tongue-in-cheek advertisements.
The line 'Baki Sab Bakwas' (All the rest is nonsense)
was clearly targeted at Pepsi's claims in its ads. The
advertisement made fun of almost all the Pepsi and
Mirinda advertisements launched during 1998. Pepsi
termed this as Coke's folly, claiming it was giving
Sprite a 'wrong positioning,' and that it was a case
of an ant trying to fight a tiger.
Sprite received an encouraging response in the market, aided by the high-decibel
promotions and pop music concerts held across the country. But Pepsi was confident that
7 Up would hold its own and its ads featuring film stars would work wonders for Mirinda
Lemon in the lemon segment.
When Pepsi launched an advertisement featuring Sachin Tendulkar with a modified Hindi
movie song, 'Sachin Ala Re,' Coke responded with an advertisement with the song, 'Coke
Ala Re.' Following this, Pepsi moved the Advertising Standards Council of India and the
Advertising Agencies Association of India, alleging plagarisation of its 'Sachin Ala Re'
creation by Coke's advertising agency, Chaitra Leo Burnett, in its 'Coke Ala Re'
commercial. The rivals were always engaged in the race to sign the most popular
Bollywood and cricket celebrities for their advertisements. More often than not, the
companies pitched arch-rivals in their respective fields against each other in the cola
wars as well. (Refer Table I)
Table I
Celebrity Endorsers *
Indian film industry Cricket players
Karisma Kapoor, Hrithik
Roshan, Twinkle Khanna, Robin Singh, Anil
Coke Rambha, Daler Mehndi, Kumble, Javgal
Aamir Khan, Aishwarya Rai. Srinath.
**
Aamir Khan, Aishwarya
Rai**, Akshay Kumar, Azharuddin,
Shahrukh Khan, Rani Sachin
Pepsi Mukherjee, Manisha Koirala, Tendulkar, Rahul
Kajol, Mahima Chaudhary, Dravid, Sourav
Madhavan, Amrish Puri, Ganguly.
Govinda, Amitabh Bachchan.
* The list is not exhaustive.
**Aamir and Aishwarya had switched from Pepsi to Coke.
In October 2000, following Coke's 'Jo Chaaho Ho Jaaye' campaign, the brand's 'branded
cut-through mark, ' reached an all-time high of 69.5% as against Pepsi's 26.2%. In
terms of stochastic share, Coke had a 3% lead over Pepsi with a 25.5% share. Pepsi
retaliated with a campaign making fun of Coke's advertisements. The advertisement had
a mixed response amongst the masses with fans of both the celebrities defending their
idols. In May 2000, Coke threatened to sue Pepsi over the advertisements that ridiculed
its own commercials. Amidst wide media coverage, Pepsi eventually stopped airing the
controversial advertisement. In February 2001, Coke went on the offensive with the
'Grow up to the Thums Up Challenge' campaign. Pepsi immediately issued a legal notice
on Coke for using the 'Yeh Dil Maange More' phrase used in the commercial. Coke
officials, however, declined to comment on the issue and the advertisement continued to
be aired.
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The Rivalry on Various Fronts Contd...
III - PRODUCT LAUNCHES
Pepsi beat Coke in the Diet-Cola segment, as it
managed to launch Diet Pepsi much before Coke
could launch Diet Coke. After the Government gave
clearance to the use of Aspertame and Acesulfame-
K (potassium) in combination (ASK), for use in low-
calorie soft drinks, Pepsi officials lost no time in
rolling out Diet Pepsi at its Roha plant and sending it
to retail outlets in Mumbai. Advertisements and
press releases followed in quick succession. It was a
major victory for Pepsi, as in certain parts of the
world, Coke's Diet Coke sold more than Pepsi Cola
itself. Brand visibility and taste being extremely
important in the soft drink market, Pepsi was glad to
have become the first-mover once again.
Coke claimed that Pepsi's one-upmanship was
nothing to worry about as Coke already had a brand
advantage. Diet Coke was readily available in the
market through import channels, while Diet Pepsi
was rarely seen.
Hence, Diet Coke has a brand advantage. Coke came up later with a high-profile launch
of Diet Coke. However, as expected, diet drinks, as a percentage of the total cola
demand, did not emerge as a major area of focus in the years to come. Though the price
of the cans was reduced from Rs 18 to Rs 15 in July 2000, it failed to catch the fancy of
the buyers. In September 2000, both the companies again slashed the price of their diet
cans by over 33% per cent to Rs 10. Both the companies were losing Rs 5-6 per can by
selling it at Rs 10, but expected the other products to absorb these losses. A Pepsi
official said that the diet cola constituted only about 0.4% of the total market, hence its
contribution to revenue was considered insignificant. However, both companies viewed
this segment as having immense potential and the price-cuts were part of a long-term
strategy.
Coke claimed that it was passing on the benefit of the 5% cut in excise duty to the
consumer. Industry experts, however, believed that the price cut had more to do with
piling up inventories. Diet drinks in cans had a rather short shelf life (about two months)
and the cola majors were simply clearing stocks through this price cut. However, by
2001, the diet-cola war had almost died out with the segment posting extremely low
growth rates.
IV – POACHING
Pepsi and Coke fought the war on a new turf in the late 1990s. In May 1998, Pepsi filed
a petition against Coke alleging that Coke had 'entered into a conspiracy' to disrupt its
business operations. Coke was accused of luring away three of Pepsi's key sales
personnel from Kanpur, going as far as to offer Rs 10 lakh a year in pay and perks to
one of them, almost five times what Pepsi was paying him. Sales personnel who were
earning Rs 48,000 per annum were offered Rs 1.86 lakh a year. Many truck drivers in
the Goa bottling plant who were getting Rs 2,500 a month moved to Coke who gave
them Rs 10,000 a month. While new recruits in the soft drinks industry averaged a pay
hike of between 40-60% Coke had offered 300-400%. Coke, in its reply filed with the
Delhi High Court, strongly denied the allegations and also asked for the charges to be
dropped since Pepsi had not quantified any damages. Pepsi claimed that this was
causing immense damage as those employees who had switched over were carrying with
them sensitive trade-related information. After some intense bickering, the issue died a
natural death with Coke emerging the winner in another round of the battle.
Pepsi also claimed that its celebrity endorsers were lured into breaking their contracts
with Pepsi, and Coke had tried to pressure the Board of Control for Cricket in India
(BCCI) to break a sponsorship deal it had signed for the Pepsi Triangular Series.
According to Pepsi's deal with BCCI, Pepsi had the first right of refusal to sponsor all
cricket matches played in India where up to three teams participated. The BCCI,
however, was reported to have tried to break this contract in favor of Coke. Pepsi went
to court protesting against this and won. Pepsi also alleged that Coke's Marketing
Director Sanjiv Gupta was to join Pepsi in 1997. But within days of his getting the
appointment letter, Coke made a counter offer and successfully lured Gupta away.
V – OTHER FRONTS Contd...
• Coke also turned its attention to Pepsi's stronghold
- the retail outlets. Between 1996-98, Coke doubled
its reach to a reported 5 lakh outlets, when Pepsi
was present at only 3.5 lakh outlets. To reach out to
smaller markets, interceptor units in the form of
mobile vans were also launched by Coke in 1998 in
Andhra Pradesh, Tamil Nadu and West Bengal.
However, in its rush to beat Pepsi at the retail
game, Coke seemed to have faltered on the service
front. For instance, many shops in Uttar Pradesh
frequently ran out of stock and there was no
servicing for Coke's coolers. Though Coke began
servicing retail outlets on a daily basis like Pepsi, it
had to wait for a while before it was able to match
Pepsi's retailing strengths.
One of Coke's victories on the retail front was in the
form of its tie up with Indian Oil to set up dispensing
units at its petrol pumps. Pepsi responded by
striking a deal with Bharat Petroleum, whose
network was far smaller than Indian Oil's. Of the
estimated 2,50,000 retail outlets in the country that
sold soft drinks, Pepsi was stocked only at 2,00,000.
In the late 1990s, Pepsi and Coke kept trying to outdo each other in sponsoring music
concerts by leading artists in order to reach out to youth. Pepsi also tied up with MTV to
hold a series of pop concerts across the country. Coke on the other hand, tied-up with
MTV's rival Channel V for a similar venture. There were frequent skirmishes regarding
movie sponsorships and vending rights at leading cinema halls.
In May 1999, the companies were involved in a 'freebies war' - promotional schemes
designed to help grow the overall cola market besides the usual market share
enhancement. Coke was running as many as 12 volume-building, national-level
consumer promotions, while Pepsi had 8 schemes for its brands. Coke's schemes ranged
from crown exchanges to under the crown prizes, which included toys, cars, free travel,
consumer durables etc. Pepsi had crown exchanges and under the crown prizes as well,
it also offered free gifts like cards and tattoos. A huge outlay was involved in promoting
these schemes, with frequent media splashes.
Is The Rivalry Healthy?
In a market where the product and tastes remained virtually indistinguishable and fairly
constant, brand recognition was a crucial factor for the cola companies. The quest for
better brand recognition was the guiding force for Coke and Pepsi to a large extent.
Colorful images, lively words, beautiful people and places, interesting storylines,
innovative/attractive packaging and catchy jingles have made sure that the cola wars,
though often scoffed at, rarely go unnoticed. And that's what it has all been about till
now. The management of both the companies had to constantly adapt to the changing
attitudes and demands of their consumers or lose market share.
The wars seemed to have settled down into a pattern. Pepsi typically won a market,
sustained itself for a few years, and then lost to a very determined Coke. In the earlier
years, Coke was content with advertising its product to build a strategic positioning for
its product. With Pepsi's offensive moves getting stronger and stronger, Coke had no
option but to opt for the same modus operandi. Though the market share debates would
not have any conclusions, it would be safe to infer that the cola wars were a major factor
in keeping customer interest alive in the segment so far. However, in the late 1990s,
questions were raised about the necessity and more importantly, about the efficacy of
these wars. Answers for this would be too difficult to ascertain and too shaky to confirm.