Coca-Cola and Pepsi Companies Strategies

Introduction

The soft drinks industry has grown immensely over the years as different industry players struggle to achieve market leadership and control over their competitors. The Coca Cola Company and PepsiCo are notably the global industry leaders as far as soft drinks are concerned. From high annual profits to huge expenditures in marketing activities and popular brands, Coca Cola and PepsiCo are undoubtedly the unbeatable leaders and players in this industry throughout the world. In their operations and business activities, nevertheless, the two companies have adopted different strategies to strengthen their market positions and activities.

Coca-Cola

Pharmacist John Pemberton in Atlanta, Georgia, accidentally formed Coca Cola in 1886 in his shop as he experimented on formulating a tonic that could cure headaches (Bodden, 2009). The resultant fruit syrup that is today’s Coca Cola ingredient was formed after mixing cola nut with coca leaf, among a collection of other ingredients. Pemberton and his business partner, Frank Robinson, introduced the mixture of fruit syrup and water into the market, with the latter suggesting the name ‘Coca Cola’ to be adopted as the brand name. The two business partners placed the first advertisement of the new product on the Atlanta Journal, with their original catch line being that the beverage was, ‘Delicious! Refreshing! Exhilarating! Invigorating!’ (Bodden, 2009).

The new beverage began selling in Atlanta’s largest drug store, Jacob’s Pharmacy, where it was sold to consumers as soda. Its main ingredients, however, included the fruit syrup and water only. However, it was at the Jacob’s Pharmacy that carbonated water was used in the mixture, replacing plain water as an ingredient. Customers liked the new taste, a factor that saw the drink being sold as a carbonated beverage throughout Atlanta (Bodden, 2009).

Initial sales only reached $50, which was less than the $75 cost that both Pemberton and Robinson had used in expenses (Bodden, 2009). Pemberton later sold his shares to partners in the business shortly before his death in 1888 following poor health. Asa G. Candler, a doctor and pharmacist based in Atlanta, later acquired the rest of the shares from Coca Cola’s shareholders, spending $ 2,300 in total. The Coca Cola Company was formed the next year under Candler’s watch (Bodden, 2009).

Candler was very instrumental in increasing the company’s sales, reaching 189,270 liters each year by the year 1893. Pemberton’s performance, in contrast, was only 95 liters in the year 1886. His marketing focus was responsible for the change in performance, immediately enabling the company to set up manufacturing plants for its syrup ingredients in Texas and Dallas in 1984, before spreading to Chicago, Illinois, California, and Los Angeles in 1894 (Bodden, 2009).

Joseph Biedenharn, a businessperson hailing from Mississippi, became the first one to bottle Coca Cola products in 1894. This set a very important business precedent for the company, which today relies heavily on independent bottlers for its business. Five years later, in 1899, two lawyers Joseph B. Whitehead and Benjamin F. Thomas won themselves exclusive rights to carry out bottling of the beverage and sell out to consumers.

The period after 1905 particularly saw the company focus its attention on increased advertisement even as the problem of imitations in the market became imminent (Coca-Cola, 2011). Advertisement messages by the firm stressed on the need for consumers to ensure that they always bought and consumed genuine Coca Cola products and not substitutes.

As a way of differentiating itself in the market, Coca Cola opted to introduce a new and distinct bottle shape in the market. The contour bottle, remains to be the signature shape associated with the Company, was first manufactured in 1916. These developments came at the same time when growth of the company was gaining strong momentum, with Coca Cola establishing presence in the international market for the first time in Cuba, Puerto Rico, as well as France (Coca-Cola, 2011).

Coca Cola changed ownership again in 1918 when Candler finally sold it out to Ernest Woodruff. This paved way for Robert Woodruff, Ernest’s son, to take over as the company’s president in 1923. Woodruff’s tenure mainly helped in marketing the brand into the international market. His tenure lasted for close to 60 years, during which Coca Cola built its partnership with the Olympics Games starting in 1928.

The World War II was of great significance to Coca Cola, even as Woodruff ordered for a bottle of Coke to be sold at a subsidized price to all US soldiers. It was during the war that the company had the opportunity to expand further into the international market, establishing foreign operations in mainly Europe countries.

New brands were later introduced in the 1960s, with Sprite being established in 1961, while TAB and Fresca being established in 1963 and 1966 respectively. Advertisement also gained momentum in the 1970s when its marketing activities managed to fuse fun, playfulness, together with freedom, altogether. Another milestone by the company was achieved in 1978 when China allowed Coca Cola’s products into its local market as the only marketer of packaged cold drinks.

The 1980s, however, saw the leadership at the firm change hands. Roberto C. Goizueta became the CEO in 1981, managing to overhaul the company completely with his ‘intelligent risk taking’ strategy. This saw the several bottling companies in the US form a new public company that was referred to as Coca Cola Enterprises, Inc. The Diet Coke, which has been successful in the market, was also introduced under Goizueta’s watch as the CEO (Coca-Cola, 2011).

The Coca Cola taste was also changed for the first time in 1985, another of Goizueta’s initiative. The focus on international cultures and tastes took center stage under Goizueta’s stewardship, a fact that saw the numbers of Coca Cola establishments in international markets grow to over 200 countries. Other brands that were introduced during this period include the Dasani bottled water in 1999 and Fridge Pack in 2001.

Neville E. Isdell took charge of the company in 2004, continuing with the growth and development culture of the company (Coca-Cola, 2011). Additional products have continued to be introduced, including the Coke Zero in 2005, as well as new acquisitions that involved Glaceau in 2007, bringing on board such products as smart-water, fruit-water, and vitamin-water, among others (Coca-Cola, 2011).

PepsiCo

Another pharmacist, Caleb Bradham, founded Pepsi in 1898 (Stoddar, 2006). After mixing several formulas, Bradham invented the now famous Pepsi, although it was referred to as ‘Brad’s Drink’ at the time. Need for a better marketing name later emerged and the search for a more marketable name began. The name ‘Pepsi’ was coined from pepsin enzymes, which exist in the human digestion system and play a critical role in food digestion.

Bradham had a belief that the new drink he had just created was capable of helping in digestion of food, just in the same way pepsin enzymes do. It is, however, not true that the Pepsi drink contained pepsin. ‘Cola’, on the other hand, is a representation of the invigorating and refreshing qualities that are part of the drink (Stoddar, 2006).

Pepsi Cola grew in popularity within a short period, prompting its founder, Bradham, to start the Pepsi Cola Company in 1900 (Stoddar, 2006). Initially, the company only concentrated on selling the Pepsi Cola syrup stores that sold drugs within the eastern areas of North Carolina. The sale of Pepsi Cola in bottles began in 1905 following increased market demand for the product. Franchise agreements between the company and bottling companies were entered to facilitate easy marketing of the product (Stoddar, 2006).

By 1910, up to 240 bottling franchises that involved Pepsi existed, leading to the debut bottler’s convention of the company during the same year. Initial advertisements of the brand highlighted its health benefits to consumers, which went as far as claiming that it helped children grow healthier. With increased sales throughout the years, the company recorded its net income as $31,346 by 1915 (Stoddar, 2006). Its market also widened and covered Virginia, North and South Carolina, Georgia, Alabama, as well as Florida and Tennessee.

With the beginning of the First World War in 1914, however, the success of Pepsi was immediately overtaken by tough times. The company suffered losses because of price controls and sugar shortages. Sugar prices increased soon after the war, leading to Pepsi struggling in its business. A pound of sugar retailed for 28 cents, up from 3 cents prior to the beginning of the World War. Bradham, out of fears that the prices would continue rising, bought a huge stock of sugar at 28 cents, only for the prices to fall and retail at the pre-war prices (Stoddar, 2006).

The fluctuations in sugar prices finally led to Pepsi’s bankruptcy. Attempts to revive the company fell flat as Pepsi was eventually certified as bankrupt in May 1923. Pepsi underwent subsequent losses for five years, with different companies attempting with minimal success to revive Pepsi. The Loft Candy Company acquired Pepsi in 1931, with Charles G. Guth, its president, assuming command of the beverage manufacturer. Pepsi gradually regained its strong footing in sales, increasing the number of its franchises in 1936.

Introduction of new brands under the Pepsi flagship, as well as expansion of the international market has continued throughout the years as Pepsi has grown to become an internationally renowned beverage brand (Stoddar, 2006). This research paper seeks to analyze, in detail, the different strategies that both companies have employed, and the contributions they have had in sustaining their leadership.

Problem Statement

At this time when globalization is opening up international markets and making market competitions even more intense, the Coca Cola Company and PepsiCo are faced with new marketing challenges. It is evident that market diversity is becoming more crucial, especially given that the global consumer is more enlightened than before. Companies must seek for marketing strategies that will help distinguish them from their rivals, and focus more on the preferences and demands of the consumer.

Literature Review

Use of Renowned Celebrities

According to Hsu and McDonald (2002), modern marketing methods have continuously adopted the use of famed celebrities in their advertisement and marketing campaigns. This idea is particularly preferred because celebrities can turn out to be successful spokespersons, both for the company as a whole or its specific brands in particular.

Coca Cola has even initiated a whole program dubbed ‘Perfect Harmony’ music platform, which seeks to provide young and upcoming artists an opportunity to launch into stardom (The Coca-Cola, n.d.). The artists compete on popular TV shows in their bid to outshine each other and win the coveted prices. The Coca Cola has traditionally looked at music as a perfect way of creating market awareness for its products not only in America, but also throughout the world.

In the ‘Perfect Harmony’ initiative by the soft drinks manufacturer, a partnership with 106 & Park television show provides the artists with a worldwide viewership and audience. The show is a flagship of the BET AWARDS, which is also shown on cable television (The Coca-Cola, n.d.). The millions of hip-hop, as well as R&B music fans both in America and throughout the world, who follow these programs are the target market for Coca Cola.

Because these fans have a passion for music and possibly for their favorite contestants, it is easier for them to connect with Coca Cola as a brand because of the sponsorship program. Cable TVs are a new phenomenon that has revolutionized the entire TV industry and market. Viewers, supported by the internet, are able to watch their favorite programs without necessarily being curtailed by physical distance and location, which are factors that determine the outreach of traditional TV.

In November 2011, Coca Cola tapped the services of Natasha Bedingfield, a famous R&B artist, to help in its marketing campaign. The “Shake Up Christmas” rendition was sung by the artist in six different languages to highlight Coca Cola’s key message for Christmas. To highlight how global the company is, Coca Cola relied on Bedingfield’s flair of languages, which saw her record the holiday anthem in English, Swahili, French, Ukranian, Spanish, and Filipino. This was part of Coca Cola’s ‘Open Happiness’ marketing campaign that spread across the globe to cover up to 90 countries (The Coca-Cola, 2012).

Non-Celebrity and Lifestyle issues Campaign

The PepsiCo advertisement has taken a different approach from the use of celebrities and lifestyles as has been synonymous with Coca Cola. Although PepsiCo, like its rival Coca Cola, previously used different celebrities in their marketing campaigns, a different strategy has been adopted since 2003.

The change of strategy, according to the company, seeks to portray PepsiCo products as the hero and not something or somebody else (Elliott, 2003). Additionally, the idea of leaving out celebrities and focusing on building the products as the main hero aims at presenting Pepsi as a perfect accomplishment that users must consider for their snack chips, pizzas, and hot dogs (Elliott, 2003).

For a long period, between 1999 and 2003, PepsiCo had embarked on an aggressive marketing campaign that saw its advertizing message and material fill up with stars, jingles, humor, and other special effects. ‘The joy of cola’ marketing theme used in 1999 and which later changed in 2001 to ‘The joy of Pepsi’ focused on celebrities as the main way to create market awareness and attract customers (Elliott, 2003).

Pepsi’s senior vice president, also doubling up as chief marketing officer, David Burwick, explained the main reason why the company was changing their strategy at the time. There was need for Pepsi to highlight the fact that it greatly matched with food and social occasions (Elliott, 2003).

Market Positioning

Historically, Coca Cola and PepsiCo have been known to pay a lot of attention to the question of market positioning for their respective brands. The frequent changing of marketing themes for both companies highlights their different strategies and approaches to marketing. A focus on the recent days and times explains how the two companies have been using different approaches, using their marketing themes.

According to Moraru (2010), the period beginning 1980 represents what is known as ‘The Corporate Era’ in the inner circles of both Coca Cola Company and PepsiCo Inc. This is a period where the brands are establishing their positioning even as competition maintains its prolific stance.

Both companies put a lot of emphasis on the policy of management that they adopt, as well as working out on their international image (Moraru, 2010). A series of the different marketing themes used by Coca Cola and Pepsi during the corporate era also highlight the different marketing strategies pursued by both companies. They underline the focus by both companies on their market positioning.

Source: Moraru (2010)

Moraru (2010) proceeds to deduce the exact positioning for both companies by analyzing the themes adopted. Coca Cola, for instance, uses its themes to insist on the image that is traditionally associated with it. The positioning emphasis is based on time, particularly with the 1993 theme, ‘Always Coca-Cola’ (Moraru, 2010). The brand also adopts a market position that puts more emphasis on lifestyles, owing to the double meaning of taste, which is the quality of the product and the social aspect.

The Coca Cola theme of 2009 attempts to introduce another new feeling, that of happiness, which implies a market positioning that is founded on surprise expectations (Moraru, 2010). The Coca Cola commercial known as, ‘Happiness Factory’ clearly highlights this reasoning, with its main purpose being to formulate the mechanical instrument through which the ideal in life can be attained (Moraru, 2010).

Although both brands use ‘taste’ in their different themes, the approach by Pepsi is very different. The implied meaning of the company refers to living life as a challenge, where the feeling of ‘forever being young’ is actually tasted (Moraru, 2010). The emphasis of Pepsi is to position itself as a ‘substitute product’, most definitely for Coke (Dupont, 1999), and as a replacement for virtually everything.

The mention and comparison made to sex seeks to cement the reasoning that no pleasure on earth can actually replace that of Pepsi. Both brands, however, focus on their consumers being happy, which displays their interest in the spirit of the consumer. An in-depth analysis of the themes used by the companies, including those adopted in the early days of their competition in 1900, points at the fact that Coke only refreshed consumers. On the other hand, Pepsi focused on covering the whole world, a factor that helped Pepsi acquire the autocracy sign in the market (Moraru, 2010).

Pepsi appears to have adopted the old opposition strategy previously used by Coke by seeking to identify itself as the original Cola in the market. The theme adopted, ‘Pepsi. It’s the Cola’, emphasized the fact that the brand is the only deserving Cola in the market, despite the fact that Cola is actually part of Coca Cola (Moraru, 2010). Additionally, Pepsi’s focus is based more on international and global view, where it attempts to offer something unique for everyone.

This is particularly informed by the multicultural world, which requires that products should always consider breaking their initial border. The same, however, cannot be said of Coca Cola, whose focus is on fighting for time’s authority strongly. Coca Cola is seeking to achieve the tag of constantly being ‘the real thing,’ particularly because it has been, for years, relatively successful in earning the international status (Moratu, 2010).

Analysis Model

With the main purpose of this research being to understand the different marketing strategies employed by Coca Cola and PepsiCo, various aspects require to be studied. It is important to realize the impact that globalization, as a phenomenon, plays in affecting the choice of strategy that both companies eventually end up with. This is because consumers continue to get enlightened with every passing year, implying that consumer behaviors vary greatly, especially on the basis of their national origins.

Hypothesis

Coca Cola was introduced to consumers before the emergence of Pepsi. This gave Coca Cola the market advantage that it continues to enjoy to date. With both companies not having their marketing strategies far apart, it could be true that Pepsi’s late introduction into the market, relative to its competitor Coca Cola, is the main reason behind its comparatively dismal performance in the market. Consumers tend to believe that Coca Cola is the original beverage product, while Pepsi is only attempting to imitate the success of the former.

Although PepsiCo’s main marketing strategy is based on establishing new tastes and preferences for the market, Coca Cola continues to maintain its market leadership position, with its main strategy focusing on traditional practice. The market may not necessarily be diverse in its preferences, despite the physical nature of the beverage market.

Methodology

Choice of Subject

Different manufacturers attempting to appeal consumers presently fill the market with various marketing efforts, including advertising and other promotional efforts. Both Coca Cola and PepsiCo spend huge sums out of their revenues in funding marketing activities to win and maintain large markets. The discussion on marketing strategies adopted by the two companies is of great interest and is the main highlight of this research.

Data Collection

There are two different sources of data that can be used in research, which are primary and secondary sources (Gravetter & Forzano, 2012). This paper relies heavily on secondary data, mainly from research findings and analyses that have already been done by other researchers. A number of books and other published materials have been used to provide the data, all of which have been listed in the bibliography section of this research.

Conclusion

Both Coca Cola Company and PepsiCo are today the leading manufacturers and marketers of soft drinks throughout the world. With both companies being older than 100 years since formation, there is immense market experience and performance that both companies enjoy today. As the quest to expand their international markets, as well as grow market profits continue, there has been need for both companies to adopt unique marketing practices and strategies. The advent of globalization, however, has posed a challenge to the business operations of the two giant beverage manufacturers.

Market tastes and preferences have become the greatest focus for both players, with new products being introduced to cater for the ever-growing market preferences. Acquisitions have also been pursued, with PepsiCo venturing into a new product market that is not necessarily under beverages. The marketing themes that have been adopted over the years highlight the core marketing strategies for both companies. While Coca Cola continues to emphasize on tradition, portraying itself as the original soda manufacturer right from the early days, PepsiCo has been preoccupied more with building its profile. The company has successfully presented itself to buyers as an innovative venture that attempts to explore new areas where its main rival has not been able to explore.

References

Bodden, V. (2009). The story of Coca-Cola. Mankato, MN: Creative Education.

Coca-Cola (2011). Coca-Cola: Year by year. Beverage World, 130(2), 20-90.

Dupont, L. (1999). 1001 advertising tips. Quebec: White Rock Publishing Inc.

Elliott, S. (2003). In Pepsi’s new campaign, the drink goes with everything except celebrities and lifestyle issues. New York Times.

Gravetter, F. J., & Forzano, L. B. (2012). Research methods for the behavioral sciences. Belmont, CA: Wadsworth.

Hsu, C., & McDonald, D. (2002). An examination on multiple celebrity endorsers in advertising. Journal of Product & Brand Management, 11(1), 19-29.

Moraru, M. (2010). The “positioning” concept and the fight between two well known brands Coca-Cola and Pepsi. Journal of Media Research, 3(2), 47-62.

Stoddar, B. (2006). Warman’s Pepsi field guide: Values and identification. Iola, WI: Krause Publications

The Coca-Cola (n.d.). Coca-Cola taps Natasha Bedingfield to “Shake up Christmas” for global holiday campaign. Business Wire (English). Web.

The Coca-Cola (2012). Coca-Cola and BET give amateur talent a chance to get their shine on this summer. Business Wire (English). Web.