Investigation Analysis of Pepsi versus Coke - Case Study Example

Case Analysis on Pepsi v. Coke Name Course Tutor Date: October 21, 2012 Outline I Introduction II History of Coke and Pepsi III Mission, Vision & Values Mission statements Vision statements- Values and philosophy- IV Strategies of communication and packaging of their products Communication Packaging design V Global Market Share Opportunity Reference list Introduction Pepsi and Coke are the two major players in soft-drink industry and for many years both brands have been into an intense competition. Indeed, both products continually and aggressively competing with each other as they kept rejuvenating their market through their various product, distribution, price, and promotion strategies. In order to gain competitive advantage, both Pepsi and Coke resort into more tactics, innovations just to conquer the market. For many years, people witnessed their individual weaknesses and strengths as well. Between the two products, Coca Cola was the first being introduced in the market. As early as 1886, the people already had the taste of Coke and they identified it as something so good and so pleasant. Throughout the years, Coke tried several product innovations in terms of flavor and types. In 1903, Pepsi was finally introduced to the people and from then on the two products began to fuel the competition. This paper aims to explore on the strengths and weaknesses of two top cola products in the market Coke and Pepsi. History of Coke and Pepsi In early 1886, Coca Cola was invented in Atlanta, Georgia by a pharmacist John Pemberton and immediately sold to the public through soda fountain placed at Jacob’s Pharmacy. After a year, the product was sold to Asa Candler for $2,300; in 1890 it became one of the most popular fountain drinks in America. Due to Candler aggressive marketing campaigns and promotions, Coke was able to register a sales growth by over 4000 percent just for its first ten year period in the market. Thus, the success of Coke was significantly fueled by its effective advertisements (Doris, 2006). Eventually, Candler decided to sell Coke to different individual bottling companies across the United States and Canada. This decision boosts the public especially the city dwellers to love carbonated beverages. Finally, Coke has been commercialized as bottled soft drinks that can be ordered in many restaurants, stores, and lunch counters. Meanwhile, Pepsi was experimented by Caleb Bradham in 1893 and being sol only at soda fountain in his own drugstore. Its first name was Brad’s drink and later renamed as Pepsi Cola after combining pepsin and cola nuts as its major flavor. The popularity of Pepsi flourished in 1902 and that year Bradham decided to give his full energy and make it as a full business. Pepsi Cola trademark was issued by U.S. Patent Office in Washington D.C. (Pepsico, 2012). Its first formal year in operation was in 1903 enabling them to sell 7,968 gallons. In 1904, its operation began to flourish and its first bottling franchises were established in North Carolina followed by other bottling plants. Mission, Vision & Values Mission statements:- Coca cola mission statement is to refresh the world, inspire moments of optimism and happiness as well as create value and make a difference. While Pepsi mission statement is to become the world premier consumer products in foods and beverages industry with the intention of rewarding investors adequately. They also have a statement regarding the reward of employees and partners. They strive to keep ‘honesty, fairness and integrity’. The two companies have different mission statements which target different issues of the society. Vision statements- Coca cola vision statement encompasses a framework of 6Ps that guide them in achieving sustainability and growth. These include people, partners, productivity, portfolio, planet and profit. In the statement they indicate that Coca cola is a good workplace where employees are inspired to do their best. They also indicate that their intention is to provide quality products to satisfy people’s needs. They also intend to maximize profits for the sake of shareholders as well as become responsible citizens of the world. The other two Ps of partners and productivity stands for having a good network of suppliers and customers as well as becoming highly productive to be able to feed the world with good brands. Pepsi has a simple vision statement which states that their responsibility is to improve life in the world for the better tomorrow. They focus on the environment, social and economic factors of the stakeholders. Values and philosophy- Coca cola values include high integrity, collaboration with the rest of the world, having good leadership, are accountable, be committed in delivery of environmental friendly products, have diversity in employment and quality products. This is defined in their culture and vision 2020. Pepsi values entail a commitment to deliver sustained growth by empowering people, being responsible and trusted. This is achieved by caring for stakeholders as well as environment. They market products which are of good quality and their marketers are informed of the need of telling “the whole story” rather than adding marketing gimmicks. Like coca cola they also strive to employ people of different diversity as well as respect other cultures. Key Success Factors Global Presence Right now, Coca-Cola already made its name across the globe and it is due to their aggressiveness in expanding business internationally and continuously giving emphasis on product development. Coca-Cola Company understands that the tastes and demands of people are rapidly changing and it is necessary for them to overcome all these challenges. Indeed, business strategies significantly contribute to their success particularly in expanding internationally. Among other functions, Coke also gives emphasis on their financial performances and overall company image. It is part of their objective to be recognized as international business and be able to lead the market share locally and internationally as well. The company is aware about the growing demands for fruit and diet drinks in the market and this fact serves as a big challenge. In this regard, the company has to develop new marketing strategies and messages to the market. They need to set on new directions and prepare the company for new environment. Along with their plans on how to overcome the challenges, the company continues in their expansion and branching out internationally. These moves led the company to come up with new product lines along with their response to various health issues. In settling all these concerns, Coke decided to produce alternatives for their products and introduce additional lines like bottled water. Right now, Coke is selling for about 400 different brands of soft drinks including teas, sports drinks, fruit juices, and coffees. They produced certain brands based on the local demand of their target market. In fact Coke manages top five soft drinks in the world such as Diet Coke, Coca-Cola, Sprite, and Fanta. In the international markets, they are selling Schweppes, Crush, and Dr. Pepper. Coke believes that their international markets are significant key drivers for their revenue growth. Throughout the years, their sales registered growth in major areas like China, Russia, Egypt, Pakistan, and North Asia, Middle East, and Eurasia. For the PepsiCo, their international markets continue to strengthen and expand as they continue developing new products that are tailored to the taste of local consumers. Throughout the years, Pepsi has been known for acquiring products in different parts of the world just like ho they acquired Star Food snacks in Poland and Duyvis nuts in Netherlands. Thus, Pepsi’s revenue growth is dependent on international operations particularly with their snack brands like Lay’s, Doritos, Walkers, Ruffles, Quaker brands, and Sabritas. Among their popular beverages are Pepsi, Mirinda, Tropicana, 7up, and Mountain Dew that are mostly being managed by independent bottlers, retailers, and distributors. Pepsi beverages registered sales growth in major countries like Argentina, China, Russia, Middle East, and Venezuela. Strategies of communication and packaging of their products In terms of bottling structure, both Coke and Pepsi rely on bottling franchises for the distribution of their products. Overall, both products are benefited from outsourcing distribution and bottling. As beverage companies, they give high emphasis on bottlers since it is necessary for them to ensure that all their products are bottled and distributed properly. Through franchise agreements, both companies could give more focus in controlling their brands and not affecting much their management resources and financial capital (Doris, 2006). In the case of Coke and Pepsi, both companies are actively using their own marketing and sales organizations in the promotions of their soft drinks. They have their own production standards in producing their beverages (ICMR, 2008). This time, Coca-Cola is planning to acquire the largest share of Coca-Cola Enterprises. In the same manner, PepsiCo plans to acquire two of their largest bottlers Pepsi Americas and Pepsi Bottling Group to answer for the growing demand in distribution. In assessing the bottling structure of the two companies Coke and Pepsi, it shows that both are vertically integrated. These two beverage companies manufacture the products, distribute, and manage all the marketing efforts. Both companies are now moving on different directions, unlike years ago that they only have control on marketing and product development and leave all the logistics responsibilities to their independent bottlers (The Coca-Cola Company, 2012). Their bottlers are the one manufacturing the products mostly those from the category of carbonated drinks and distributing the products through direct store delivery directly down to retail establishments. For Coke, they believe that by acquiring the bottler could give them greater flexibility in distribution as they will have the chance to directly supply to stores (Wernick, 2011). Furthermore, owning the bottler could allow them to deliver their products through warehouses in much cheaper rather than method of direct store delivery. Meanwhile, it is great advantage for Pepsi if they would later owns two of their big bottlers that will allow greater flexibility. In such decision, Pepsi could further control the distribution, development, and marketing of their new products. Acquiring two of their bottlers could give them the chance to negotiate directly with retailers instead of having partnership with the representatives of independent bottlers (Girard, 2008). Pepsi believes that by integrating beverage businesses will allow them to further develop their products as well as their packaging. Pepsi understands that beverage companies need to be aggressive in responding to changes in the market. Indeed, by facing the retailers directly could give them the chance to further grow their business and maintain their position in the competition. By owning these bottler companies, beverage companies could have direct control of their distribution and cut down their costs with middleman who took advantage over their beverages. Communication In soft drink industry, Pepsi and Coke have been rivals for a long time since both are trying to gain market leadership for carbonated beverages. Indeed, both companies are battling in their advertisements in video and prints just to conquer the market share. For Coca-Cola, their main objective is to elevate public’s consumption of it beverages. The company aims to offer their products in various outlets by starting aggressive advertisements and branding. Coke wanted their beverages be made available in different schools’ outlets and vending machines. Furthermore, they wanted to make their products available even at gas stations, major restaurants, and grocery stores. In fact, Coke has partnerships with several food chains along with its efforts to make the product being highly promoted in Internet banners, TV commercials, print ads, product placements, and other major sponsorships. For Coke, advertising strategy is very important to create consumer awareness. The company ensures that all their campaigns reach various outlets such as radio, billboards, television, magazines, newspapers, and Internet. In all their product launches, they want to ensure that advertisements were placed effectively on major networks. Through this process, consumers could easily have an access about the product. Along with their advertisements, the company ensures for their massive promotional activities such as by giving product samples in major events. Coke understands the high costs of making advertisements; however, they believed that it is the most effective way to reach all their potential customers. Thus, Coke is also using line promotions for their other campaigns and marketing activities. Indeed, the advertisements of Coke made huge impact on the public within and outside America. In fact, Coke used the image of Santa Claus as an old man wearing white and red clothes similar to the characteristic of Coca-Cola. Meanwhile, Pepsi is like other companies believing on the impact of new innovated advertisements. Pepsi is focusing more on the youngsters as it keeps maintaining its position as leader in black color beverages. Clearly, their main objective in establishing advertisements is to retain their old consumers and attract new customers. The company believes that soft drink industry is a huge field so there is always great opportunity for them to catch more customers. They understand that the market is changing rapidly and there is a need for them to always make something new especially in their advertisements and campaigns. It is part of their objective to compete with Coca-Cola and gain more market share in beverage industry. Pepsi wanted to create consumer awareness and make their products more popular to youth. Furthermore, Pepsi wanted to set an image to their customers that their brand doesn’t have failing attitude (Pfanner, 2011). It can be observed that in most of Pepsi’s advertisements are directed toward the youth who are energetic, enthusiastic, and possess a never failing attitude. In promoting their ideas about the younger generation, the company always ensure eye catching concept on their advertisements. To further elevate the impact of their advertisements, Pepsi launched their campaigns to media such as TV channels, prints, newspaper, and Internet advertisements along with their sponsorship on various sports events. Packaging design Pepsi intends to use its expertise to rebrand its leading healthy brand, Quacker, in order to improve its design and packaging. This aims to make the products more attractive especially to children. Pepsi seeks to improve on the flavors of its oatmeal drinks and biscuits as well as porridge. Coke and Pepsi have been going beyond their scope of innovation in order to adapt their brands to markets abroad. For instance, Coke launched Sprite Tea, which is a mixture of green tea with Sprite, whereas Pepsi used herb-based sweeteners. Coke and Pepsi redesigned their packages to meet local demands. The use of small recyclable glass bottles increased access to poor markets (Yoffie & Kim 2011). Coca cola has been re-inventing their packaging since 1894 when they started packing in glass bottles. Their package designs photographs have been shown below in the pictures containing the periods. Currently Coca cola company is packaging in containers which are environment friendly that is in plastics and cans. At time they package their products to mark some events which are associated with coca cola like Olympics and the world cup. The aim of changing packaging is to be environment friendly unlike the current packages are reusable. Earlier, the beginning of this century the company introduced packaging that aimed at reducing the cost and the weight of the container. Although this did not result into a great green environment improvement it was equivalent to planting trees in an 8,000 acre piece of land. The current packages have improved on this and they are environment friendly since they are light and reusable. Pepsi has adapted similar approach in packaging their products by adapting 5 R approach in packaging their products. The 5 R stands for reduce, renewable, recycle, remove environmental sensitive materials and promote reuse. Their packaging is environmental friendly like coca cola. The photographs below show the trend in their packing. This packaging has made these two companies hold 75% of the world market in the beverage industry. The evolution of their packing designs has continually made them maintain the large market share. Global Market Share Opportunity The opening up of new markets in Asia and Eastern Europe provided an excellent stimulus for new demand. The burgeoning middle class market in China and India provided an excellent opportunity for cola wars as it took new dimension. Both companies expressed commitment to invest heavily in China over the following decades. In 2011, Coke announced its plans to pump $ 4 billion of foreign direct investment in China. This is in addition to $ 3 billion in 2008. Coke’s sales from global market formed 80 percent of total sales. Pepsi’s global sales were approximately 50 percent of its total sales. Due to its little success as compared to Coke, Pepsi focused on penetrating new markets. Both Coke and Pepsi have been going beyond their scope of innovation in order to adapt their brands to markets abroad. For instance, Coke launched Sprite Tea, which is a mixture of green tea with Sprite, whereas Pepsi used herb-based sweeteners. Coke and Pepsi redesigned their packages to meet local demands. The use of small recyclable glass bottles increased access to poor markets (Yoffie & Kim 2011). From 2005 onwards, both Coke and Pepsi stepped up their quest for use of other sweeteners. The products Pepsi Throwback and Mountain Dew Throwback contained natural sugar rather the usual high-fructose syrup. Both Pepsi and Coke considered using Stevia, some kind of an herb perceived to contain no calories, and could serve as natural sweetener. Both Coke and Pepsi recognized that non-carbonated drinks would spur on their growth because of their growing popularity. Both companies diversified their product mix to include juices and juice drinks, energy drinks, bottled water, and tea-based drinks. Reference List Angelkov, V 2011, Pepsi’s Strategy, viewed 25 October, 2012, from: http://www.mcafee.cc/Classes/BEM106/Papers/UTexas/2003/Pepsi.pdf Doris, J 2006, Advertising Strategies of Coca Cola, viewed 25 October, 2012, from: http://ibscdc.org/Case_Studies/Marketing/Marketing%20Strategies/MKS0084C.htm Girard, R 2008. Coke and Pepsi’s New Marketing Strategies, viewed 25 October, 2012, from: http://www.alternet.org/water/79741/ ICMR , 2008, Differentiation Strategies of Coca-Cola, viewed 25 October, 2012, from: http://www.icmrindia.org/Short%20Case%20Studies/International%20Marketing/CLIM015.htm Pepsico 2012, Pepsico Mission and Vision, viewed 25 October, 2012 Pfanner, E. 2011, Pepsi’s Branding Strategy. viewed 25 October, 2012, from: http://www.nytimes.com/2007/02/18/business/worldbusiness/18iht-ad19.4633528.html The Coca-Cola Company 2012 Mission, Vision & Values < http://www.thecoca-colacompany.com/ourcompany/mission_vision_values.html> Wernick, A 2011, Coca-Cola Marketing, viewed 25 October, 2012, from: Yoffie, D B & Kim, R 2011, Cola Wars Continue:Coke and Pepsi in 2010. Harvard Business School , pp. 1-22. Read More