CASE STUDY

Answer All Questions (20 Marks)

Pepsi and the Cola Wars The cola wars began somewhere in the mid 1950s. The main players in the war were Pepsi and Coca Cola. The two companies had been in rivalry ever since Pepsi came out with its first cola. But the rivalry reached its zenith in the 1980s and 1990s. The main point was neither company had a cost advantage. Hence promotion was the main way of competing. In the 80s Pepsi started coming out with campaigns that undermined Coke. For example, a Pepsi ad came out which showed a group of retirement home people dancing to rock n roll when they get the wrong delivery of a Pepsi crate instead of Coca Cola. It also used celebrity advertising vigorously. This gave Pepsi a lead in the market, though short lived. In the 1990s Coca Cola was beating Pepsi by huge margins again. The war was quite cut throat with Coca Cola doing everything possible to outrun Pepsi. This included stealing Pepsis bottlers, hoarding of Pepsi bottles and creating ads that hinted at ridiculing the Pepsi brand. In many countries Coca Cola were forcing retailers and bottlers to boycott the Pepsi brand. Upon learning about this Pepsi filed several anti-competitive cases out of which they won around 70. Yet, at one stage of the war Pepsis market value fell to less than half of Coca Colas market value. Coca Cola was and is still leading in when it comes to market share of its cola brand. The only way Pepsi could fight back was through diversification. It started spreading its wings to include sports beverages, varied versions of the Pepsi drink and non-carbonated beverages in its portfolio. It started considering itself as a complete beverage company. The diversification further happened to include snacks and food items like potato chips and oats. Diversification really helped Pepsi to improve its falling stand in the market not only in the local markets of America and Europe, but also in its international markets where Coke is leading the show.

Questions for Discussion: B.

What trends in consumer preferences has PepsiCo sought to satisfy?