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Coca-Cola Vs Pepsi Essay, Research Paper

Coca-Cola vs. Pepsi Co.: An International Battle

The soft drink industry has been engulfed by an ongoing cola war stemming from a long-time battle between Coca-Cola and Pepsi Co. Recently both companies have introduced their products to the foreign market, but in order for either company to turn a profit, there is a large amount of red tape they must cut before production can begin. This paper will examine the new markets and the roadblocks that have stopped these companies for so long.

Established in 1886 and 1889, Coca-Cola and Pepsi Co., respectively, were among the first soft drinks invented and their popularity grew rapidly. By the 1930 s, Coca-Cola appeared on over 20,000 walls, 160,000 billboards, 5 million soda fountain glasses and 400 million newspaper and magazine advertisements (Secret Formula p. 206). When the war (Second World) ended, the Coca-Cola Company had sixty-three overseas bottling plants in operation in venues as far-flung as Egypt, Iceland, Iran, West Africa and New Guinea (Secret Formula, p.265).

Since then, international marketing has become more complex and the following will study the new territories and the advancements that the companies have made.

Eastern Europe:

In 1972, Pepsi signed an agreement with the Soviet Union which made it the first Western product to be sold to consumers in Russia. This was a landmark agreement and gave Pepsi the first-mover advantage. Presently, Pepsi has 23 plants in the former Soviet Union and is the leader in the soft-drink industry in Russia. Pepsi outsells Coca-Cola by 6 to 1 and is seen as a local brand. However, Pepsi has had some problems: there has not been an increase in brand loyalty for Pepsi since its advertising blitz in Russia, even though it has produced commercials tailored to the Russian market and has sponsored television concerts. On the positive side, Pepsi may be leading Coca-Cola due to the big difference in price between the two colas: Pepsi sells 2 liters for Rb1,300 ($1.30 US), but Coca-Cola sells 1.5 liters for Rb1,800. Coca-Cola, on the other hand, only moved into Russia 8 years ago and is manufactured locally in Moscow and St. Petersburg under a license. Despite investing $85 million in these two bottling plants, they do not perceive Coca-Cola as a premium brand in the Russian market. Moreover, they see it as a “foreign” brand that is drank by the wealthy, or on special occasions.

Romania is the second largest Central European market after Poland, and makes this a large battleground for Coca-Cola and Pepsi. When Pepsi established a bottling plant in Romania in 1965, it became the first U.S. product produced and sold in the region. Pepsi began producing locally during the communist period and has recently decided to reorganize and retrain its local staff. Pepsi owns 5 factories in Romania under a joint venture with Flora and Quadrant, which leases Pepsi the equipment and handles Pepsi’s distribution. In addition, Pepsi bought 500 Romanian trucks which are also used for distribution in other countries. While the price of Pepsi and Coca-Cola are the same (@15 cents/bottle), some consumers drink Pepsi because the company once sent Michael Jackson to Romania for a concert. Also, some Romanians drink Pepsi because, in the past, only top officials were allowed to drink it. Coca-Cola only began producing locally in November 1991, but is outselling all of its competitors. In 1992, Coca-Cola saw an increase in Romania of sales by 99.2% and outsold Pepsi by 6 to 5. While Pepsi preferred to buy its equipment from Romania, Coca-Cola preferred to bring equipment into Romania. Also, Coca-Cola brought 2 bottlers to Romania and since has invested almost $25 million into 2 factories. Furthermore, Coca-Cola has a partnership with a local company, Ci-Co, in Bucharest and Brasov. Ci-Co has planned an aggressive publicity campaign and has sponsored local sporting and cultural events.

The key to success in the Czech Republic is for both Coca-Cola and Pepsi to increase the annual consumption of soft drinks. Per capita consumption of beer, the national drink in the Czech Republic, exceeds that of soft drinks by 3 to 1(165 liters of beer per capita of beer versus 50 liters of soft-drinks). Both companies are trying to increase their market share because distribution for both products is no longer as limited as it was in 1989. Domestic producers have a market share of about 60%, as their overhead costs are lower and the price of their beverages are cheaper. Coca-Cola and Pepsi each have a market share between 10%-25%. The main hesitation may be that the price of Coke is twice the price of locally produced colas and a little higher than Pepsi. Coca-Cola has arrangements with 4 domestic bottling companies and acquired a new plant in 1992 in which it has invested almost $20 million. This may be one reason why Coca-Cola is closing in on Pepsi’s lead in the Czech Republic.

Poland, with a population of 38 million people, is the biggest consumer market in Central and Eastern Europe. Coca-Cola is closing in on Pepsi’s lead in this country with 1992 sales of 19.5 million cases versus Pepsi’s sales of 26.5 million cases. The main problems in this area are the centralized economy, the lack of modern production facilities, and poor distribution. However, since the zloty is now convertible, Coca-Cola realizes the growth potential in Poland. Coca-Cola has developed an investment plan that includes direct investment and joint ventures/investments with European bottling partners. Its investments could exceed $250 million, and it has completed the infrastructure building. Coca-Cola has divided Poland into 8 regions with strategic sites in each of these areas. In addition, it has organized a distribution network to make sure its products are widely available. This distribution network, which Coca-Cola has spent

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