Coursework Project: Coca-Cola Versus Pepsi-Cola [‘B+’, 2001]

Introduction

In this project, I will be looking at these two similar products competing within the same market. I will attempt to find out which is the more successful, and explore the reasons behind its success; I will also include any future product developments which the company could look at. [^]

COCA-COLA: CURRENT SITUATION

Target Audience

Coca-Cola’s target audience spans basically the entire soft-drinking population. It is a firmly established brand, a classic, that appeals to young and old alike. It is appealing to youngsters as it has retained its ‘COOL’ image, yet appeals to adults because of its ‘family favourite’, ‘classic original’ status.

Current Situation & Market Share

Coca-Cola has long been at the – or near the – head of the soft drinks market. Established in 1886 (August 5th) by Dr John Styth, its main rival has been Pepsi – developed in 1898, August 28th, by Caleb Bradham – for many years: the two battling it out for the title of ‘market leader’.

As we can see from the 1999 Top-10 US Soft Drink Companies and Brands statistics, Coke Classic leads Pepsi-Cola, holding a 20.3 percentage share of the market to Pepsi‘s 13.8% in the branded soft drink market and 44.1% vs 31.4% company share.

In the 15 US Markets stats, we can see that Coke leads Pepsi in 11 of the 15 major US markets (1997).

From these figures we can safely say that – for the time being – COCA-COLA IS THE MARKET LEADER. Coca-Cola is well known to its target audience through its extensive advertising campaigns and has a stable position at the head of the market (% changes in each category are minimal: it is a flat, steady company). [^]

Notes on Coca-Cola’s Three-Facet Model:

• Aspirational/intrinsic value:
  brand image – ‘cool’ amongst kids, but established, classic, and popular enough to retain popularity amongst teenagers
  implications of drinking coca-cola – ready to pay for quality, socially-accepted, youthful; also a ‘family favourite’
• Tangible value:
  appearance – brown fizzy drink with bubbles
  taste – fizzy, caffeinated soft drink
  logo/slogan – ‘The Real Thing’, ‘Always Coca-Cola‘
  packaging – red, cylindrical drinks can [with some black and white]
• Core value:
  carbonated soft drink [^]

COCA-COLA: PRODUCT DETAILS

• PRODUCT:
• Size: average, cylindrical canned drink size and shape
• Packaging: aluminium can with ring-pull
• Colour: red [foreground] and black [bottle, faded into background] predominantly, with some white [logo and brand]: distinctive and traditional
• Brand Image: original, classic carbonated soft drink at upper end of the market
• Logo: ‘The Real Thing’, ‘Always Coca-Cola‘ writing and drinks bottle
• Copyright/Patent: not outlined on can
• Guarantee: not outlined on can [address for internet site given and distributing company details for comments]
• PRICE:
• Pricing Strategy: premium, high-end of market — it is a brand leader and can therefore afford to be priced comparatively highly
• Actual Price: dependent upon outlet; usually 50p from vending machines and roughly 40p from newsagents
• PLACE:
• Retail Outlets: all good suppliers [owing to popularity]
• In-Store Positioning: well-placed [usually roughly eye-line vision] in a predominantly-positioned refrigerator/freezer – SERVED ICE COLD
• Times Available: opening hours of retail outlet
• Use of Agents, Licensing etc: no individual selling, freezers may be decorated with Coca-Cola-themed stickers
• PROMOTION:
• Advertising: extensive television campaigns, usually coinciding with the heat of summer or the famous coca-cola Father Christmas “Holidays are coming…”; winter advertising slots are very common in England; occasional magazine/newspaper advert; fairly regular gimmicks to generate publicity, demonstrated by recent ‘Coca-Cola Card’ promotion [^]

COCA-COLA BOSTON MATRIX COMMENT:

Shows Coca-Cola‘s position as the company’s cash cow, funding the promotional costs of the ‘rising star’, Dr. Pepper (massive advertising campaign), and investing in the ‘problem child’, Cherry Coke, which hasn’t enjoyed the same level of success as other products while still being a promising brand (lots of potential). Minute Maid Juices are shown as the ‘dog’ of the company’s portfolio, as they haven’t taken off over here in England: I was unaware of their existence until researching this product – as was the owner of ‘Vernons Stores’ (the local shop where I used to work). [^]

COCA-COLA LIFE-CYCLE COMMENT:

Coca-Cola was invented well over one hundred years ago, so it is obviously an established, successful brand. However, although it currently continues at the head of the soft drinks market, it will not be around forever: it will be replaced one day, or it may continue as a brand but decline in popularity; this explains my decision to put it near the end of maturity. It has gone from ‘totally innovative’ to ‘classic original’ – where else can it go from here? Will it forever live on as an endearing classic drink? [^]

COCA-COLA: CURRENT INITIATIVES

Coca-Cola is currently employing a ring-pull collecting initiative for exchange over the internet: ‘Coke Auction’ (whereby you can swap ring-pulls for prizes). This initiative has had an advertising campaign backing, increasing consumer awareness. I think this is a good business decision because it will encourage people to buy coke when choosing a drink (because of the potential rewards on offer), and also make Coca-Cola the ‘hip’ drink amongst the HUGE market of all ages (but especially the younger generation – ensuring future success) and of all abilities, who “surf the ‘net”.

As regards products, the Coca-Cola Company hasn’t launched any new varieties lately and, looking through their various Internet websites, I don’t think they are planning to launch any. However, looking at the products supplied from its European territories [there are numerous products available in other parts of Europe which are currently unavailable here), there is the potential for an expansion of its portfolio in England. This could be an option for the company. [^]

PEPSI-COLA: CURRENT INITIATIVES

This is another area where Pepsi is trailing Coke: while Coca-Cola ring-pulls can be used to log online and bid for items at the Coca-Cola website [an extremely good initiative, promoting and encouraging the drinking of Coca-Cola], Pepsi-Cola is dragging its feet with much more mundane incentives. The latest – and most exciting for a while – offer was a comparatively pathetic ‘Pepsi Radio’ (which also has time, day, date, and stopwatch facilities) designed to be worn by a sports coach/keen sports enthusiast. With celebrity football superstars David Beckham and Roberto Carlos (English and Brazilian internationals) endorsing the product, it sounds like it ought to have been a winner. However, although football fans are in the majority, how many people would collect so many tokens plus pay money for a TIMEPIECE? Not many people are that interested to persuade further drinking of Pepsi. This is an area which could be improved upon.

With regard to the latest products, Pepsi-Cola company hasn’t released any new products for some time (Pepsi Max – years ago – being the last initiative). Glancing through the various websites, it doesn’t appear to be planning any new drinks/further product development in the near future. This could be an option for Pepsi, as its European product portfolio is large: it could expand its range within England and take the initiative from Coca-Cola. [^]

PEPSI-COLA: CURRENT SITUATION

Target Audience

As with Coca-Cola, Pepsi‘s target audience is the soft-drinking mass market. Through its widely-acclaimed advertising campaigns – often using famous American-based celebrities, such as Fred Savage, Kirk Cameron, and Joe Montana – it is well-known to the market. Pepsi-Cola is very popular amongst youngsters but, in my eyes, appears to be more of an ‘Americanized’ drink and doesn’t have the ‘classic original’ feel of Coca-Cola because – although well-established – it was not the original, ground-breaking product that Coca-Cola was, and has not tried to be the ‘family favourite’: it is destined to be known as Coke‘s challenger.

Current Situation & Market Share

Pepsi-Cola – both the company and the soft drink brand – is the challenger to Coca-Cola‘s dominance, trailing Coca-Cola in terms of both company and soft drink market share: both statistics showing a stable, but second-placed, market position, as the % change is very little. Pepsi also trails Coca-Cola by 11 to 4 in 15 major US trading states.

From these figures it seems fair to suggest that: PEPSI IS THE SECOND-PLACED PRODUCT ON THE MARKET. [^]

PEPSI-COLA: PRODUCT DETAILS

• PRODUCT:
• Size: same as coca-cola: average, cylindrical canned drink size and shape
• Packaging: aluminium can with ring-pull
• Colour: blue (foregrounding), white (logo/brand name), red (logo): their original colours
• Brand Image: challenger to ‘Real Thing’: perhaps viewed as an inferior product
• Logo: a sort of split sun [and the name ‘PEPSI’]:
  

  

• Copyright/Patent: not outlined on can
• Guarantee: internet address given/distributing company address for future comment
• PRICE:
• Pricing Strategy: premium (in that it’s an expensive product); parity (match Coca-Cola)
• Actual Price: again, dependent upon outlet, but similar to – if not the same as – Coke’s ~ 50p from vending machines/40p from newsagents
• PLACE:
• Retail Outlets: all good suppliers, equally as many as Coke’s [popularity]
• In-Store Positioning: usually in same aisle/adjacent aisle to coca-cola in the drinks fridge (in line with customer expectations)
• Times Available: opening hours of retail outlet
• Use of Agents, Licensing etc: again, no individual selling, fridges occasionally decorated with Pepsi-themed stickers (to a lesser extent than Coca-Cola)
• PROMOTION:
• Advertising: virtually zero original Pepsi adverts here in England: there was a boom of advertising through TV/newspapers/magazines with the arrival of PEPSI MAX, ‘Live life to the MAX’. From what I can gather, advertising is centred in America, rather than over here (hence its ‘Americanized’ image and feel); again, gimmicks are used to generate publicity, demonstrated by recent ‘Pepsi Radio’ offer [^]

Notes on Pepsi-Cola’s Three-Facet Model:

• Aspirational/intrinsic value:
  brand image – always going to be in the general subconscious that it is an imitation of ‘The Real Thing’: it will always be the challenger.
  implications of drinking pepsi-cola – more emphasis on youth – rather than ‘family favourite’ – demonstrated by icons such as basketball star Shaquille O’ Neal endorsing it.
• Tangible value:
  appearance – brown fizzy drink with bubbles
  taste – fizzy, carbonated soft drink with caffeine
  logo/slogan – always changing as it tries to fit the national mood better, e.g. “Be Young, Have Fun, Drink Pepsi“ (’93), “Nothing else is a Pepsi“ (’95)
  packaging – blue, cylindrical drinks can
• Core value:
  carbonated soft drink

COMMENT ON PEPSI-COLA’S 3-FACET MODEL VS COCA-COLA’S 3-FACET MODEL

Although many aspects of the model are identical, the striking difference is, once again, the image and slogan of Pepsi: Pepsi uses youth icons to endorse their products – appealing to niche sections of the general market – whereas Coca-Cola (“Holidays are Coming…”) advertises to a wider range of potential consumers. Pepsi doesn’t have a fixed jingle-based logo (Coca-Cola = “The Real Thing”, “Always Coca-Cola”): Pepsi tries to compensate for its lack of originality by changing its slogan to try and capture the national mood best ~ it will never be a settled, classic drink like Coke. [^]

Comment on Pepsi-Cola’s Life Cycle:

I have put Pepsi-Cola in the same position as Coca-Cola, as they have both been around for over a century; i.e. they are firmly established market dominators. As with Coca-Cola, Pepsi has gone into the worldwide consciousness as ‘the drink to be seen with’. It is obvious that no further alterations are going to be made to the original versions of Coca-Cola and Pepsi: the respective companies continue to produce ‘offspring’ drinks (i.e. different forms of original, ‘diet…’, ‘…max’ etc), while using Coke/Pepsi as their flagship branded drinks. [^]

Comment on Pepsi-Cola’s Boston Matrix:

Pepsi-Cola’s position as the ‘cash cow’ of the Pepsi-Cola Company is shown here funding the efforts to improve sales performance of Cherry 7-Up [the ‘problem child’] and the ‘rising star’, Mountain Dew – which currently holds an impressive, and still rising, 7.4% share of the soft drink market. In England especially, all three other-branded products would reap the benefits of more advertising (if only in that it would raise consumer awareness of their existence). [^]

FINDINGS AND CONCLUSIONS:

Comment on ingredients:

As you can see, the ingredients given on the back of the can are EXACTLY THE SAME (albeit in a slightly different order). Of course, there will be some secret ingredients that aren’t listed by each company, but it is easy to see why the layman will not be able to correctly identify the drink as one or the other. Therefore – if the taste is very similar, if not identical – there must be other factors for the big differences in market share of a.) the company, and b.) the actual drink… again, I think it is down to the brand image differences.

WHICH IS BEST?

Taste-wise there is little difference: most people are impartial. Price-wise there is little – if anything – to choose. Image-wise: despite all Pepsi’s efforts – and critically-acclaimed advertisements – Coca-Cola wins. Coca-Cola, ‘The Original and Best’, appears to be held in higher general regard than Pepsi-Cola. Although studies in 1982 provided undeniable evidence that Pepsi is preferred to Coke in unbiased trials, Coca-Cola remains the market leader ~ sitting proudly at the top of the market share tables, untroubled by its biggest competitor’s efforts.

VERDICT: COCA-COLA.

WHAT NEW INITIATIVES CAN THEY USE? ~ COCA-COLA

The current Coke Auction is proving to be popular and effective for the company at the minute, and looks set to run and run. As shown by their expansive product portfolio, the Coca-Cola Company has an extensive range of soft drink products; they are leaders in the market. Having cracked this market, perhaps they could enter another suitable market – such as ice creams, lollies – where their current brand values could be carried over: so many people respect the company – and are loyal towards it – that they wouldn’t have to try so hard to promote the product and persuade people to buy it. Of course, if they botched up the launch, it would reflect badly on their other products; a lot of careful planning would have to go into the Research & Development and Marketing areas. Perhaps the company could introduce a new product in the soft drink market (new and revolutionary) OR further advertise its existing products: this would really cement its position at the head of the market.

SUMMARY:

• NEW soft drink product
• ADVERTISING of current soft drinks
• Attempt to enter a NEW MARKET
• – Coca-Cola Company should look to build on its current success, not become complacent and allow competitors back into business

WHAT NEW INITIATIVES CAN THEY USE? ~ PEPSI-COLA

Pepsi-Cola is always going to struggle to dethrone Coca-Cola, so “if you can’t beat ’em, join ’em”! By this I mean image-wise: perhaps Pepsi-Cola should change its style so that it fits in with the ‘family favourite’ ideal, appealing to as large a market as Coke. Also, in places other than America it would benefit from having a less ‘Americanized’ feel. Pepsi-Cola – if they are ever to overthrow the Coca-Cola empire – must seize the initiative and take calculated risks. Completely new, innovative products within the soft drink market – coupled with their excellent advertising campaigns – would alert people to the fact that Pepsi can think for itself. They could also employ the same other tactics as I suggested for Coke, BUT Pepsi must get there FIRST ~ they must be seen as the innovator, not the imitator.

SUMMARY:

• Change IMAGE
• Take RISKS
• Get there FIRST (before Coca-Cola):
  – NEW product
  – NEW advertising
  – NEW markets
• Pepsi-Cola must be decisive, calculated, image-conscious and innovative

PREDICTED MARKET SHARES [future]:

If things continue in their current vein – without any major new innovation from Pepsi-Cola – there can only be one winner: Coca-Cola. The market shares of the respective companies are fairly stable at the moment – reflected by their relatively flat performance percentages – and will continue to be so in the foreseeable future.

CONCLUSION:

Coca-Cola has won the war for now, and seems safely settled on its perch at the top of the market. [^]