Coca-Cola vs. Pepsi: A battle that changed the world for good

First published on 16 Aug, 2021 in the Business Standard

Around August 1993, a half-page advertisement with the headline "Dehydrated? … There's always Coke" appeared in two of Thailand's leading English-language dailies, The Nation and the Bangkok Post. 

Although this may appear to be a usual advertisement of a carbonated soft drink on the face of it, those familiar with the nearly century-old rivalry between Coca-Cola and Pepsi at the time must have realized that this headline was anything but normal and that the former took a dig at its nemesis through this.

In this particular instance, Coca-Cola took full advantage of the fact that Pepsi was sponsoring Michael Jackson's world tour, and the pop legend had to postpone a concert in Bangkok twice due to acute dehydration caused by the heat and humidity of the city.

Pepsi, on the other hand, did not let it slide and, like a wounded lion going after its prey, hit back more fiercely at the first opening it found.

Seeing the popularity of the game in the South Asian region, both companies wanted to be the official sponsor of the 1996 Cricket World Cup.

Coca-Cola eventually paid a large sum of money for the right to be referred to as the tournament's official sponsor.

With its 'Nothing Official About It' campaign, Pepsi, on the other hand, completely turned the tables on its opponent.

The advertisements showed cricketers and even officials choosing Pepsi over Coke. This campaign was a first-of-its-kind example of ambush marketing in the region, and it captivated the public imagination to the point where "it was as if Coke threw a party and Pepsi gate-crashed and had a blast."

This was just one of many such instances where these two companies have gone at each other. In fact, their long-standing rivalry has been so intense that it has changed the course of history by influencing important political decisions and causing a paradigm shift in global consumer behavior, among other things.

From the beginning, Coca-Cola performed relatively well and successfully managed to become the domestic leader in this sector by the 1940s.

However, Pepsi was struggling to keep itself in competition due to bankruptcies in 1923 and 1932. But the game began to shift in favor of Pepsi when the former marketing executive of Coca-Cola Alfred Steele became the CEO of Pepsi in 1950.

Start of the rivalry between Coca-Cola and Pepsi

Aiming at family use, Alfred Steele decided to introduce Pepsi in 26-Ounce bottles. This strategy seemed to work for Pepsi, as other Cola companies, including Coca-Cola, typically used 6.5 or 12-ounce bottles in those days.

After Alfred Steele, Donald Kendall became the CEO of Pepsi. During his tenure, Pepsi worked with its bottlers to improve and modernize its plants alongside improving store delivery service. Under his visionary leadership, Pepsi merged with the snack food giant Frito-Lay to become PepsiCo.

Targeting young people through its aggressive marketing strategies, Pepsi soon successfully captured a large portion of the US domestic cola market.

Meanwhile, Coca-Cola’s excessive focus on overseas markets weakened the distribution network in the US market, which ultimately reduced its domestic lead to 2-1 to Pepsi.

Rivalry turned into Cola War

Under the aggressive marketing strategy of Donald Kendall throughout the ’70s and ’80s, Pepsi introduced ‘The Pepsi Challenge’ in the Coca-Cola-dominated city of Dallas in Texas state in 1974.

After demonstrating Pepsi was better than Coca-Cola in this blind taste, Pepsi decided to roll out this campaign over the US. However, for the first time in history, Pepsi passed Coca-Cola by a 1.4 share point level in 1979.

The policymakers of Coca-Cola seriously took the downturns. During 1980-84, they introduced Diet Coke and doubled their advertising costs alongside some reforms in their management and policies. During the ‘80s Coke introduced another 11 CSD brands whereas Pepsi introduced 13 other CSD brands.

Despite Coke’s efforts, it failed to regain its position. During this turmoil, Coke made a huge mistake in 1985 by changing its 99-year-old formula to upset its loyal customers.

Their outrages forced Coca-Cola to bring back its old formula under the brand name ‘Coca-Cola Classic’ in just 6 months. However, the blunder of Coca-Cola to change its formula proved to be a blessing in disguise for the company as after this incident, many people started to consume Coca-Cola more than ever.

Soon Coke’s sales surpassed the sale of Pepsi. During this time, many of Pepsi’s executives alongside business analysts marked this incident as a pre-planned one by the policymakers of Coca-Cola.

During this time the President of Coca-Cola, Don Keough said in a famous interview “Since the blunder was so colossal, some cynics say that we planned the whole thing. The truth is we’re not that dumb, and we’re not that smart.”

US Politics Added a Dimension in the ‘Blood Feud’ between Coca-Cola and Pepsi

Coca-Cola became a household name in the United States for its marketing and policy-making strategies by the 1940s’. During World War II, Coca-Cola gave a Coke bottle to every US army soldier at only five cents regardless of the place of the war and the cost of producing a bottle of Coke.

However, this move made Americans more emotionally attached to Coca-Cola and helped the company get rid of wartime sugar rationing in beverage production.

The US government also set up 64 overseas plants of Coca-Cola to ensure the continuous supply of Coke to its soldiers. These infrastructures later helped Coke to expand its sales outside the United States.

Following Coca-Cola’s path, Pepsi also tried to get help from the government and it made Richard Nixon Pepsi’s brand ambassador during his tenure as Vice President (1953-1961). Later on, when he became the 37^th US president in 1969, he replaced Coca-Cola with Pepsi as the official drink in the White House.

He helped Pepsi to grow before, during his tenure as vice president. But the political and policy support during his tenure as president (1969-1974) helped ‘Pepsi’ to take a significant market share of ‘Coca-cola’ not just in America but also in other countries.

During this period, Pepsi also influenced different international political decisions taken by the US government. In 1973, an elected socialist government was ousted by a US-backed military coup.

Later on, it found that Pepsi, which was the leading cola brand of Chili at that time, expressed the need for US intervention in Chili to the then-US secretary of state, Henry Kissinger.

However, the political fortunes of these two companies changed again after Jimmy Carter of the Democratic Party became president in 1977. He replaced Pepsi with Coca-Cola as the official white house drink.

Although Pepsi was giving tough competition in the US domestic market during this period, Coca-Cola remained the global player due to its political support from the US government.

Despite Coca-Cola’s brand philosophy being much more conservative than Pepsi’s, by the ‘80s Coca-Cola had become associated with the Democratic party whereas Pepsi maintained its relationships with the Republicans.

The 2008 US presidential election again saw a change in the political ideology of the two companies when Pepsi was supporting the Democratic party’s Barack Obama and Coca-Cola was backing Republican candidate John McCain.

However as more and more people began to abandon soda in favor of healthier alternatives, Coca-Cola and PepsiCo broadened their beverage portfolios, placing less attention on their primary brands. 

For example, a trade publication known as Beverage-Digest reported that in 2016, the lowest number of people consumed carbonated soft drinks in 31 years.  

PepsiCo made a brilliant decision to focus more on producing a variety of snacks in the midst of this shift in consumer behavior. Because of this bold decision, the company has been able to stay ahead of Coca-Cola during the ongoing pandemic. 

As has been rightly pointed out by PepsiCo Vice Chairman and CFO Hugh Johnston, "We have seen real increases in snacking. As a result, that demand is sustaining."

"The beverage business is more challenging in that regard as the away-from-home channels have either shut down and are quite limited," he added.

Coke fans, on the other hand, will be relieved to learn that in March 2021, the company revealed that its global unit case volume had returned to where it was in 2019.

"We are encouraged by improvements in our business," said CEO James Quincey, "particularly in markets where vaccine availability is increasing and economies are opening up."

However, this is by no means a permanent recovery. With the delta wreaking havoc all over the world, many countries are being forced to revert to a state of emergency and this could once again throw Coca-Cola into deep water. Indeed, this pandemic has tipped the scales in PepsiCo's favor, possibly forever.  

This article was co-authored by Arafat Reza, a Dhaka-based journalist and researcher, currently serving as a research associate at the Centre for Peace and Justice (BRAC University).