1

Date

Project On Consumer
Behaviour
Submitted by
Santanu Banik

Regd No. BIM0409BM034

Batch - 2009-11
Submitted To
Chumki Madam (Faculty)

2
Executive summary:
Control of market share is the key issue in this case study. The situation is both Coke and Pepsi are
trying to gain market share in this beverage market, which is valued at over $30 billion a year. Just how
is this done in such a competitive market is the underlying issue. The facts are that each company is
coming up with new products and ideas in order to increase their market share. The creativity and
effectiveness of each company's marketing strategy will ultimately determine the winner with respect
to sales, profits, and customer loyalty. Not only are these two companies constructing new ways to sell
Coke and Pepsi, but they are also thinking of ways in which to increase market share in other beverage
categories. Although the goal of both companies is exactly the same, the two companies rely on
somewhat different marketing strategies. Pepsi has always taken the lead in developing new products,
but Coke soon learned their lesson and started to do the same. Coke hired marketing executives with
good track records. Coke also implemented cross training of managers so it would be more difficult for
cliques to form within the company. On the other hand, Pepsi has always taken more risks, acted
rapidly, and was always developing new advertising ideas. Both companies have also relied on finding
new markets, especially in foreign countries. In the foreign markets, Coke has been more successful
than Pepsi. For example, in Eastern Europe, Pepsi has relied on a barter system that proved to fail.
However, in certain countries that allow direct comparison, Pepsi has beat Coke. In foreign markets,
both companies have followed the marketing concept by offering products that meet consumer needs
in order to gain market share. For instance, in certain countries, consumers wanted a soft drink that was
low in sugar, yet did not have a diet taste or image. Pepsi responded by developing Pepsi Max.
These companies in trying to capture market share have relied on the development of new products. In
some cases the products have been successful. However, at other times the new products have failed.
For Coke, changing their original formula and introducing it as “New Coke” was a major failure. The new
formula hurt Coke as consumers requested Classic Cokes’ return. Pepsi has also had its share of failures.
Some of their failures included: Pepsi Light, Pepsi Free, Pepsi AM, and Crystal Pepsi.
One solution to increasing market share is to carefully follow consumer wants in each country. The next
step is to take fast action to develop a product that meets the requirements for that particular region.
Both companies cannot just sell one product; if they do they will not succeed. They have to always be
creating and updating their marketing plans and products. The companies must be willing to
accommodate their “target markets”. Gaining market share occurs when a company stays one-step
ahead of the competition by knowing what the consumer wants.
Pepsi In Short:-

Caleb Bradham, a New Bern, North Carolina pharmacist, renamed "Brad's Drink," a carbonated soft
drink he had created to serve his drugstore's fountain customers. The new name, Pepsi-Cola, was first
used on August 28, 13 years after Coca-Cola. In 1902 Bradham applied for a trademark to the U.S.

3
Patent Office, issued stock and began selling Pepsi syrup. By 1923, Pepsi-Cola Company was declared
bankrupt and its assets were sold to a North Carolina concern, Craven Holding Corporation, for $30,000.
Roy C. Megargel, a Wall Street broker, bought the Pepsi trademark, business and goodwill from Craven
Holding Corporation for $35,000, forming the Pepsi-Cola Corporation and in 1932 the trademark was
registered in Argentina. PepsiCo gained entry to India in 1988 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.

Coca-Cola In Short:-

Coca-Cola was formulated by John S.Pemberton, originally as a cocawine called Pemberton’s French
Wine Coca, and originally sold as a patent medicine for five cents a glass at soda fountains, which were
popular in America due to a contemporary view that soda water was good for your health. Coca-Cola is
the trademarked name, registered in 1893, for a popular soft drink sold in stores, restaurants and
vending machines around the world. The Coca Cola company started operations in India in 1993 after an
absence of 16 years. In India, Coca-Cola was the leading soft-drink till 1977 when govt. policies
necessitated its departure. Coca-Cola made its return to the country in1993 andmade significant
investments to ensure that the beverage is available to more and more people, even in the remote and
inaccessible parts of the nation. Coke had entered the Indian soft drinks market way back in the 1970s.
Over the next few years, a host of local brands emerged such as Campa Cola, Thumps Up, Gold Spot and
Limca etc. However, with the entry of Pepsi and Coke in the 1990s, almost the entire market went
under their control.

PRODUCTS OF PEPSI

4
Products Of Coca Cola

5
6
Facts Of Rivalry
When the cola giants, Pepsi and Coke, entered the Indian market, they brought with them the cola wars
that had become part of global folklore. This case study details the various battles fought in India by the
two rivals with its focus on the publicity campaigns where the two sought to stealeachother'sfizz.

The case also outlines battles fought on other fronts - conflicts with bottles, product modifications,
attempts to steal the rival's employees and other mini wars. On the whole, the case attempts to provide
a comprehensive perspective regarding the dimensions of the cola wars and the direction in which they
are heading.

The cola wars had become a part of global folklore - something all of us took for granted. However, for
the companies involved, it was a matter of 'fight or succumb.'Both print and electronic media served as
battlefields, with the most bitter of the cola wars often seen in form of the comparative advertisements.

In the early 1970s, the US soft-drinks market was on the verge of maturity, and as the major players,
Coke and Pepsi offered products that 'looked the same and tasted the same,'substantial market share
growth seemed unlikely. However, Coke and Pepsi kept rejuvenating the market through product
modifications and pricing/promotion/distribution tactics.

As the competition was intense, the companies had to frequently implement strategic changes
in order to gain competitive advantage. The only way to do this, apart from introducing
cosmetic product innovations, was to fight it out in the marketplace. This modus operandi was
followed in the Indian markets as well with Coke and Pepsi resorting to more innovative tactics to
generate consumer interest. In essence, the companies were trying to increase the whole market pie, as
the market-shares war seemed to get nowhere. This was because both the companies came out with
contradictory market share figures as per surveys conducted by their respective agencies - ORG (Coke)
and IMRB (Pepsi). For instance, in August 2000, Pepsi claimed to have increased its market share for the
first five months of calendar year 2000 to 49% from 47.3%, while Coke claimed to have increased its
share in the market to 57%, in the same period, from 55%.Media reports claimed that the rivalry
between Coke and Pepsi had ceased to generate sustained public interest, as it used to in the initial
years of the cola brawls worldwide. They added that it was all just a lot of noise to hardsell a product
that had no inherent merit.

The Players
Coke had entered the Indian soft drinks market way back in the 1970s. The company was the
market leader till 1977, when it had to exit the country following policy changes regarding
MNCs operating in India. Over the next few years, a host of local brands emerged such as
Campa Cola, Thumps Up, Gold Spot and Limca etc. However, with the entry of Pepsi and Coke
in the 1990s, almost the entire market went under their control. Making billions from selling
carbonated/colored/sweetened water for over 100 years, Coke and Pepsi had emerged as truly
global brands.
Coke was born 11 years before Pepsi in 1887 and, a century later it still maintained its lead in
the global cola market. Pepsi, having always been number two, kept trying harder and harder
to beat Coke at its own game.
In this never-ending duel, there was always a new battlefront opening up somewhere. In IndIndia the

7
battle was more intense, as India was one of the very few areas where Pepsi waiis the leader in the cola
segment.

Coke re-entered India in 1993 and soon entered into a deal with Parle, which had a 60% market share in
the soft drinks segment with its brands Limca, Thums Up and Gold Spot.

Following this, Coke turned into the absolute market leader overnight. The company also acquired
Cadbury Schweppes'soft drink brands Crush, Canada Dry and Sport Cola in early 1999.

Coke was mainly a franchisee-driven operation with the company supplying its soft drink concentrate to
its bottlers around the world. Pepsi took the more capital-intensive route of owning and running its own
bottling factories alongside those of its franchisees...

The Rivalry on Various Fronts

I-Bottling
Bottling was the biggest area of conflict between Pepsi and Coke. This was because, bottling
operations held the key to distribution, an extremely important feature for soft-drink
marketing. As the wars intensified, both companies took pains to maintain good relationships
with bottlers, in order to avoid defections to the other camp... to be accurate 56% CSDs
packged in cans, thus Coke and Pepsi are the largest customers in metal can industry.again to
consider about plastic bottles these represents 36.7 OF CSD Sales volume

II -Advertising
When Coke re-entered India, it found Pepsi had already established itself in the soft drinks
market. The global advertisement wars between the cola giants quickly spread to India as well.
Internationally, Pepsi had always been seen as the more aggressive and offensive of the two,
and its advertisements the world over were believed to be more popular than Coke's.

It was rumored that at any given point of time, both the companies had their spies in the other
camp. The advertising agencies of both the companies (Chaitra Leo Burnett for Coke and HTA
for Pepsi) were also reported to have insiders in each other's offices who reported to their
respective heads on a daily basis... Both formulated their advertising on the basis of insiders
8
they put inside the offices of each other. Initially Pepsi relied onadvertisements featuring
filmstar, cricket star and pop star, while Coke focused on the indian culture and music. But now
Coke’s marketing and advertising strategies are the- Rejuvenation, Refreshment, Refreshment,
Health and Nutrition, Replenishment, where Pepsi focuses on Slandering Coke, Youth, Market
Segment.

9
10
Famous Personalities Associated With The Companies

III -Product Launches

Pepsi beat Coke in the Diet-Cola segment, as it managed to launch Diet Pepsi much before Coke
could launch Diet Coke. After the Government gave clearance to the use of Aspertame and
Acesulfame-K (potassium) in combination (ASK), for use in low-calorie soft drinks, Pepsi officials
lost no time in rolling out Diet Pepsi at its Roha plant and sending it to retail outlets in
Mumbai...

IV –Poaching
Pepsi and Coke fought the war on a new turf in the late 1990s. In May 1998, Pepsi filed a
petition against Coke alleging that Coke had 'entered into a conspiracy'to disrupt its business
operations. Coke was accused of luring away three of Pepsi's key sales personnel from Kanpur,
going as far as to offer Rs 10 lakh a year in pay and perks to one of them, almost five times
what Pepsi was paying him. Sales personnel who were earning Rs 48,000 per annum were
offered Rs 1.86 lakh a year. Many truck drivers in the Goa bottling plant who were getting Rs
2,500 a month moved to Coke who gave them Rs 10,000 a month.

While new recruits in the soft drinks industry averaged a pay hike of between 40-60% Coke had
offered 300-400%. Coke, in its reply filed with the Delhi High Court, strongly denied the
allegations and also asked for the charges to be dropped since Pepsi had not quantified any
damagesTill the late 1980s, the standard SKU for a soft drink was 200 ml. Around 1989, Pepsi
launched 250 ml bottles and the market also moved on to the new standard size. When Coke

11
 re-entered India in 1993, it introduced 300 ml as the smallest bottle size. Soon, Pepsi followed
and 300 ml became the standard.

But around 1996, the excise component led to an increase in prices and a single 300 ml
purchase became expensive. Both the companies thus decided to bring back the 200 ml
bottle, In early 1996, Coke launched its 200 ml bottles in Meerut and gradually extended to
Kanpur, Varanasi, Punjab and Gujarat, and later to the south...

• In May 1996, Coke launched Thums Up in blue cans, with four different pictures depicting
'macho sports'such as sky diving, surfing, wind-surfing and snow-boarding. Much to Pepsi's
chagrin, the cans were colored blue - the color Pepsi had chosen for its identity a month
earlier, in response to Coke's 'red'identity...

• There were frequent complaints from both the players about their bottlers and retailers
being hijacked. Pepsi's blue painted retail outlets being painted in Coke's red color overnight
and vice-versa was a common phenomena in the 1990s...

• Coke also turned its attention to Pepsi's stronghold - the retail outlets. Between 1996-98,
Coke doubled its reach to a reported 5 lakh outlets, when Pepsi was present at only 3.5 lakh
outlets.

To reach out to smaller markets, interceptor units in the form of mobile vans were also
launched by Coke in 1998 in Andhra Pradesh, Tamil Nadu and West Bengal.

However, in its rush to beat Pepsi at the retail game, Coke seemed to have faltered on the
service front. For instance, many shops in Uttar Pradesh frequently ran out of stock and there
was no servicing for Coke's coolers...

The Cola War In Recent Years

 Soft drink industry encounters new challenges

 U.S. sales volume grew at a rate of 1%, while in the 1980s and early 1990s the rates were 3% to
7%.

 Globally the demand remained flat.

 While Coke struggled, Pepsi quietly flourished. In 2001 Pepsi expanded into other beverage
categories.

 Pepsi’s North America beverage volume grew by 3% in 2004, compared with virtually flat

12
 volumes for Coke.

 New federal nutrition guidelines identified regular CSDs as the largest source of obesity-causing
sugars in the American diet.

 In the U.S. non carb market overall Pepsi had a market share of 47.3% compared with Coke’s
share of 27% for 2004.

Recent expansion of Coca-Cola

Expansion Of Pepsi

13
Distribution Of Pepsi

Distribution Of Coke

14
Revolution Of Their Logos Where Competition Exists Also
1896

1898 1990s

1905 1900s
1906

1940
1910
1950
1950-60
1962
1980
1973
1985

1987
1991
1990
1998
2000
2005
2009
2008

Comparative Income Statement Of The Two Companies

PERIOD Pepsi (Rs in thousands) Coke (Rs in thosands)
ENDING 31-Dec-09 31-Dec-08 31-Dec-07 31-Dec-09 31-Dec-08 31-Dec-07

Total 43,232,000 43,251,000 39,474,000 30,990,000 31,944,000 28,857,000

Revenue

Cost of 20,099,000 20,351,000 18,038,000 11,088,000 11,374,000 10,406,000

Revenue

Gross Profit 23,133,000 22,900,000 21,436,000 19,902,000 20,570,000 18,451,000

Net Income 5,946,000 5,142,000 5,658,000 6,824,000 5,807,000 5,981,000

15
Coca cola:
In Q1 2010

In the first quarter of 2010, the Coca-Cola Company posted revenues of $7.53 billion, an
increase of nearly 5% from the previous year; operating income increased 17% to $2.18 billion.
Net income for the quarter grew more than 19% to $1.6 billion.Worldwide, both unit case and
concentrate volumes increased 3% compared to Q1 2009.

In Q2 2010

In the second quarter of 2010, Coca-Cola Company posted revenues of $8.67 billion, an
increase of 5% from Q2 2009; operating income increased 13% to $2.76 billion. Net income for
the quarter rose 16% to $2.37 billion.Worldwide, both unit case volume and concentrate sales
increased 5% with Eurasia & Africa leading the charge with 10% unit case growth and 13%
concentrate sales growth. India was the primary driver of the growth with an overall unit case
volume increase of 22%, with 19% growth in sparkling beverages and 30% growth in still
beverages.

Pepsi:
In Q1 2010
In the first quarter of 2010, PepsiCo had revenues of $9.4 billion, a 13.4% increase against US$8.2 billion
recorded in the first quarter last year.

Q2 2010

In the second quarter of 2010, PepsiCo had revenues of $14.8 billion, up 40% from Q2 2009;
net income decreased 3.4% to $1.6 billion. Operating income increased 12.3% to $2.46 billion.
The primary reason for the discrepancy in revenues and net income was the ongoing costs
associated with the company's purchase of its primary bottlers. In Q2 2010 charges related to
the restructuring decreased income by $155 million.

Market Share
The market capitalizations of these companies at close of business on Friday February 26, 2010
was:

The Coca Cola Company- $121.41BN

PepsiCo, Inc.- $97.77BN

While Coca-Cola’s market share has been slipping, it still holds a significant advantage. In recent
years, foreign sales have been lifting the company during recession.

16
Findings:
So after a comprehensive analysis on the topic it can be said there are ups and
downs in revenue, net income for both the company in the present or the past
years, but still if we have to choose the market leader on the basis of popularity
or stiffly on the financial result basis , it is to be said that COCA-COLA is leading
the Indian market.

c
Conclusion:
c
cBoth Coke and Pepsi are industry leaders in terms of profitability. Coke is having edge over
Pepsi. Although Pepsi is having slight edge over Coke, both the firms are below industry
c
average in terms of efficiency. Coke and Pepsi are industry leaders but no one is having clear
c
sustainable competitive advantage.
V
c
o
m
m
d
m
d
m
f
d
T
h
i
s

17