The Rivalry between Coca-cola and Pepsi - Essay Example

Coca-cola vs. Pepsi Introduction The rivalry between Coca-cola and Pepsi, famously known as the cola wars, is as old as capitalismitself. The cola wars are more than two centuries old, and they are bound to continue in the future. Both companies major in the production of beverages with the Pepsi-cola and Coca-cola drinks being their brand’s flag bearers. The two drinks are ultimately similar with slight differences that have divided consumer markets all-over the world. The rivalry between the two transcends distance, time and culture. The two brands divide society, restaurants, nations, presidents, supermarkets, stadiums and other arenas. The two companies have recruited many media and business personalities into the war. Bill Gates, Michael Jackson, Santa Claus, Bill Cosby are some of the individuals who at one time have represented their favorite brands. This essay will compare the two great brands to identify the areas that contribute to their rivalry. In addition, it will also address the various ways the heads of both brands have attempted to resolve their differences. Body This legendary rivalry between Coca-cola and Pepsi began as early as 1899 when Caleb Bradham created Pepsi. Coca-cola is the older of the two as it was first produced in 1886 by John S. Pemberton. This brand rivalry officially began 13 years after the introduction of Pepsi into the market (Muniz & Hamer 2001). Both companies were at loggerheads since the 19th century due to the conflicting nature of their leading brands. The two companies produced the first cola drinks in the market and thus became direct competitors to each other. The similarities between the two brands are innumerable to say the least. These similarities start with the cola drinks and transcend to their advertising techniques utilized in competing with each other. The taste of their flagship brands is the first shared characteristic of these two beverage giants. Muniz & Hamer assert that Coca-cola is the original cola, being in the market 13 years prior to Pepsi, and for this reason its taste is the benchmark of colas (2001). Pepsi, in order to compete favorably, copied the taste of Coke in making Pepsi-cola. There is little difference between these two beverages as illustrated by people who participated in double blind taste tests. The tests failed to derive concrete differences between the two (Muniz & Hamer 2001). The other similarity is both companies specialize in the production of carbonated drinks. Pepsi produces Pepsi-cola, Mountain Dew, Diet Pepsi, 7 Up and many other carbonated drinks. On the other hand, Coca-cola produces coca-cola, fanta, sprite, Diet Coke and other carbonated drinks (Barton 2002). Another similarity is the sweetness in the flagship drinks is their sweetness. In taste tests, Pepsi is sweeter than coca-cola, and this is the reason people often prefer the taste of Pepsi over Coca-cola. However, people are more likely to prefer downing an entire can of coca-cola than a Pepsi one. Barton identifies the other similarity between these brands as their use of carbonation in producing their beverages (2002). In terms of carbonation, coca-cola utilizes more carbonation than its competitor. However, due to their worldwide status and being produced globally the levels of carbonation differ ever so slightly from one region to the other. Therefore, the levels of carbonation in both brands is similar across its all its markets. Apart from these similarities in their production process, the similarities transcend into other areas. Their products, beverages, offer the same core benefit to their customers. Pepsi-cola and Coca-cola, together with their other brands, aim to quench the thirst of their customers and to sell non-alcoholic beverages to the same (Muniz & Hamer 2001). Their generic products are alike, in that they are both soft drinks. The expected product, on the other hand, is quite different for both beverages. For coca-cola, consumers expect a raisiny-vanilla taste while Pepsi-cola faithful expect a citrusy-flavor busty taste. In addition to this brand difference, Coca-Cola’s advertisements are majorly red while those of Pepsi favor blue. The two companies share the same market space and target the same market segments. For this reason, the two companies have been locked in a battle for superiority (Ferrell et al 2010). These battles, known as the Cola wars, as the two companies fought for market share and the superior cola drink. The cola wars were campaigns full of mutually targeted advertisements since the 1980s till now. These epic battles started with the “Pepsi Challenge” where Pepsi arranged blind taste tests across stores in the United States of America. Muniz and Hamer state that the tests concluded that consumers favored Pepsi for its taste comprising of more lemon oil, vanillin and less orange oil (2001). The Pepsi challenge resulted to an increase in sales of the Pepsi brand. This challenge kicked off the famous cola wars. This challenge prompted Coca-cola to change its formula developing New Coke. Coca-cola faithful did not receive the New Coke well prompting the company to revert to its previous formula. During the first Cola war, Pepsi reigned supreme. Its advertising strategies were unique as they were the first company to use celebrities in their marketing campaigns. These celebrities such as Michael Jackson signified that they preferred Pepsi over Coca-cola (Muniz & Hamer 2001). Pepsi was the “Choice of a new Generation”. In its marketing campaigns, Pepsi focused on its consumers while Coca-cola focused on the drink. According to Muniz and Hamer the advertisements, during the first Cola war, symbolized Pepsi as a reward for its consumers. Pepsi also painted the Concorde blue in attempts of winning the war. The extent of the war reached space in 1985 when both companies launched their products on the Space Shuttle Challenger on STS-51-F. Pepsi during the cola wars developed genius marketing strategies with the “Drink Pepsi, Get Stuff” being its most effective (Barton 2002). The Cola wars transcended into cyber space as the two companies engaged in a “cyber war “as Coke introduced its Coke Rewards to counter the Pepsi Stuff. Their individual websites administered these loyalty programs. Pepsi went ahead to form an online partnership with Amazon to increase the value of the loyalty points its consumers accrued (Muniz & Hamer 2001). Coca-cola, on the other hand, partnered with iTunes store to tempt more consumers in participating in their Coke rewards loyalty campaign. The Cola wars, in their magnitude, were negative for the carbonated soft-drink (CSD) industry suffered as a result of these wars. Coca-cola and Pepsi are concentrate producers who form a section of the industry (Ferrell et al 2010). The CSD industry also comprises of bottlers and other smaller concentrate producers. The rivalry between the two companies did not result in the industry growing. These wars affected the profitability of the industry. Other industry players were at the mercy of the two brands. Ferrell clearly state that the rivalry affected the profitability of the bottlers as they could not distribute their competitor’s brand due to anti-trust legal issues together with regulatory action (2010). The bottlers experienced slim profit margins as the two companies restricted their distribution channels ultimately leading to their declined growth. The wars restricted the entry of other Concentrate Producers (CP) into the market that would have salvaged the bottlers’ situation. Pepsi and Coca-cola did not consider the effect they had on the global CSD industry. In short, the Cola wars devastated the profitability of the CSD industry (Ferrell et al 2010). The Coca-Cola Company v Pepsi Inc case in Australia illustrates the enmity between the two companies (Donovan 2013). In the case, Pepsi was accused of trademark infringement as they used the famous Coca-cola bottle in their bottling. Coca-cola alleged that their rivals used their “Carolina” bottle without their consent. Pepsi, according to Coca-cola, infringed the three registered bottle shapes that Coca-cola holds. Coca-cola claimed that Pepsi using their iconic glass bottle confused their consumers, and they demanded a $1 billion damages fee (Donovan 2013).. Coca –cola, despite their claims, had not registered their bottle silhouette, and the court ruled against them. Pepsi’s Carolina bottle, according to the judge, was not similar to any of Coca-Cola’s registered shape marks. Donovan states that the lack of registering the silhouette of their iconic bottle, Coca-cola could not claim trademark infringement (2013). The judge further asserted that the bottle’s silhouette could not substitute the registered trademarks owned by Coca-cola. For this reason, the judge urged Coca-cola to solely rely on the bottle shape marks they had registered (Donovan 2013).. In my opinion, the judge in this case ruled fairly because Coca-cola simply picked a fight with its rival. There are many brands that use this bottle shape in selling their beverages and Coca-Cola singled out Pepsi. By targeting Pepsi, Coca-Cola saw this infringement case as a way of effectively reducing their competition with Pepsi. The iconic Coca-cola has become generic as more beverage companies are using it in marketing and selling their beverages. The curvy nature of the bottle is not an invention in itself. The curvy nature together with the bottle’s waist provides functional ease of use by consumers. Consumers find the bottle easier to grab while drinking. Pepsi added curves in its bottle in attempts to differentiate it from the Coca-Cola bottle. These curves only add aesthetics to the bottle nothing more. In addition to Pepsi using this model, water bottling companies use the same model. Therefore, the use of this bottle by other beverages does not confuse consumers in choosing their preferred brand. Conclusion The rivalry between these soft drink giants stands in the way for any form of resolution between them. A number of court cases over several issues and concerns illustrate this. Pepsi, in recent times, has opted to concentrate in other markets in order to reduce the confrontation with its rival. The cola wars in recent years have reduced as Pepsi entered the food and snacks industry. Moreover, coca-cola has diversified into other beverage products that are not in direct competition with Pepsi-cola. The Cola wars are now in other markets but they will reduce in time, In conclusion, the Cola wars are not beneficial to both companies. The wars negatively impact the CSD industry and in the light of recent trends; the profitability is reducing. The two companies should reduce their rivalry by concentrating on other sections of the CSD industry other than the Cola part. The diversification of Pepsi into other markets is a positive start by the company. The two rivals should consider the nature of their operating market as it determines their survival in the future. References Barton, D. (2002). Cola wars (1st ed.). Lincoln, Nebr.: iUniverse. Donovan, T. (2013). Fizz: How soda shook up the world. Ferrell, O., Fraedrich, J., & Ferrell, L. (2010). Business ethics (1st ed.). Mason, OH: South-Western Cengage Learning. Muniz, A., & Hamer, L. (2001). Us versus them: oppositional brand loyalty and the cola wars. Advances In Consumer Research, 28, 355--361. Read More