PepsiCo vs.

Coca-Cola in India, Russia and South Africa

1. Short company history

1.1. Coca-Cola

Coca-Cola was created in 1886 in Atlanta, Georgia, by a pharmacist called John Pemberton,
who was a morphine addict. He sold the syrup for different treatments. It was transformed
several times before Asa Griggs Candler, a business man who bought Coca-Cola and
transformed it from an invention into a business, added carbonation. He registered it as a
trademark in 1887. Due to his marketing tactics, by 1895 it was widely sold in every state and
territory of the United States. In 1899 it started franchising, and quickly reached 370
franchisees by 1910.

By 2003, Coca-Cola became the largest company in the world to manufacture, sell or
distribute non-alcoholic drinks, with a portfolio of more than 400 beverage brands, more than
70% of its income coming from outside the United States. On the basis of a research about
future earnings (considering revenues that could be credited to the brand, assessment of brand
strength), market leadership, stability, global reach and ability to cross geographical and
cultural borders, Interbrand was able to rank Coca-Cola as number 1 on their Global Brand
Scorecard, with a brand value estimated at $70.45 billion. Coca-Cola became the world’s
most powerful brand.

Coca-Cola began its international expansion in 1906, when it started opening bottling plants
in Canada, Cuba and Panama, and by 1920 they reached a number of 27 countries around the
world, to host their bottling plants, and became available in other 51 countries. However, its
quality was not very consistent, its volume was quite low and advertising was not really
effective, being faced with challenges related to language, culture and government
regulations. But Coca-Cola wanted their products to be available everywhere. Although they
were faced with barriers, they managed to achieve dominant global market share by taking
advantage of the Second World War and proving their patriotic commitment by offering a
bottle of Coca-Cola for five cents for every man in uniform, wherever he was. It was a great
strategy of public relations, which resulted in their status of military supplier. Thus, the
government offered subventions to build bottling plants around the world to serve the
fighting troops.

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Its headquarters is located in Atlanta, but they have divisions in more than 200 countries
around the world.

1.2. PepsiCo

Pepsi-Cola is another carbonated drink, invented in 1890, by a another pharmacist, Caleb

Bradham, living in New Bern, North Carolina. It was first called “Brad’s drink” and it was
made of carbonated water, sugar, vanilla, rare oils, pepsin and cola nuts. As the drink became
more and more popular, it was renamed Pepsi Cola, due to the pepsin and cola nuts used in
the recipe. Bradham created the Pepsi-Cola Company in 1902. The name was trademarked in
1903 and it also got its first logo, designed by an artist who was one of Bradham’s neighbors.
After many years of ups and downs, Bradham lost Pepsi Cola, due to the fluctuations of sugar
prices, which he believed would rise, but they fell instead, so he was left with a huge
inventory of overpriced sugar. Pepsi Cola went bankrupt in 1923 and it was bought by the
Loft Candy Company in 1931. It merged with Frito-Lay Inc. in 1965 and thus PepsiCo was
created. It has then expanded to a wider range of products, food and beverage brands,
acquiring and merging with different companies (Tropicana in 1998, Quaker Oats in 2001,
etc.)

At this time, PepsiCo’s products are distributed in more than 200 countries, with sales
generating net revenues of more than $43 billion, thus considered the second largest food and
beverage business in the world.

The company was first incorporated in Delaware but relocated in 1970 to Purchase, New
York, which is currently the location of its headquarters.

Its primary competitor on the market is the Coca-Cola Company. Although Pepsi is usually
second to Coke in sales, it outsells Coke on some markets.

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2. Internationalization and globalization strategies most employed by each company

Internationalization is a process through which different products and services are adapted to
different local cultures and languages.

One strategy used by both companies is growth through acquisition or exclusive contracts
with franchise bottlers or independent bottlers and distributors. Another strategy worth
mentioning for both companies is broadening the family of beverage brands, to drive
profitable growth.

Another strategy they used was to involve in joint ventures with other companies (Nestlé),
who had the same business objective, to bring resources and use them together to reach their
goals. Coca-Cola participated with marketing beverage in aluminum cans, while Nestlé was a
well-known brand of tea. PepsiCo, as well, involved in joint ventures, one worth mentioning
is with Lipton, based on the same principles as the one between Coca-Cola and Nestlé. Their
main objective, for all 4 companies, was to sell tea in aluminum cans.

2.1. Coca-Cola

The main corporate strategies of Coca-Cola are based on opportunity and public relations.
They are already in the beverage business, but they only sell one billion Cokes a day, while
around the world, people drink more than 48 billion servings of beverages every day. That is
why they designed a business strategy to take advantage of that opportunity. A brand is, in a
way, a promise to the consumer. The Coca-Cola brand is all about making a promise to
consumers all over the world that they can always trust Coca-Cola. The brand promises
quality and value. On the other hand, the business promises jobs.

Coca-Cola understood that in order for people to like their products, they needed to
understand the area where they would sell them. They need to respect all the smaller
countries around the world where they would sell their products. That means to think on a
smaller scale, not a large one, so that the people in small towns can relate to it.

Therefore, they guided their production and marketing practices according to the different
cultures in the areas they operated, using a variety of ingredients, to offer slightly different
products on different markets, trying to meet taste preferences of consumers everywhere (for
example, in the US, people like sweeter Coke, while in China prefer it with less sugar). They
want to appeal to consumers everywhere. In other words, they “think globally, act locally”,
which helped them globalize their industry and reach an 80% income from foreign places. To
sum up how Coca-Cola got the position it has today on the market; it would be best put as:

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“Anywhere you go in the world, Coca-Cola is a hometown business… in Poland, we are a
Polish business, and in Indonesia, we are an Indonesian business”. One example to prove
their “local action” is that they took into consideration the weather conditions in every area
they are selling products. In winter, their sales decrease with 20% as compared to sales in
summer. They have seen in weather a major factor that affects their sales. Also, sometimes
consumers do not care exactly what they are drinking. They drink what they get, some of
them do not even differentiate between Pepsi and Coke on taste, but as long as it’s cold, it’s
sold. For this reason, Coca-Cola provided their coolers and freezers on the market. Also their
price strategy is to sell at a different price in different seasons, so in winter, when sales
decrease, prices also decrease, in order to keep making profit.

As about the PR strategy, as their main target market is the youth, they focused on advertising
based on young generations, trying to represent Coke with youth and energy. However, they
also have a co-target market, older people, as compared to Pepsi, whose only target consists
of young people. They advertise their products through print media, POS materials (posters,
stickers), TV commercials, billboards and holdings, but also through sponsoring activities
(concerts) or participation in festivals, parties, promotions, etc. They want to serve customers
with creativity and consistency.

2.2. PepsiCo

PepsiCo owns its own manufacturing and distribution facilities in certain parts of the world
(Asia, Middle East, Africa) and more of their production is conducted via alternate means,
such as licensing (e.g. Aquafina). They also involved in joint ventures and affiliate operations
(e.g. Unilever, Lipton, Starbucks).

Their main strategies are PR and changing packaging very often. Concerning the packaging,
it is considered as a meaningful and appealing communication tool for the latest generation of
youth that are not overwhelmed by media, music and other digital distractions. From the
beginning they adopted a youth-oriented strategy. Compared to Coca-Cola, who focus on
consumers’ needs, PepsiCo focus less on unmet needs, and more on giving people something
they haven’t even asked for, but are certainly dying to have. By changing packaging very
often, they want to create a supportive an inspiring relationship between Pepsi and the young
people. They managed to do this, after conducting a lot of research on the emerging markets,
to find key to get to youth cultures and learn how their brand was perceived in different
countries. They were surprised to find out that there were few differences in how consumers

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felt about Pepsi’s fun brand image. That is why they offered more designs (35 distinct ones),
as they wanted to speak to youth in their language. Their packaging designs are intended to
reflect back on culture, not impose on it. Based on a survey, in which they asked loyal
consumers what brand elements should remain to reassure them that their favorite drink is not
changing, they updated their logo without redesigning its key elements (the Pepsi globe, the
color, and the letters). They backed up their strategy with TV ad campaigns, that used “same
Pepsi inside, new look outside” as a reassuring tag line. They introduced new can and bottle
designs every few weeks, seeking to connect with young consumers who are loyal to video
games, portable music players and other forms of new technology (they gave links on the
packages, to websites with online video games). Changing their packaging so often was quite
a striking difference from conventional marketing. Instead of focusing on brands’
consistency, since brands are developed to reassure consumers that they are getting the same
product every time they buy it, they decided to recognize cultural movements, not just create
a brand. The themes used on their packages include international travel, music, and digital
technology, thus trying to use it as an interactive element. They promoted their products,
especially Pepsi, through aggressive advertising that included celebrities.

Coca-Cola consider themselves an “US” brand, as they believe in togetherness, bringing

people, families, friends together, while Pepsi is more of a “ME” brand, as they believe in
individual struggle.

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3. Case Study 1 – India

3.1. Market entry

Coca-Cola first entered the Indian market in 1958, but was forced to leave in 1977 because
the Indian government decided that the secret recipe and 60% of the equity stake should be
transferred to the Indian producers. Coca-Cola agreed with the capital transfer, but refused to
give away the recipe, insisting to keep control on the production process. The Indian
government decided to control it themselves, stating that the Indian subsidiary would only be
an intermediary anyway in selling American products. Also, they wanted to stop capital
going out of the country. In the end, Coca-Cola decided to leave the Indian market rather than
risking the competitiveness. Another reason why it wasn’t difficult for them to decide to
leave the market was that the sales of their products in India were less than 1% of the global
sales. Things changed in 1990, when government was changed into a liberal one and
investing conditions were less restrictive and the growth of the home market made India
attractive again. Besides, there was a new reason for Coca-Cola to re-enter, because while
they were away, Pepsi conquered 26% of the Indian market. But, with such a great potential,
India having more than 900 million inhabitants, there was enough room for both companies.

However, from this huge population, only 10% lived in urban areas or larger cities and drank
ten bottles per year, while the rest lived in rural areas, where the annual consumption was less
than 4 bottles. With its large population and low consumption, the rural market was a
significant opportunity for Coca-Cola. But to penetrate and dominate the rural market, they
had to compete with traditional refreshments, including lemon water, green coconut water,
fruit juices or tea. Therefore, it was essential to come up with a competitive pricing, so they
launched their product in a smaller bottle at a price that was 50% lower than the traditional
package.

Regarding the distribution part, considering the narrow streets and alleys of the Indian cities,
they used 10-tonne three wheeler trucks that could constantly keep their brands available in
every corner of the country’s remotest areas. They have 50 bottling operations, of which 25
are owned by the Coca-Cola Company, while the others are owned by franchisees. They also
have 21 contract packers to manufacture products for the company.

PepsiCo established its business operations in India in 1990, and since then it has become the
4th largest consumer products company there. As the US, which was the major market for
PepsiCo, seemed to have reached a saturation level, expansion on a global scale seemed

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inevitable. They saw in India an opportunity after Coca-Cola departed. It represented a
lucrative destination, with its vast population offering a huge customer base, since the annual
consumption of soft drinks was only three bottles per capita. PepsiCo was also encouraged by
the fact that increasing urbanization had already familiarized Indians with some of the
leading global brands. But in order to enter such a high regulated economy as that of India,
they had to struggle hard with the Indian government. They had several attempts before they
managed to enter the Indian market (twice in 1985, then they started again in 1986, then 1988
and 1989). In 1990 PepsiCo officials started to lobby with the government in order to obtain
permission to begin their operations in India. Due to the fact that many political parties were
against its entry, they had to come up with a package that was attractive enough for the Indian
government to accept it. PepsiCo promised, among other things, to help uplifting the rural
economy in the north part of India, which was affected by terrorism, by getting involved in
agricultural activities. PepsiCo finally gained entry to India by creating a joint venture with a
government owned corporation (Punjab Agro Industrial) and with Voltas India Limited.

PepsiCo uses India as a benchmark for low-cost-high-quality products. Its drinks portfolio
promotes healthy drinks at cheaper prices. All products are different in size and package, but
they keep the same price for all, except Slice and Aquafina.

Also, their promotion is focused on short term, designed to stimulate a greater purchase of
products. For sales promotions they used different schemes to distributor, retailers and
customers. For example, you buy one case; you get 2 or 3 PEPSI, as well as prizes.

3.2. Mistakes / Scandals

One of the greatest scandals, in 2003, which actually brought Coca-Cola and PepsiCo on the
same side, was related to the pesticide traces discovered in their carbonated drinks. One of
India’s southwestern states, Kerala, even banned the Indian subsidiaries of both companies
from making or selling their beverages. The Supreme Court in India gave them one month to
respond to accusations addressed by an Indian NGO, who requested that they both explicitly
state the exact quantity of pest substances contained in every bottle. The dangerous pesticides
found, such as lindane, chlorpyrifos and heptachlorine, cause serious illnesses, including
cancer, birth defects, nervous system disorders, kidney and liver damages, reduced immunity.
In spite of all this, both Coca Cola and Pepsi officials insisted that their drinks are
manufactured according to the international standards of quality.

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Apparently, the government failed to set up the necessary quality-control standards for the
soft drinks industry, so that, three years later, in 2006, another report came out with worse
news. The conclusion was that Pepsi products contained 30 times more pesticides than found
in 2003, while Coke samples had 25 times the amount of pesticides found 3 years earlier.

Another issue, concerning the 52 Coca-Cola bottling plants located in India, was that
groundwater was dried in many local wells, forcing many residents to rely on water supplies
delivered daily by the government. Not only have they dried some of the wells, but they also
polluted many of them. Near the holy city of Varanasi, in the North-East of India, a local
water official blamed the Coke plant to have polluted groundwater by releasing wastewater
into the surrounding land. It led to massive protests from environmental activists. They
accused Coca-Cola of creating thirst in India and being directly responsible for the loss of
livelihood and for the hunger of thousands of people across India (“Drinking Coke is like
drinking farmer’s blood in India”). One plant consumes almost 1 million liters of water every
day, but is located in a poor area, where people suffer from lack of water. Besides, they buy
this water at extremely low prices and sell it back as expensive and toxic drinks. The protests
showed that large corporations set monopoly on water resources, dry them and release toxic
wastes, without considering any environmental regulations.

To sum up, Coke’s and Pepsi’s problems in India were complicated by the fact that water
carries such great significance there. We are often told about cultural knowledge we should
have before doing business in other countries. Water is one of those issues in India. Despite
having some of the worst water in the world, due to poor sewage, pollution and pesticide use,
water carries an almost spiritual meaning to Indians. Bathing is seen by many as a sacred act,

3.3. Competition – Who’s winning and why?

Competition between Coca-Cola and PepsiCo is quite intense, so both companies had to
frequently implement strategic changes in order to gain competitive advantage. They did that
through product modifications, pricing tactics, comparative advertising and promotions, as
well as distribution tactics.

From the point of view of the price, Coca-Cola reduced it by 15-23% in order to make them

affordable, while PepsiCo introduced returnable glass bottles so that customers could recoup

costs.

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They both launched different products to appeal to the Indian consumer tastes. They started

with products that were already available (cola, fruit juices) and continued with new products

(bottled water – Kinley for Coke and Aquafina for PepsiCo, and clear lime sodas – Sprite for

Coke and 7 Up for PepsiCo). However, PepsiCo managed to beat Coca-Cola when they

launched their Diet Pepsi, long before Coke could launch their Diet Coke.

Promotion played an important role in the competition. They both adapted to the local market

with promotions, especially during festivals, where they competed by giving a kilo of rice

with every refill of a case of Pepsi, which was an effective strategy, to blend the old (rice)

with the new (Pepsi), while Coca-Cola gave vacations to a famous resort in India. Regarding

advertising strategies, PepsiCo relied on advertisements featuring film stars, pop stars, cricket

players, while Coke focused on Indian culture and music.

Both companies tried to maintain good relationships with bottlers, as they were the key to

distribution, which was an important feature of the soft-drink marketing.

It is difficult to say who is the winner of this competition, but it is worth noting that PepsiCo

has better marketing and advertising strategies, and more market share than Coca-Cola. Also,

PepsiCo was not involved in many political conflicts, compared to Coca-Cola. All in all, it

would be a bit too much to say that Pepsi is more preferable than Coke, but in the long run,

PepsiCo will be more successful.

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4. Case Study 2 – Russia

Both Coca-Cola and PepsiCo tried to keep up with the continuously changing times. That is

why they looked for new opportunities around the world and new markets they could enter.

Russia was one of them.

4.1. Market entry

Coca-Cola first had contact with Russia in 1980, considering the Moscow Olympics an
opportunity for them. But PepsiCo was there long before Coke could enter. It was in 1959
that Pepsi first had contact with Russia, at the Moscow Trade Fair, when Nixon convinced
Khrushchev to have a glass of Pepsi during their Kitchen Debate. However, it was only in
1974 when PepsiCo really entered the Russian market, being the first Western product to be
made and sold there.

Coca-Cola became successful in Russia one year after the fall of the Soviet Union, in 1992.
The Russian opportunity, however, came with challenges as Russians were used to a
monopoly environment, not with a competitive system. Also, the organizational structures
remaining from the communist period were difficult to deal with. In addition to this, finances
were low, human resources and technology as well. Another problem they were confronted
with was the poor transportation network. Coca-Cola was successful due to the fact that they
managed to show that its presence in Russia would benefit the country and its citizens,
helping its economy. They were confident that they could improve the level of employment
and planned to hire Russian citizens. In addition to this, they also provide training for their
employees, as well as other benefits, like lunch, medical insurance or even life insurance.

Both companies invested billions of dollars in Russia and Coca-Cola managed to lead the
market until 2008 when PepsiCo acquired the largest juice company in Russia, OAO
Lebedyansky. It was a great thing for their global strategy of diversification.

Due to the economic crisis in 2008, industry was severely affected and consumers began to
spend less money on beverage. Coca-Cola adopted a new strategy. It started spending more
and more on advertising in order to increase sales and profit, instead of cutting down their
expenses. They plan to take advantage of companies who have to cut their advertising budget
and buy vacant advertising spaces. They learned to be flexible and adapt to the Russian
market, by deciding to invest 100% in bottling, as compared to their previous strategy, of

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providing the syrup and leaving the investment to the bottler and also they have their own
distribution system that can supply more than 480 shops across the country.

Coca-Cola mainly focuses on the tastes of local consumers, who believe that carbonated
drinks are unhealthy. Thus, it offered consumers bottles of 1.25 l or 1.5l to try to accustom
the people to drinking soft drinks at home, instead of restaurants where prices are higher.

To advertise their products, PepsiCo produced commercials shaped according to the Russian
market and has also offered sponsorship to TV concerts.

PepsiCo and Coca-Cola continued to expand in Russia, by buying shares in different juice
makers around the country.

4.2. Mistakes / Scandals

The main problem of Coca-Cola in Russia revolved around advertising campaigns. They
were accused of blasphemy against Orthodox Christian beliefs by using images of churches
and crosses that were turned upside down, which is known to be a symbol of Satanism. The
people who complained felt insulted by the commercials, while officials of Coca-Cola
insisted that they were only promoting Russia’s cultural heritage.

4.3. Competition – Who’s winning and why?

In spite of huge investments made by Coca-Cola in Russia, inhabitants do not perceive them
as a premium brand, but still as a “foreign” one. However, they still lead the Russian market,
even though PepsiCo has years on the market ahead of Coca-Cola, having a larger market
share. After the Cold war, Coca-Cola managed to increase its market share and surpass
PepsiCo, because it was associated with the new system, while PepsiCo with the old one.
Event though prices for Coke are higher than for Pepsi, it is still preferred by Russians.

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5. Case Study 3 – South Africa

5.1. Market entry

Coca-Cola entered on the South African market in 1930 and after the World War II expanded
north. It became successful there because of the political and economic situation, allowing
them to hire cheap labor force that was also politically powerless, especially from the non-
white populations. Thus, they could legally pay their workers less than the American ones,
which enabled them to reduce costs significantly and also dominate the market. They applied
the same practices as in other countries, using signs, coolers and trucks to advertise
themselves.

When PepsiCo entered the market, in 1948, it was the moment when the Nationalist control
and the institutionalized apartheid arrived. It was quite a bad timing for PepsiCo, since they
also had to deal with the 18-year advantage of Coca-Cola in the country. As it was expensive
to open new factories, they decided to work with local bottlers, which cut possible profits.
The situation changed in 1950, when the Company Chief Executive Officer brought his wife
who was a famous actress, to help advertising the company. It was a way to become stronger
on the market, however not as strong as Coca-Cola.

Regarding the advertising and promotion, Coca-Cola adopted a strategy that proved to be
successful, by getting involved in the African society and associating their products with the
communities. They also offered sponsorship in different events and festivals. PepsiCo
themselves sponsored events, of which the Louis Armstrong jazz tour is worth mentioning, as
the message delivered was very clear: “If Pepsi is good enough for Satchmo, it is good
enough for you, too”. Even with this, they were still behind Coca-Cola, who managed to open
37 bottling plants by the end of 1960.

Although by the end of 1980, both Coca-Cola and PepsiCo were officially leaving the
country, they unofficially maintained their presence there. Of course, Coca-Cola benefited
more from this “presence” than their competitor, PepsiCo.

In 1985, PepsiCo decided to withdraw from the South African market, as a sign of protest
against apartheid. However it came back in 1987, when they created Pepsi Cola Africa LTD,
which didn’t last much and shut down in 1990, due to a decrease of sales and bottling
problems. While Coca-Cola remained on the market, they focused on strengthening their

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position, taking advantage of PepsiCo’s absence and offering more and more types of
products.

When PepsiCo came back, in 1994 when Mandela became president, they attracted a lot of
American celebrities as investors and spokespersons, in an attempt to be perceived as the
African alternative. In 1995 they bought 50% of a local crisp maker (Simba), thus managing
to increase their sales with the crisps-Pepsi couple.

5.2. Mistakes / Scandals

The main problem in South Africa for Coca-Cola, as well as for PepsiCo, was related with
discrimination. In 1966, different American Civil Rights groups put pressure on both Coca-
Cola and PepsiCo to be more sociably responsible and review their hiring practices, which
were quite discriminatory, considering that there were no black people hired in middle
management. However that was not an uncommon thing in businesses in those times.

PepsiCo had already hired an African American as an executive, in 1962, thus becoming the
first major American company to do so.

Following the pressure of the Civil Rights groups, both companies had to make efforts to
include people of color in their business.

When Martin Luther King Jr. stated that it was not necessary to behave towards a business
that didn’t offer them jobs or the opportunity to advance. Thus, in order to avoid boycotts, the
two companies had to take action.

Coca-Cola took the first step, in the bottling plants from the southern part of the country,
where they eliminated the “white” and “colored” restrooms and also hired their first black
bottling representative. Although at a certain moment, they reached a majority of black
employees, they still didn’t dismiss certain practices, as it turned out that they also made a
contract with the government of South Africa to use black prisoners in their plants.

PepsiCo also hired black people within their company and not only in management positions.
They successfully managed to end the possibility of boycott and, at the same time, gaining
the US credibility. They also allowed their black employees to be promoted and paid them a
wage that was above average. However, the white workers were still better paid, PepsiCo
working on changing this disparity regarding the wage.

New threats of boycotts forced Coca-Cola to raise the wages of their workers and also offer
them other benefits that were greater than what local employers offered. Still, they didn’t get

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away so easily, because in 1990 American college and high-school students started protesting
against their presence in South Africa and voted for the removal of Coke from their campus.
Their action was successful and gave the idea to others, too.

Protests against PepsiCo started in South Africa as well. In 1994, a lot of people gathered in
front of the Johannesburg plant, protesting against their hiring policies and accusing them that
they only offer jobs to people who worked for Coca-Cola, some of them stating that would
not leave the plant without a job. PepsiCo denied hiring Coca-Cola workers, but admitted that
most of the positions are filled even before the plant is open.

After managing with the protests, PepsiCo focused on regaining consumers and brought
Whitney Houston to South Africa on a tour. While preparing for the concert, they wanted to
supply the Ellis Park with PepsiCo products, for the spectators, but were faced with a
problem. The stadium had made a deal with Coca-Cola which prevented them to sale non-
Coke products. Thus, PepsiCo’s chances to sell their products to thousands of people
attending were undermined.

5.3. Competition – Who’s winning and why?

Coca-Cola and PepsiCo were welcomed in South Africa by Mandela because he saw them as
options to improve the economy of his country. But for the two companies, South Africa was
just another battlefield, in their competition. PepsiCo found it quite difficult to stand against
Coca-Cola’s international strength, in terms of social intentions and considering also their
modest investments. Also, being faced with protests and other obstacles (like the Whitney
Houston tour), their re-entry to South Africa didn’t offer them much, since all consumers and
workers were distracted with these issues, which, in contrast, helped reinforcing Coca-Cola’s
image and domination on the market.

In 1997, a public poll company made a survey about brand loyalties and revealed that the
Coca-Cola was the most popular and admired brand in South Africa. Thus, Coca-Cola proved
to be unaffected by PepsiCo’s attempts to regain consumers.

Part of the reason why PepsiCo lost the battle in South Africa was the fact that Coca-Cola
had almost 18 years advantage on the African market, which allowed them to develop a
powerful relationship with the government and with other businesses. Coca-Cola has also
been extremely successful due to their PR strategy, trying to make a connection between their
products and consumers’ aspirations (advertisement including soccer, which is an extremely
admired sport in Africa).

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6. Lessons to be learned

Coca-Cola has always been a traditional company, valuing family especially in the US, while
PepsiCo promoted a completely different image: that of young and restless people, as they
intended to become a trendy youth brand.

Both companies invested important amounts of money in market research but they soon came
to realize it wasn’t enough to compete with each other. So they carried on to new strategies:
direct attacks through advertising.

The cases of the three countries, India, Russia and South Africa, and how the companies
managed to enter and remain on the market offer valuable lessons for both Coca-Cola and
PepsiCo.

First of all it is obvious that people nowadays, especially young ones, demand a certain
authenticity for the products they buy. The PepsiCo strategy is easy to be changed, in order to
include designs that might appeal during a certain season or in a certain region. Coca-Cola
could try this strategy, too, considering that consumers want more variety and always expect
more from their favorite brands. Also, according to tests, people usually prefer sweeter
drinks. That is why, even though Coca-Cola’s brand is stronger than that of PepsiCo, they
should pay more attention to the taste as well.

Another thing companies should try to change is the way they approach advertising, in order
not to have any problems like that in Russia, when people felt offended or even insulted by
their commercials, which used images of the church inappropriately.

It is also important that they do not take for granted any opportunity that is offered, as Coca-
Cola did when they re-entered the Indian market, thinking they would benefit from the same
government treatment as before leaving the country. They should also pay attention to any
deals concluded with the government but at the same time, try to keep a good relationship
with them. In addition to these, Coca-Cola should be careful when competing with PepsiCo
when it comes to prices, as PepsiCo is very flexible and can reduce them even with 50% if
needed, although this risk taking attitude might lead to loss.

It is worth mentioning that both companies have learned, or should have learned, especially
from the Indian experience, that it is important to reduce wastes and at the same time get
more involved in activities such as recycling or improving environment, and not focus only
on economy and profits.

15
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