Comparative study on the marketing strategies of Pepsi

and Coca-Cola on the youth

A Research Project under Research Methodology

INTRODUCTION

This report includes a comparative analysis of the marketing strategies of the

two rivals Coca-Cola and Pepsi. Analysis of research data will provide an

1
overview of the market, which will be evaluated to provide a conclusion of the
two different brands of cola in terms of their marketing strategies.

Coca-cola was invented in 1886 by Dr John S Pemberton. Ownership passed to

Asa Candler’s company and remains the producer of coca-cola. (Wikipedia
website) Coca-cola was introduced to the UK in 1900. (Coca-cola website)
Coca-cola is the most recognised brand in the world, with influence being so
great that “the now famous red-suited Santa that is now known and accepted …
as the popular image of Santa Claus.” (Coca-Cola website)

Pepsi-cola was invented in 1898 by pharmacist Caleb Bradham. (Wikipedia

website) Trademarked in 1903 Pepsi-cola has been in a battle with Coca-cola
for dominance of the soft-drink market for over a century, in recent years it has
fallen behind coca-cola in regards to market share.

The “Cola-Wars is the term used to describe the campaign of mutually-targeted

television advertisements and marketing campaigns in the 1980s and 1990s
between Coca-Cola and Pepsi-cola” (Wikipedia website) This report aims to
analyse whether the Cola-war still exists and whether the Cola-war continues to
consist of Coca-Cola and Pepsi-cola or if other brands, specifically Virgin-cola
have been able to gain a foothold in the market.

COCA-COLA VS PEPSI

According to Consumer Reports, in the 1970s, the rivalry continued to heat up

the market. Pepsi conducted blind taste tests in stores, in what was called the
"Pepsi Challenge". These tests suggested that more consumers preferred the
taste of Pepsi (which is believed to have more lemon oil, less orange oil, and
uses vanillin rather than vanilla) to Coke. The sales of Pepsi started to climb,
and Pepsi kicked off the "Challenge" across the nation.

2
In 1985, The Coca-Cola Company, amid much publicity, changed its formula.
Some authorities believe that New Coke, as the reformulated drink came to be
known, was invented specifically in response to the Pepsi Challenge. However,
a consumer backlash led to Coca-Cola quickly introducing a modified version
of the original formula (removing the expensive Haitian lime oil and changing
the sweetener to corn syrup) as Coke "Classic".
Overall, Coca-Cola continues to outsell Pepsi in almost all areas of the world.
Saudi Arabia, Pakistan (Pepsi has been a dominant sponsor of the Pakistan
cricket team since the 1990s), the Canadian provinces of Quebec and Prince
Edward Island and the U.S. states of Michigan and South Carolina are the
exceptions.
By most accounts, Coca-Cola was India's leading soft drink until 1977 when it
left India after a new government ordered The Coca-Cola Company to turn over
its secret formula for Coke and dilute its stake in its Indian unit as required by
the Foreign Exchange Regulation Act (FERA). In 1988, PepsiCo gained entry to
India by creating a joint venture with the Punjab government-owned Punjab
Agro Industrial Corporation (PAIC) and Voltas India Limited. This joint venture
marketed and sold Lehar Pepsi until 1991 when the use of foreign brands was
allowed; PepsiCo bought out its partners and ended the joint venture in 1994. In
1993, The Coca-Cola Company returned in pursuance of India's Liberalization
policy. In 2005, The Coca-Cola Company and PepsiCo together held 95%
market share of soft-drink sales in India. Coca-Cola India's market share was
60.8%.
Pepsi had long been the drink of Canadian Francophones and it continues to
hold its dominance by relying on local Québécois celebrities (especially Claude
Meunier, of La Petite Vie fame) to sell its product. "Pepsi" eventually became
an offensive nickname for Francophones viewed as a lower class by
Anglophones in the middle of the 20th century. The term is now used as an
historical reference to French-English linguistic animosity (During the
partitionist debate surrounding the 1995 referendum, a pundit wrote, "And a
wall will be erected along St-Laurent street [the traditional divide between
French and English in Montréal] because some people were throwing Coke
bottles one way and Pepsi bottles the other way").
Comedian Dave Chappelle starred in ads for both Coca-Cola and Pepsi, an act
which drew controversy. When referring to it in his show, Chappelle said, "I
can't even taste the difference: all I know is Pepsi's paying more right now, so it
tastes better."
Coca Cola has become a cultural icon and its global spread has spawned words
like "coca colonization", Pepsi Cola and its relation to Russia has also turned it
into an icon. In the early 1990s, the term, "Pepsi-stroika", began appearing as a
pun on "perestroika", the reform policy of the Soviet Union under Mikhail
Gorbachev. Critics viewed the policy as a lot of fizz without substance and as
an attempt to usher in Western products in deals there with the old elites. Pepsi,

3
as one of the first American products in the Soviet Union, became a symbol of
the relationship.

REVIEW OF LITERATURE

The Indian market for soft drinks is increasing. “India is becoming a warmer
and drier country. “Chilled drinks are becoming increasingly important.”
(Britvic Soft-Drinks Category Report 2006) However “Carbonated soft
drinks…have felt the negative impact of heightened consumer interest in

4
healthy eating.” “Consumer demand for healthier drinks led to a decline in
sales of carbonated drinks” (GMID)

INDIA CARBONATED SOFT DRINKS VOLUME 2001 – 2006 ( m LITRES)

The carbonates market peaked at 2003 with a rise of 10.5% from 2002 but has
been in decline since then. This market contains both the brands of Cola
analysed within this report.

Brand Shares of Soft Drinks 2005 %

Others 89.8

Virgin Cola 0.3

Brand

Coca Cola Pepsi Virgin Cola Others

Pepsi 2.7

Coca Cola 7.2

0 20 40 60 80 100
Coca Cola Pepsi Virgin Cola Others
Series1 7.2 2.7 0.3 89.8

Percent 5
Coca-cola is leading in terms of market share over both Pepsi-cola and Virgin-
cola. Virgin-cola has failed to gain a substantial share of the market at only
0.3% which is extremely low in comparison to Coca-cola at 7.2%.

Coca-cola currently is marketing the “Coke-side-of-life” campaign. This

campaign has been running since 2006. The campaign is a multi-platform
project running through various media. These include the re-launching of the
coca-cola website with emphasis on the new slogan and a new mass media
audiovisual campaign.

Pepsi-cola is focusing on the Pepsi-Max brand of cola . Pepsi-cola continues to

use opinion-leaders and portray the brand as an extreme experience. The “Max
your life” campaign uses actress Deepika Padukone as an opinion-leader.
Pepsi-cola continues to use a multi-medium campaign.

For a thorough and complete analysis of marketing strategy it was necessary to

analyse each part of the marketing-communications to show how each brand is
utilising each method. The marketing strategies consists of Advertising, Sales-
Promotion, Public-Relations, Personal-Selling and Direct-Marketing.

Advertising is “any paid form of non personal media presentation.” To analyse

the advertising techniques of each brand a marketing communication tool has
been used to compare the advertising aspect of each brand.

Coca-cola uses mediums such as television in order to advertise the latest

marketing campaign “the Coke-side-of-life” and tries creating a fantasy world
around the brand. This is clear in the television adverts that are broadcast. One
of the adverts creates a fantasy around the journey a bottle of Coca-cola takes
when it is dispensed through a vending machine.
Coca-Cola is raising the awareness of the brand through the advert, interest and
desire are created by the fantasy that the advert is based around whilst action is

6
suggested by the slogan “The-coke-side-of-life” at the end.
To analyse the advert primary research was undertaken in the form of a small
focus-group consisting of ten people.

All focus-group members believed; the television advert featuring the journey
of a coca-cola in a vending machine was advert was exceptionally or very
creative. 80 % also believed that the advert was exceptionally or very
entertaining with a 17 year old male commenting;

“This was the most original Coca-cola advert I have seen”.

100% of people questioned within this focus-group believed that the advert
lacked information about the product. 40% said that the advertisement was not
very persuasive. A male aged 32 commented;

“Not what I have known the brand image of coca-cola to be”

This view was shared by people aged 25+ whereas the age group 16-24
suggested that it was fresh and incorporated what they saw as Coca-cola. An 18
year old female said;

“Very creative and original.”

Pepsi-cola also uses television advertising. Awareness is created by the

presentation of the advert whilst interest and desire are created through the use
of an opinion-leader and action is created by the slogan “Max your life” at the
end of the advert.

The focus-group was requested to complete the same questionnaire as before

but in respect of Pepsi-cola.
Only 3 members of the focus-group believed that the advert was very creative in
comparison to all ten people who believed that Coca-cola’s advert was creative.
These responses came from young males. This may be due to the use of an
attractive model as an opinion-leader. The Pepsi-cola advert was no different to
the Coca-cola one in terms of information; all participants suggested that there
was a lack of information about the product. In terms of entertainment this
advert fell below the Coca-cola advert in the views of the participant’s. 25 year
old female commented;

“Its all the same, they use an attractive woman to tempt males,
there is nothing unique about it.”

7
This view was generally shared by the women in the group. Asked how
persuasive the advert was a range of responses were received. One response
from a 30 year old female;

“As modern-consumers we are more aware of products and advertising does not
affect us as much when it comes to Cola drinks. We choose the drink we like
the taste of.”

Sales-Promotion “consists of a diverse collection of incentive tools, mostly

short term, designed to stimulate quicker and/or greater purchase…consumers.”
It is also necessary to consider packaging and other incentives which are offered
by the brands in the short term.

The “Coke show” sales-promotion is currently running and part of the “Coke-
side-of-life” website has been created for this promotion. This promotion
encourages consumers to send in videos of what they see as the essence of
Coca-cola to be judged by professional movie producers. Coca-cola has made
use of the internet for short promotions such as the World Cup in 2006 and this
new campaign the “Coca-cola Show.”

Pepsi-cola have also made use of the internet to aid in sales promotion. The
“Max your life” interactive website targets consumers to increase sales by
providing incentives to buy a Pepsi. Pepsi-cola in addition teamed up with
Microsoft in creating a competition to win a new generation games console.
The use of opinion-leaders by Pepsi-cola has also been used as sales-promotion,
using model Deepika Padukone as a current figure-head for the Indian market
Pepsi-cola has been able to attract a male customer base. Pepsi-cola have long

8
been affiliated with the use of opinion-leaders such as David Beckham.

Both the brands of Cola have used packaging to increase short term sales; one
example of this was the use of packaging during the recent 2006 world cup.

Both Coca-cola and Pepsi-cola focused on football however both used different
methods, Coca-cola using innovative bottle design techniques and the Pepsi-
cola using an opinion-leader in footballer David Beckham.

The use of packaging has been a long running theme in the marketing-
communications-mix of each brand. Through packaging each brand has been
able to communicate with the consumer directly and allow them to send a
message to the consumer which may lead to direct feedback from the consumer.

“Public relations involves a variety of programs designed to promote and/or

protect…image” PR has become more important than ever, with heightened
consumer awareness there has been a need for each of the brands to project a
image which incorporates social responsibility as well as remaining committed
to their fundamental values.

Coca-cola takes public relations very seriously in that the public relations
impact is considered in every aspect of business decision. Although Coca-Cola
utilises many methods of PR, one of the dominant methods Coca-Cola has used
is to use sponsorship in order to:

• To connect with teens in an interesting and fun way

• To create unforgettable teen moments linked to “coca-cola”.
• To ensure that “Coca-Cola is viewed as making everyday life more
9
 interesting and fun
• To Communication the dynamic and leading attributes of the brand

Coca-cola maintains a positive relationship with the public by sponsoring global

events. As a result of positive PR Coca-Cola is the world’s most valuable brand.
Coca-Cola currently sponsors these following events.

• 2002 and 2006 FIFA World-Cup

• FIFA Women's World-Cup 1999, 2003
• FIFA Confederation-Cup 1999, 2001, 2002, 2005
• World Champions vs. FIFA All-Stars 2002, 2006
• FIFA World Youth-Championships 1999, 2001, 2003,
2005
• FIFA U-17 World-Championships 2001, 2005
• FIFA FUTSAL World-Championship 2000, 2004
• Blue Stars/FIFA Youth Cup 1999-2006
• FIFA/'Coca-Cola' World-Rankings

In order for Coca-cola to portray a responsible yet innovative brand image it has
been necessary to connect with the target-market. Through sponsoring events
which the target-market attends and adores Coca-cola has created an association
with the target-markets.

Sponsorship is also a major part of Pepsi-cola’s PR in India, Pepsi-cola was one

of the main sponsors of the Indian Cricket Team. Pepsi-cola continues to
maintain a heavy influence in sport and it is clearest seen in the use of opinion-
leaders. One example of this is the use of David Beckham as an opinion-leader;
the sponsorship deal is £2 million a year.

Although sponsorship is a major form of PR in the competitive world of the soft

drink market, there is also another aspect of PR which both the companies have

10
made use of. The ever-expanding communications tool; the Internet. Both the
brands have specifically designed websites in order to provide the consumer
with information and entice them to the brand.

Apart from sponsorship , the brands use the media to keep in touch with their
stakeholders. Through a mixture of press conferences, releases and other media
articles each brand attempts to befriend their stakeholders. Evidence suggests
that the brands within this report saturates the market with their brand image
and message, it remains the consumer’s prerogative however to which they
interpret as the brand for them.

Through research completed for this report it is clear that not all parts of the
marketing-communications are utilised by the brands in this report. Both the
brands have analysed the most effective way of communicating with their
target-market and shareholders and because of this their marketing campaigns
have been streamlined. Therefore what is clear from the research is that direct-
marketing and personal-selling are two methods not utilised within this industry.

However it is very important to consider that the brands may use the methods of
personal-selling and direct-marketing when it comes to b2b (business to
business) transactions. Predictably marketing techniques used to promote a
brand to consumers differ vastly from b2b promotion.

Word-of-mouth is also very important, although not directly in the marketing-

communications. Word-of-mouth can make or break a brand; the brands
discussed in this report attempts to convince consumers that they are the best.
In this case marketing campaigns may not help a brand image if the reputation
is perceived as poor. In order for brands to prosper it is necessary to maintain
good public relations which in turn will achieve positive word-of-mouth
promotion.

11