While the duopoly that Coke-Cola and Pepsi-Cola have had for the past century is not predestined to

continue, the Cola wars, in various forms, will almost certainly continue with their ever evolving products
and expanding global reach. The rivalry, primarily started by Pepsi in 1974, may have boosted Pepsis
share of the market at Cokes expense, but Coke, in part due to the rivalry, was able to maintain its top
position and continue to increase their market share, as did Pepsi, at the expense of the smaller
independent players in the game. The third major player, Cadbury Schweppes, may continue to thrive
and will be waiting in the wings for any misstep by Coke or Pepsi.
The rivalry between Coke-Cola and Pepsi-Cola formally launched with the Pepsi Challenge made soda
a topic of conversation and, once a consumer picked a product, increased consumer loyalty. While Coke
was still strong, Pepsi made large gains and no longer to be ignored by Coke, as evidenced by accidental
utterance of the name Pepsi at a 1979 Coke bottlers conference. Together, Coke and Pepsi forced the
smaller producer out of the market by taking ever larger amounts of shelf space for their various products,
reducing the other component of sales to almost 5% with only 2 other companies, Cott and Cadbury
Schweppes. This strong hold gave them more leverage with their suppliers and franchise bottlers
allowing them almost wipe out the some competitors.
Coke particularly took advantage of this power. In 1980 Goizueta renegotiated contracts with domestic
bottlers and bought up poorly performing ones. Eventually Coke created its own independent bottling
subsidiary, Coca-Cola Enterprises. They kept 49% which allowed them to have separate financial
statements but still retain substantial influence with their major independent bottler. Pepsi also
acquired major bottling operations and created Pepsi Bottling Group. Cadbury Schwepps followed suite
and also bought two large US bottling companies. By 2004, each of the top three, Coke, Pepsi and
Cadbury Schwepps, used their own top 10 bottlers to produce the majority of its domestic volume.
Coke was clearly the leader, producing over 94% of its domestic volume while Pepsi was at 87% and
Cadbury Sweppes was at 72%. This dominance over their bottling companies gave them even more
power to negotiate deals with bottlers which the smaller companies could not match. The top three
were able to force the bottlers to upgrade plants and equipment enabling them to produce the
widening variety of products which were demanded by consumers as time progressed. Additionally, as
technology improved, a single bottling plant would be able to supply the entire US.
As consumers tastes and dietary concerns changed, Coke and Pepsi responded. Coke is known for its
initial difficulties with this, introducing one of the all-time loser products, New Coke, which was
eventually, with no fanfare, taken off the market, as well as failing to expand while allowing Pepsi to
purchase SoBe and Quaker Oats. During this time both Coke and Pepsi significantly increased their


product offerings to include both other carbonated drinks and non-carbonated drinks, including water,
which were considered a healthier alternative to carbonated drinks. At the same time Coke suffered set-
backs due to foreign currency crisis and contamination scares abroad. The fact that we say Coke got back
on track after these issues indicates the companies apparently strategy was solid, but it was poorly
executed during that period. The new bottling plants allowed Coke and Pepsi to expand their selection of
offerings, although CSD still accounted for the bulk of their sales; 80% for Coke and 66% for Pepsi.
Coke, with its dominance in the global market is poised to continue its success. While the Chinese
market may currently be the largest, the Indian market is growing faster and as a democracy, may be a
more open market for Coke and Pepsi to penetrate. India may have a very large lower income population;
Coke has shown that they have the ability to crack that market successfully. However, Pepsi has learned
from the past how to steal business from Coke and may just repeat that in India and the other global
markets which Coke already has a toehold. While both Coke and Pepsi must remain nimble in their
product lines and advertising schemes, they should be able to maintain their strong rivalry, benefiting
both companies long into the future with little to fear from Cadbury Sweppes .