Coca-Cola vs Pepsi

Cola Wars in a Changing Marketing Environment

Stefanie Bayer
Tobias Cavaleri
Franziska Fischer
Edgars Puzo

08.05.2010

Case Study „Coke“

Strategic Marketing
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Agenda

| Company profiles
| Case Study

| Question 1
| …

| Question 6

Case Study „Coke“

Strategic Marketing
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Company profiles – Key facts

| Founded in 1886 | Founded in 1965

| HQ: Atlanta, USA | HQ: Purchase , USA
| Focus on beverages with more than | More diversified product portfolio;
3.300 products in more than 200 beverages only 37% of total
countries: 100% of total revenues revenues
Market Shares of Carbonated Drinks
| Owning 4 of the world’s top 5 non-
alcoholic sparkling beverage others
25%
brands: Coca-Cola, Diet Coke, Sprite Coca Cola
43%
and Fanta
Pepsi
32%

Case Study „Coke“

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Company profiles – Financial Key Figures

| Better financial health1 | Better profitability2

| Volatile stock price without positive | Increasing, Constant stock price
development3 development3

2009 $31 billion $44 billion

revenues
2000 $20 billion $20 billion
2009 $ 8.2 billion $5.8 billion
profits
2000 $ 2.2 billion $2.1 billion
2009 $123 billion $105 billion
market cap. 1 See Annual Report Coca Cola
2000 $128 billion $44 billion 2 See Annual Report Pepsi

brand value 2009 $67 billion $13,5 billion 3 Compare www.morningstar.com

Case Study „Coke“

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Case study

| Comparison between Coca Cola and PepsiCo

concerning
– Positioning
– Marketing Mix
– Brands
– Strategy
– Marketing-orientation
– Competition

|  6 Questions to analyze the situation…

Case Study „Coke“
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1. Compare Coca-Cola’s response to the changing marketing environment before the
arrival of Neville Isdell to that of PepsiCo.

| What changed?
– Different consumer behaviour – focus on health (product)
– Declining demand for carbonated soft drinks (product)
– Emerging markets (place)
– Brand building became more important (promotion)
| Responses
– Coca Cola:
• Reduced marketing investments (advertising and marketing research)
• Focused on carbonated drinks
 Unsuccessful product launches & take overs, scandals
– Pepsi:
• Investments in brand building
• Acquisitions of Tropicana, Gatorade, Aquafina to create a powerful non-carbonated
product portfolio
• Diversification into snacks etc.
 Strong brand, closed the gap to Coca Cola (market cap 2005: $98,4 bn vs. $97,9 bn)
Case Study „Coke“
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2. Assess both companies in terms of their level of marketing
orientation

Coca-Cola Pepsi
Relied heavily on their former success and Followed market trends and strategically
status as a market leader >> lost % of its diversified its portfolio
strong brand
Not as innovative as Pepsi: Very innovative:
Pepsi Raw – first „natural“ cola
Followed Pepsi‘s PurVia with their equivalent PurVia – with Stevia, zero-calorie sweetener
Truvia Pepsi Extra Cold – guaranteed cool drink of
draught Pepsi
Labelling system > fits the health
consciousness of the people
Emerging markets presence – Coke faces
ethical
issues
Both companies tried to fight decline in sales of carbonated drinks with lime and cherry
flavored colas >> without success (ban from school vending machines in the UK and in
California etc.)

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3. How would you position Coca-Cola and PepsiCo on the efficiency-effectiveness
matrix?

| Efficiency
– Profit growth collapsed to
low single digits after 1997
– Bureaucratic culture
– Many non-strategic / non-successful aquisitions, takeovers,
brands all over the world  high complexity
| Effectiveness
– Scandal involving launch of Dasani
– Diet Coke – failed to connect with young males  Coke Zero
– Only „catching up“
– Try to target emerging markets more aggressivley

Case Study „Coke“

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3. How would you position Coca-Cola and PepsiCo on the efficiency-effectiveness
matrix?

| Efficiency
– Better deals due to size of
company
– Economies of scale / scope
| Effectiveness
– Very innovative
– Successful strategic aquisitions
– Focus on new customer needs
– Created new products
– Labelling system
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4. What advantages , if any, does PepsiCo‘s greater diversification gave the company
over Coca-Cola?

PepsiCo Coca-Cola

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4. What advantages , if any, does PepsiCo‘s greater diversification gave the company
over Coca-Cola?

| Not as dependent on the market for carbonated drinks as

Coca Cola (23% vs. 80% of revenue)
 minimize risks
| 4th largest food and beverages company in the world – higher
revenue (!)
 synergy effects (see Q3)
| Able to target different customer groups
| Able to push sales with selling products from different
product groups together
| Know customer behaviour concerning different products 
able to target same group with different products

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5. Assess Coca-Cola‘s part-ownership of innocent drinks from point of view of both
companies.

| smoothies
| smoothies for kids
| superfruit smoothies

| orange juice
| Innocent fruit tubes (fruit puree)
| thickies (live probiotic yoghurt)

| veg pots
(vegetabels, whole grains and sauce,
with fresh herbs and spices)

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5. Assess Coca-Cola‘s part-ownership of innocent drinks from point of view of both
companies.

| Coca-Cola acquired in 2009 minority stake in innocent, entering smoothie

and juice segments in Europe
| Innocent offered new sub-segments: Smoothies, Yogurts, Fruit Puree,
Juice and entering new sub-segment -Vegetable products.
| Coca-Cola is following general trend in customers’ expectations for
healthy-natural products ( ALL-Natural products )
| Coca-Cola is perceiving this move as a long-term investment in order to
reach new customers and later to offer them to new geographies
(probably willing to fully acquire innocent in near future)
| Focused on markets outside US who mainly concerned about non-natural
products
| If this move will be successful, Coca-Cola will probably acquire another
natural products brand

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5. Assess Coca-Cola‘s part-ownership of innocent drinks from point of view of both
companies.

| Pepsi is getting a strong signal that Coca-Cola is moving to segments

where Pepsi is already present
| Innocent Vegetable Pots can challenge Snack’s brands
| Dairy based drinks (SoBe smooth)- Innocent thickies
| Juice and Juice Drinks (Dole Juice, Ocean Spray, Tropicana, Seasons
Harvest) – Smoothies, Orange Juice and Innocent Fruit Tubes

| Coca-Cola is targeting UK and Europe’s markets/customers where Pepsi is

strong

| Challenge to Pepsi’s labeling system to identify healthier products

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6. What future challenges Coca-Cola is likely to face?

| New trends in consumers’ behavior (research and

development)
| Introduction of new products (extending portfolio and
acquisitions)

| Effective promotion of existing products (marketing

programs)
| Marketing over social networks
| Effectiveness of advertising campaigns

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6. What future challenges Coca-Cola is likely to face?

| Product packaging (new packaging)

| Mass customization
| Introduction of new vending and dispensing equipment

| Local, regional and private label competition (growth and

emerging markets)
| Competition against retailers that have developed their own
store or private label beverage brands (in certain markets -
beer companies)
| Legal and trademark challenges on global base

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The future???

http://www.youtube.com/watch?v=lqT_dPApj9U

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Questions…

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