Case Details:

Case Code : MKTG002

Case Length : 9 Pages
Period : 1997-2001
Pub Date : 2001
Teaching : Available
Note
Organization : Coca Cola India Ltd
Pepsi India Ltd
Industry : Food, Beverages and
Tobacco
Countries : India

Abstract:
When the cola giants, Pepsi and Coke, entered the Indian market, they brought with them
the cola wars that had become part of global folklore. This case study details the various
battles fought in India by the two rivals with its focus on the publicity campaigns where the
two sought to steal each other's fizz.

The case also outlines battles fought on other fronts - conflicts with bottles, product
modifications, attempts to steal the rival's employees and other mini wars. On the whole,
the case attempts to provide a comprehensive perspective regarding the dimensions of the
cola wars and the direction in which they are heading.

Issues:
» Marketing Warfare, Comparative Advertising

Contents:
Page No.
Pepsi vs. Coke 1
The Players 2
The Rivalry on Various Fronts 2
I -Bottling 2
II -Advertising 3
III -Product Launches 5
IV -Poaching 6
V -Other Fronts 6
Is The Rivalry Healthy? 8

Keywords:
Pepsi, Coke, Indian market, cola wars, global folklore, India, publicity campaigns, fizz,
conflicts, bottles, product modifications, comprehensive perspective, cola wars, comparative
advertising, merits, demerits, marketing warfare, competitive market
"Our real competition is water, tea, nimbupani and Pepsi... in that order."

- Coke sources in 1996.

"When you're No 2 and you're struggling, you have to be more innovative, work better, and
be more resilient. If we became No 1, we would redefine the market so we became No 2! The
fact is that our competition with the Coca-Cola company is the single most important reason
we've accomplished what we have. And if they were honest, they would say the same thing."

- Pepsi sources in 1998.

"Both companies did not really concentrate on the fundamentals of marketing like building
strong brand equity in the market, and thus had to resort to such tactics to garner market
shares."

- Business India in 1998.

Pepsi vs. Coke

The cola wars had become a part of global folklore - something all of us took for granted.
However, for the companies involved, it was a matter of 'fight or succumb.'Both print and
electronic media served as battlefields, with the most bitter of the cola wars often seen in
form of the comparative advertisements.

In the early 1970s, the US soft-drinks market was on the verge of maturity, and as the
major players, Coke and Pepsi offered products that 'looked the same and tasted the
same,'substantial market share growth seemed unlikely. However, Coke and Pepsi kept
rejuvenating the market through product modifications and pricing/promotion/distribution
tactics.

As the competition was intense, the companies had to frequently implement

strategic changes in order to gain competitive advantage. The only way to do
this, apart from introducing cosmetic product innovations, was to fight it out in
the marketplace.

This modus operandi was followed in the Indian

markets as well with Coke and Pepsi resorting to
more innovative tactics to generate consumer
interest. In essence, the companies were trying
to increase the whole market pie, as the market-
shares war seemed to get nowhere. This was
because both the companies came out with
contradictory market share figures as per
surveys conducted by their respective agencies -
ORG (Coke) and IMRB (Pepsi). For instance, in
August 2000, Pepsi claimed to have increased
its market share for the first five months of
calendar year 2000 to 49% from 47.3%, while
Coke claimed to have increased its share in the
market to 57%, in the same period, from 55%.
Pepsi vs. Coke Contd...
Media reports claimed that the rivalry between Coke and Pepsi had ceased to generate
sustained public interest, as it used to in the initial years of the cola brawls worldwide. They
added that it was all just a lot of noise to hardsell a product that had no inherent merit.

The Players
Coke had entered the Indian soft drinks market
way back in the 1970s. The company was the
market leader till 1977, when it had to exit the
country following policy changes regarding
MNCs operating in India. Over the next few
years, a host of local brands emerged such as
Campa Cola, Thumps Up, Gold Spot and Limca
etc. However, with the entry of Pepsi and Coke
in the 1990s, almost the entire market went
under their control. Making billions from selling
carbonated/colored/sweetened water for over
100 years, Coke and Pepsi had emerged as truly
global brands.

Coke was born 11 years before Pepsi in 1887 and, a century later it still maintained its lead in
the global cola market. Pepsi, having always been number two, kept trying harder and harder
to beat Coke at its own game.

In this never-ending duel, there was always a

new battlefront opening up somewhere. In India
the battle was more intense, as India was one of
the very few areas where Pepsi was the leader in
the cola segment.

Coke re-entered India in 1993 and soon entered

into a deal with Parle, which had a 60% market
share in the soft drinks segment with its brands
Limca, Thums Up and Gold Spot.

Following this, Coke turned into the absolute

market leader overnight. The company also
acquired Cadbury Schweppes'soft drink brands
Crush, Canada Dry and Sport Cola in early
1999.

Coke was mainly a franchisee-driven operation with the company supplying its soft drink
concentrate to its bottlers around the world. Pepsi took the more capital-intensive route of
owning and running its own bottling factories alongside those of its franchisees...
Excerpts

The Rivalry on Various Fronts

I -Bottling
Bottling was the biggest area of conflict between Pepsi and Coke. This was because, bottling
operations held the key to distribution, an extremely important feature for soft-drink
marketing. As the wars intensified, both companies took pains to maintain good relationships
with bottlers, in order to avoid defections to the other camp...

II -Advertising
When Coke re-entered India, it found Pepsi had
already established itself in the soft drinks
market. The global advertisement wars between
the cola giants quickly spread to India as well.
Internationally, Pepsi had always been seen as
the more aggressive and offensive of the two,
and its advertisements the world over were
believed to be more popular than Coke's.

It was rumored that at any given point of time,

both the companies had their spies in the other
camp. The advertising agencies of both the
companies (Chaitra Leo Burnett for Coke and
HTA for Pepsi) were also reported to have
insiders in each other's offices who reported to
their respective heads on a daily basis...

III -Product Launches

Pepsi beat Coke in the Diet-Cola segment, as it managed to launch Diet Pepsi much before
Coke could launch Diet Coke. After the Government gave clearance to the use of Aspertame
and Acesulfame-K (potassium) in combination (ASK), for use in low-calorie soft drinks,
Pepsi officials lost no time in rolling out Diet Pepsi at its Roha plant and sending it to retail
outlets in Mumbai...

IV -Poaching
Pepsi and Coke fought the war on a new turf in
the late 1990s. In May 1998, Pepsi filed a
petition against Coke alleging that Coke had
'entered into a conspiracy'to disrupt its business
operations. Coke was accused of luring away
three of Pepsi's key sales personnel from
Kanpur, going as far as to offer Rs 10 lakh a
 year in pay and perks to one of them, almost
five times what Pepsi was paying him. Sales
personnel who were earning Rs 48,000 per
annum were offered Rs 1.86 lakh a year. Many
truck drivers in the Goa bottling plant who were
getting Rs 2,500 a month moved to Coke who
gave them Rs 10,000 a month.

While new recruits in the soft drinks industry averaged a pay hike of between 40-60% Coke
had offered 300-400%. Coke, in its reply filed with the Delhi High Court, strongly denied the
allegations and also asked for the charges to be dropped since Pepsi had not quantified any
damages...

V -Other Fronts
• Till the late 1980s, the standard SKU for a soft drink was 200 ml. Around 1989, Pepsi
launched 250 ml bottles and the market also moved on to the new standard size. When Coke
re-entered India in 1993, it introduced 300 ml as the smallest bottle size. Soon, Pepsi
followed and 300 ml became the standard.

But around 1996, the excise component led to

an increase in prices and a single 300 ml
purchase became expensive. Both the companies
thus decided to bring back the 200 ml bottle, In
early 1996, Coke launched its 200 ml bottles in
Meerut and gradually extended to Kanpur,
Varanasi, Punjab and Gujarat, and later to the
south...

• In May 1996, Coke launched Thums Up in

blue cans, with four different pictures depicting
'macho sports'such as sky diving, surfing, wind-
surfing and snow-boarding. Much to Pepsi's
chagrin, the cans were colored blue - the color
Pepsi had chosen for its identity a month earlier,
in response to Coke's 'red'identity...

• There were frequent complaints from both the players about their bottlers and retailers
being hijacked. Pepsi's blue painted retail outlets being painted in Coke's red color overnight
and vice-versa was a common phenomena in the 1990s...

• Coke also turned its attention to Pepsi's

stronghold - the retail outlets. Between 1996-98,
Coke doubled its reach to a reported 5 lakh
outlets, when Pepsi was present at only 3.5 lakh
outlets.

To reach out to smaller markets, interceptor

 units in the form of mobile vans were also
launched by Coke in 1998 in Andhra Pradesh,
Tamil Nadu and West Bengal.

However, in its rush to beat Pepsi at the retail

game, Coke seemed to have faltered on the
service front. For instance, many shops in Uttar
Pradesh frequently ran out of stock and there
was no servicing for Coke's coolers...

Is The Rivalry Healthy?

In a market where the product and tastes remained virtually indistinguishable and fairly
constant, brand recognition was a crucial factor for the cola companies. The quest for better
brand recognition was the guiding force for Coke and Pepsi to a large extent...