Case Study - Coke and Pepsi War

Case Study - Coke and Pepsi War

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