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Coca-Cola and Pepsi

Coca-Cola and Pepsi are the two greatest competitors in the soft drink industry. A brief introduction and history of the two companies will provide a basis for understanding how the companies have come to be where they are today and how they run their companies. The company structure of each will also be briefly explained to provide an understanding of how management style is impacted. Marketing and Advertising The marketing skills that these companies possess are the reason both Coca-Cola and Pepsi are so successful.

Our research will provide an in-depth look at the marketing tactics that these companies use and how they compare to each other. The use of new technologies, forecasting, advertising, and political environments will all be included when determining what affects the marketing strategies the companies choose to take. SWOT Analysis To gain a better understanding of each company, we determined some strengths, weaknesses, opportunities, and threats of each company. Each company has brand recognition on their sides and threats such as foreign, political, and economic situations in countries that Coke and Pepsi are established in.

Comparing these aspects of each company will provide a good idea of future successes. Conclusion After a detailed look into Pepsi and Coke’s tactics for managing and successfully running their businesses, a summary of how each company manages its resources ties the research together and compares the overall management of the two companies. The Coca-Cola Company is the world’s leading manufacturer, marketer, and distributor of nonalcoholic beverage concentrates and syrups, with world headquarters in Atlanta, Georgia.

Coca-Cola, the Company’s flagship brand, and over 230 other soft-drink brands are manufactured and sold by the Coca-Cola Company and its subsidiaries in nearly 200 countries around the world. The Company and its subsidiaries employ nearly 31,000 people around the world. Dr. John Stith Pemberton first introduced Coca-Cola in Atlanta, Georgia in 1886. The pharmacist concocted a caramel-colored syrup in a three-legged brass kettle in his backyard. The Coca-Cola Company’s operating management structure consists of five geographic groups plus The Minute Maid Company.

Other Coke products are: Barq’s Root Beer, Cherry Coke, Powerade, Citra, Mello Yello, Mr. Pibb, Dasani, and Surge. Pepsi-Cola Company, headquartered in Purchase, New York, is the global beverage division of PepsiCo, Inc. Caleb Bradham, a New Bern, N. C. druggist who first formulated the beverage, founded Pepsi-Cola at the turn of the century. Today, Brand Pepsi, Diet Pepsi, Pepsi-One, Mountain Dew, Slice, and Mug account for nearly one-third of total soft drink sales in the United States, a consumer market totaling about $56 billion.

The Pepsi-Cola Company is the world’s second largest beverage company. Pepsi-Cola beverages are available in about 170 countries. Pepsi also makes and markets ready-to-drink iced teas and coffees via joint ventures with Lipton and Starbucks. PepsiCo, Inc. consists of: Pepsi-Cola Company, Frito-Lay Company, and Tropicana Products, Inc. , the world’s largest marketer and producer of branded juices. Donald M. Kendell, President and CEO of Pepsi-Cola, and Herman W. Lay, Chairman and CEO of Frito-Lay founded PepsiCo, Inc. in 1965 through the merger of the two companies. Tropicana was acquired in 1998.

Television commercials for Coke and Pepsi bombard us with images of youth and beauty, fun and pleasure, family togetherness, and patriotism. Oh, and by the way, they make soft drinks too! Clearly, the “cola wars” have little to do with colas. They are wars of marketing and advertising. In the beginning Coca-Cola wanted three things: A Coke sign on every corner, bottles of Coke in every store, and put a Coke within an arm’s reach of every possible customer. However, Coca-Cola needed to focus on more than just the beverage; they needed to sell an image or a way of life.

The image that management first focused on was the essence of all that America stands for. They wanted Coke to be the American dream in a bottle and “the Real Thing”. Coca-Cola is considered an All-American drink. However, during the Vietnam War, the country was in turmoil and the American dream had died. Coca-Cola introduced the “I’d Like to Buy the World a Coke . . . ” campaign to transfuse the consumer into a world of peace and harmony. On the other hand, Pepsi-Cola did not get off the ground until the times of the Great Depression.

Their key concept was the 12-ounce bottle that would sell for the same nickel that would buy 6-ounces of Coke. This more for less strategy hit the mark of those who went for quantity rather than quality. Coca-Cola felt that their bottle was their greatest strength. Pepsi’s promotion turned that strength into a weakness because Coke’s unique bottle could not be scaled up to 12 ounces. Coke had high bottle inventories and could not cut their prices. This edge made Pepsi number two by World War II. Pepsi’s new strategy was to reposition the competition as “out of date”.

The first expression of this concept was, “Now it’s Pepsi for those who think young,” and this idea was brought to life with the classic, “Come alive, you’re in the Pepsi generation. ” With Pepsi’s new corporate spirit, based on quick-action philosophy known as “ready-fire-aim”, Coke woke up. Another Pepsi strategy was the invention of the “Pepsi Challenge. The result: tasters preferred Pepsi three to two over Coke. This was a good strategy for Pepsi because it exploited a weak point in the competitive product – Taste.

In response to Pepsi’s challenge, Coke did its own taste tests and found out that Pepsi was preferred. This led Coca-Cola to do the one thing a leader should never do – change a product people consume a lot of. The new formula was introduced to the entire market without any test marketing. Now the “real thing” was no longer the real thing; and in one stroke, Coca-Cola had undermined its own position. The “New Coke” led to an outburst from the public with their loyalties to the original formula. Management listened. The original formula was reintroduced as “Coca-Cola Classic,” giving Coke a new life cycle.

It is important for Pepsi to create an image that could never be confused with Coke’s. For twenty years, Pepsi positioned itself as the “leading edge” soft drink and called their consumers the “Pepsi generation”. The overall effect of Pepsi’s efforts was to steadily erode Coke’s leadership. Coke still currently leads Pepsi in sales, but no one knows for how long. We do know two things: both companies have always targeted youth and both portray their products as providing pleasure. Political Environment World War II changed everything.

The Coca-Cola Company promised to put a Coke in the hands of every American soldier. This inspired the government to exempt Coke – but not Pepsi – from sugar rationing. The government also built almost a hundred Coke bottling plants overseas. Then, when the war ended, Coke not only had millions of grateful servicemen as consumers, it also had the makings of a worldwide bottling network. Pepsi, on the other hand, came out of the war as the prisoner of its “Twice as much for a nickel, too” slogan. That expression positioned Pepsi as a bargain drink.

And when the price advantage vanished because of inflation, so did many Pepsi drinkers. Pepsi was left with an inferior reputation, and so it changed its formula and took on the even tougher task of changing its image. In 1959, Coke declined a booth at the American National Exhibition in Moscow to avoid domestic implications. Instead, Pepsi took the risk. Using this opportunity, the national sales manager at the time was able to persuade Soviet Premier Khrushchev and Vice President Nixon to stop at the Pepsi booth to taste two kinds of Pepsi – one bottled in America, the other in Russia.

Photographs of a Pepsi-refreshed Khrushchev with the caption “Khrushchev Learns To Be Sociable” went around the world. However, by 1961 the Berlin wall was erected not only cutting out democracy but also shutting out Coke and Pepsi. Another turnaround for Pepsi-Cola came in 1971 when both governments allowed a Pepsi representative to go to Russia because of previous relations. Pepsi walked away with a monopoly in the Russian cola market. Pepsi even reworded one of Coca-Cola’s popular sayings: “We want Pepsi in a hands reach of the Russian Consumer”.

Internet There is a growing need to keep up with the technological changes in the management system, knowing that tomorrow will be quite different from today. As Internet popularity swells, Pepsi and Coke continue to make efforts to create effective web sites to advertise their products. Pepsi’s site is geared more toward the young and energetic, whereas Coke’s appeals to any generation. These two web sites follow closely the advertising patterns Coke and Pepsi have established over the years.

Information at these sites is fairly limited, with concentration most focused on maintaining the attention of the web-surfer and luring him/her into the world of soda pop culture. Sales Forecasting Although neither Coca-Cola nor Pepsi come out and directly say what their sales forecasting method is at present, it has been known that Coca-Cola has used an automated sales forecasting system for time series analysis. Pepsi, on the other hand, used bottoms-up sales estimation that was accomplished through the Pepsi Challenge.

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