Swot On Coca Cola and Pepsi
Swot On Coca Cola and Pepsi
Swot On Coca Cola and Pepsi
promoted where each of them came out of their ethical way in promoting their products though
the media for an international cricket tournament few years back. This paper doesn’t involve the
clashes but only compares the two on all the aspects where the strategies were implemented. This
paper speaks of the details of both companies one after another in each of the segments.
Company Information:
COCA COLA:
Company History:
(http://www.thecoca-colacompany.com/heritage/ourheritage.html)
The complete history of the company can be set into three stages:
1) Era of Birth of the giant soft drink and its development (1886-1918): Dr. John Stith
Pemberton a local Pharmacist basically from Georgia developed syrup in 1886, which
entered the market in the form of a soda fountain drink later to which carbonated water
was added which led to the origin of the giant soft drink Coca Cola. He later sold his
secret recipe to various partners of whom Asa Candler was one who turned out to be the
2) Era of renaissance in the Company (1919-1941): In 1919 two gentlemen Ernest Woodruff
and W C Bradley along with a group of investors purchased the Coca Cola company for
$25 million. Later Woodruffs son and his successor to the company Robert Woodruff is
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the one to be credited for this soft drink firm to reach to the zenith. This Era saw the
completion of 50 years for Coca Cola in 1936 .The Company also got a registered
early but this time saw a lot of competition for Coke. To sustain its top slot and also
maintain its quality simultaneously Coca Cola had to make strategic decisions right from
The company diversified into many beverage markets throughout these years. The various
products the company offers are Energy drinks, Juices/Juice drinks, Soft Drinks, Sports Drinks,
And the number of varied ranges of the drinks based on different flavors can be seen in table 1.
The financial performance of the company for the year 2007 was pretty good. The revenues for
the company increased by 20 percent for the year 2007.The chairman of the company Neville
Isdell , says that “ by successfully executing our clearly defined strategies with our bottling
partners ,we delivered six percent unit case volume growth for the year and four consecutive
quarters of double digit earning per share growth”( Elizabeth Fuhrman, March 2008,)
PEPSI CO:
Just following the heels of the Coca Cola another Pharmacist named Caleb Bradham who
experimented various concentrations of soft drinks came up with a drink named “ Brads drink”
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later in 1898 the name changed to “Pepsi Cola”. In 1923 the company faced a crisis where it had
to sell its assets to North Carolina concern, Cravn Holding Corporation for $ 30,000.1934 was a
land mark year for Pepsi as the drink became a hit .In 1941 during the World War II as a symbol
of support to the home nation Pepsi colored its bottles crowns with red, White and blue Colors.
In 1984 it was Michael Jackson who took the world for a ride with his advertising for Pepsi. The
slogan was “Pepsi! The choice of the new Generation”. In one way Pepsi boasts of producing the
best Soft drinks ever. Pepsi never left the race behind compared to its strong competitor Coca
Coming to the financial aspect of the company, Pepsi co reported many positive findings in its
recent results. Net revenues increased to 13 percent and net operating profit increased by 9
ir.net/phoenix.zhtml?c=78265&p=irol-newsArticle&ID=1134344&highlight=).The growth
in the market for PepsiCo can be seen more evidently especially in the Middle east , China ,
Industry Analysis: The soft drink industry saw a decrease in the sales when the last reports
came in according to the Beverages industry magazine report. Many issues were attributed to the
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Barriers to New Entrants: The barriers to entry for the soft drink industry are not a matter of
concern for the new entrants. But after PepsiCo and Coca Cola entered into Legal trouble in
India and other countries , many pre requisites were needed to be considered like the
environmental factors , the local government permission, permission from the country’s food
authority whether the products being used are hazardous to the people who consume it and the
like. The capital required to put up an industry is again not that much of a problem. Considering
the capital attribute, entering into the soft drink industry is not a problem. But to gain sales and
beat the top giants like Coca Cola and PepsiCo is not that easy and to grab the market share of
these giants is also not that effortless. As these two giants have the brand loyalty which cannot be
taken by any new entrant it’s not a cake walk if this attribute is considered.
Threat of Substitutes: The threat of substitutes is not a matter of concern for the existing brands
till recently. These brands had and still have a high level of brand loyalty, which makes it less
possible for the customers to switch to other brands. This has been the scenario till recent. But
the recent reports in the Beverage Digest show that the customers are not that brand loyal as
before. Also the risks associated to the carbonated drinks have made customers to switch to other
products like bottled water, tea, coffee, energy drinks and the like.
Growth in the industry: There was a considerable growth of the sales of the non carbonated
drinks and flavored water( inc to what volume) .The other and the most major contribution was
from the carbonated drinks .( inc in this what percent ).Both Coca Cola and Pepsi Co showed
an expansion in the product line of the soft drink industry. Coca cola which did not have any
positive growth in the Tea sector decided to emphasize on this sector as well. The company later
invested 40 percent in Honest Tea.( Sarah Theodore, march 2008). Statistically speaking the
result for carbonated soft drinks showed a positive result. But the soft drinks sales were positive
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in most of the countries other than north America.The overall results were a matter of threat to
the carbonated soft drinks (CSD). Much promising results were seen in the bottled water, energy
drinks, tea and the like. Also the diet CSDs has declined in the total volume of sales by 5 percent
(beverage industry report) .This is not an expected outcome from the Diet CSD segment. So the
growth entered a saturation point in North America and diversification of the product line was
Rivalry among Competitors: The industry has three main competitors .They are PepsiCo, Coca
Cola and Cadbury Schweppes. The competition between PepsiCo and Coca Cola is considered to
be neck to neck followed by Cadbury Schweppes which also has a global footage similar to the
top two giants but not to that extent. According to beverage digest (Edition), the market share in
2007 for the soft drink industry in the US shows that Coca Cola has 42.8 percent of the share
followed by PepsiCo which occupies 31.1 percent of the market share. ( http://www.mind-
plays a major role in the soft drink industry shows that PepsiCo ranks more in brand loyalty
compared to the other soft drink giant Coca Cola. Also the recent market trends show that
PepsiCo is getting into much diversification of products, the reason for it to be a strong
Bargaining Power of Customers: The bargaining power of the customers is medium according
to my observation. The end customer in most of the Asian countries doesn’t consume large
quantities of soft drinks compared to the Western countries like North America, Canada and the
like. So the bargaining power is not great in such countries. But if we consider the case of North
America the consumption level of such drinks is very high .And mediocre like Wal-Mart
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purchase a large volume of soft drinks, making them have a high bargaining power. That is the
The end customer was the house hold individual .But to reach the end customer the soft drink
companies had to make use of some intermediaries. The intermediaries for this industry are super
markets, gas stations, food chains and the like. So if the end individual is considered, the
individual doesn’t have much bargaining power. The recent reports for 2007 from Euro Monitor
(http://0-ww.portal.euromonitor.com.catalog.lib.cmich.edu/portal/server.pt?
control=SetCommunity&CommunityID=207&PageID=720&cached=false&space=CommunityP
age) show that the major division of the end customers is teens followed by pensioners. The
statistics for the customer segmentation calculated in ‘000 were 860,930.2 for teens and
Products/ services:
Bargaining power of Suppliers: The suppliers for the soft drink industry mainly consist of
sugar industry and other sweeteners like corn syrup which act as substitutes for syrup, bottlers.
Relationship with the bottlers should be a cordial one, as they a major role in supplying of the
cases. When a company tries to have a deal with the bottlers, they should have a check on the
bottlers’ financial stability .The bargaining power for the sweeteners industry is less as they have
very few customers for their products. Whereas the bottlers on the other hand have a more
bargaining power and some of them being publicly traded companies, the bargaining power of
such companies is even higher. Also the profitability of the bottlers should be taken care of or
else the business of the soft drink company could be at stake. The bargaining power of the bottler
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industry could be high because of the above stated facts. But the bargaining power of the
sweeteners is low as, the industry has many substitutes for them. They have less bargaining
Opportunities: The current trend in the industry shows that there are many threats. To overcome
1. One opportunity would be to come up with innovated product line which could act as a perfect
substitute to the existing line of carbonated drinks. This not only helps the soft drink industry to
come out of its reducing sales but also helps in increasing the revenues. The diversification in the
product line like flavored water, energy drinks did see a considerable increase in the overall sales
2. The top giants in the soft drink industry have been making good use of the media to promote
their products. The new technology of internet has been the new segment to target the audience.
Most of the nations have been seeing the new trend of soft drink companies trying to promote
their products. This is a welcome step to the industry to increase its sales which have shown a
lull in 2007.
3. Merging with substitute drink product companies like tea and coffee can provide a new
4. Trends have been changing in most of the developing countries and most of the market is
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5. The accessibility to soft drinks in most of the Asian countries is not to same extent as in the
US. By providing suppliers or vending machines in busy places like malls, colleges and markets
Threats: The current situation shows that the threats could surpass the opportunities .But taken
these threats as opportunities the companies can survive the reduction in the profits in the years
to come.
1.The Decline in the Diet carbonated Soft Drink segment showed that there is a reduction of 5
percent in the sales in all companies for the year 2007.This could reduce even further for the
coming years . The reason for the decline should be investigated and a solution should be
2. The recent report has shown that the brand loyalty of the consumers has decreased over the
years. So there could be a shift in the tastes for other soft drinks or other drinks like energy
drinks, flavored water and the like. This could seriously cause a threat to the CSD as the recent
sales also have not been promising which could lead to more reduction in the sales.
3. The recent economic crisis has increased in the price of all the basic commodities like
Aluminum, sugar and the like which are used in manufacturing the soft drinks and their cans.
This has become an issue of concern for the companies who are bearing the heat of this increase.
The only option available is to increase the price. But in the current situation, increasing the price
is a kind of risk to the companies. But how they come out with a solution is the one to wait and
watch.
4. The propaganda of people becoming obese due to the intake of soft drinks has been seeing
much unconstructive outcome to the soft drink Industry. In India most of the schools have
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stopped the use of Soft Drinks and also discouraged students to stop drinking them. Even in the
US initially the soft drink advertisements targeted the kids. But rumors like obesity coming up
the ads stopped targeting kids’ .But, the overall result is a threat to the Soft Drink industry.
5 .The beginning of this century saw much problem to the soft drink industry in India. Reports
showed that pesticides were used in soft drinks like Coke and Pepsi which were harmful for the
people. Later huge protests were carried out against the ban on soft drinks in India. This was the
time which saw the meet between the two soft drink giants who discussed on the crisis situation
in India. It took a lot for these companies to come out of their negative image and keep going.
The sales of soft drinks have stopped drastically during that time. Situations like this are a very
1. Changing trends: Most of the third world countries have shown good progress economically.
The standards have increased which automatically increase the consumer spending level. So the
changing trends in all such countries have an effect on the soft drink industry.
2. Taste Preferences: The taste preferences also are of prior importance. The tastes of people in
one country differ in the tastes of another. The minute maid orange juice product in India tastes
differently from the same product in the US. So considering the tastes is an important criterion.
3. Government policies: After the issues faced by the soft drinks in India, most of the countries
are rechecking their policies making it safer for the people to consume the products. Also to put
up a soft drink industry various aspects needed to be considered like the environmental factors so
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4. Quality of Water: Water is an important ingredient in preparing soft drinks. But water is not
available in plenty. So how do soft drink manufacturers come about solving the problem without
5. Globalisation: The world is becoming flatter day by day. This helps the soft drink companies
Strategic groups: The two brands considered in this paper are PepsiCo and Coca Cola .Both are
globally acclaimed brands .To graph them on 2 particular attributes is the crux of the below
diagram:
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Coca Cola has undoubtedly been in the forefront in the soft drink industry. Many markets in the
US have reached a saturation point due to which the volume of sales in the region have been
decreasing which is not a encouraging outcome for the company .But according to (
Anonymous, Jan 2008) the author argues that there would be an increase in the sales in the soft
drink industry. Also the company is trying to have the top spot where Pepsi co is on its heels to
head towards the top .The recent list of Fortune 100 shows Coca cola placed in the 83rd position
with its net revenue as $ 28,857 Million and the profit compared to the previous result was $
5,981 million. These statistics show that the company has been showing promising returns in
terms of revenue.
STRENGHTS:
Innovation
1.The strategies which coca cola has implemented in the Latin American countries , by
integrating the roles of the wholesaler and the distributor into one has shown promising results
especially in countries like India and China.( Carlos Niezen, Julio Rodriguez, (2008)).
2. Coca cola has the knack of increasing its sales. Kudos to the marketing firm which coca cola
hired which came up with new techniques to boost its sales. One such result was shown in a Deal
where Coca cola and Subway jointly tried to promote their products .The end result was quite
promising .The revenues for both Coca Cola and Subway increased significantly.( COCA-
3. The company came up with a museum for itself .One way to increase its revenue I suppose. It
charged a fee for entry into the museum .No matter the management says that it is not for profits,
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I could well analyze that the company receives huge profits in return.( . Jennifer Wedekind
(2007)).
Quality:
4. The taste of Coca Cola is considered to be the best in its segment. The syrup used in preparing
Coca Cola is often termed as a secret formula. Over the years Coca Cola is able to get through
Efficiency:
5. The products of Coca Cola are very much diversified. The company has a been consistent
enough to take care of all the products, their prices, promotion and their presence globally. The
Company has said to be quite efficient in managing its diversified products without
Customer responsiveness:
6. A look at the company’s website shows all the responses to the queries posted by various
parties. It could be individuals, the intermediaries and the like .The company has a very well
organized customer responsive platform which is the reason for the company to be at the top.
Weaknesses:
1. The company tried to portray an excellent picture of itself for the customers by
advertising for the green marketing crush, a way of showing its social responsibility. But
the way the ads came up, boasted completely about Coca Cola and its products. In sense
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the advertising strategies of Coca cola at times miss the track due to which the company
its products in the right way to the customer. There was a lot of perplexity about which
strategies should they implement, when should they implement and how to implement.
The situation at one point of time became very tentative. The reason which could be
analyzed from that crisis situation was due to improper communication gaps and also
reduction in the confidence levels in the strategies made by the company top
management.
PEPSI:
Pepsi the other cola giant in the industry after Coke has a greater brand loyalty compared to Coca
Cola. The innovations in the product line which Pepsi has been coming up with had made Pepsi
see an increase in the sales according to the report in the Beverages Digest (What percent).
The CEO of the company Ms Indra Nooyi was credited with the current strong position in which
the company is in now; the company has been showing persistent growth over the years which
has become a reason for the investors to take a deep breath. The statistics for the Q4 of 2007
showed that the revenue of the company rose to 17 percent. I don’t think Pepsi needs to worry
much more when the analysts of bank Of America stated PepsiCo "is demonstrating great
challenge
Can this snack and soda giant go healthy? CEO Indra Nooyi says yes, but cola wars and corn
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STRENGHTS:
Efficiency:
1. A dynamic management which came up with new strategies has helped Pepsi to increase
its market share and also address issues related to the international markets.
Innovation:
2. Pepsi came up with advertising strategies which helped the company have a good
interaction with the customers. This helped the brand to get a closer relationship with the
customer. This could be one reason why Pepsi has a more Brand Loyalty compared to its
Arch rivals.
3. The company always comes up with new products which have thrown light on the
innovation for new products within the company. The increase in sales for products like
Mountain Dew even when the soft drink industry was facing a lull proves it all.
Quality:
4.according to the American Society for Quality(ASQ) reports for 2006 , Pepsi has led the race
where it got an overall score of 91.The reason behind this was Pepsi acted instinctively to the
Customer Responsiveness:
5. PepsiCo has been quite responsive to its customers quite over the years. This could another
attribute for the success of Pepsi on an overall basis. Also compared to its competitor PepsiCo
has more brand loyalty which is very important for a company to survive in the market. PepsiCo
grabbing the top slot in brand loyalty made the company run successfully over the years.
WEAKNESSES:
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1. The company has been closing some of its plants affecting the employees and their jobs.
the overall profits compared to its competitor Coca Cola .Coca Cola has found itself in
the Fortune 100 list , where as Pepsi could not find itself in the Fortune 100 list .
3. Pepsi faced a lot of backlash from India, where a number of non government
organizations have stated that the company was polluting the surroundings of one of its
plants in a village in Kerala making it difficult for people living around the plant .Also
there was a complaint that the water levels have been receding creating a scarcity for
water. It took a lot of time for the company to come out of this problem. This was the
COMPANIES:
advertising strategy both in US and in other foreign countries. It tries to rope in popular
stars of all times into promoting their product. This could be one reason for Pepsi to have
more brand Loyalty than Coca Cola. No matter Coca cola is the number one company in
the soft drink industry, but still Pepsi has been the forerunner in implementing right
advertising strategies.
2. INNOVATING NEW PRODUCT LINE: Pepsi has a very strong innovation team. That
is the reason we can see a vivid variety of Drinks not only in the carbonated segment but
also in the other segments as well. To overcome the threat of decrease in the volume of
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sales in the carbonated segments the companies were forced to think out of the box. Pepsi
product line i.e., the flavored bottled water segment and the energy drinks segment. Coca
Cola did come up with products in the same segment , but Pepsi was very quick to react
to the threat.
3. MARKETING STRATEGIES: Marketing strategies are equally important for a
company to survive in the competition. Coca Cola has done the same to be at the top
constantly. Not once or twice, Coca cola could be considered to have good marketing
strategies to boost up its sales and remain at the top even when Pepsi has got better
innovation and brand loyalty. The case of integrating the whole seller and the distributor
concept clicked for the company. So did its planning with Subway to increase the sales
depend on the dynamism portrayed by the top level management of the company . Coca
Cola had a very strong leader Roberto C. Goizueta until 1997. But after the demise of
Roberto the company’s top management was loose threaded. The planning, decision
making and other top level discussions did not have a great impact on the company’s
sales. This became a bottleneck to the company’s further growth. A management which is
very efficient is a prerequisite for the success of any company. But when the top
management lacks the confidence in the decision making process, there is no way the
company can go forward. On the other side, Pepsi has a very dynamic management under
the leadership of the CEO Indra Nooyi who has made Pepsi to go on the success track.
The Indian water pollution crisis, its international hold, everything has been carved out
well by the top management of the company .The recent Times magazine has also
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credited the CEO of the company to be the reason behind the success of the company in
the international market. She stood first in 50 most powerful women. So a management
which is strong in its decision making processes could be the reason which has the
times came out of its ethical ways to get to the top. A recent ad showed a boy buying two
(http://crackle.com/c/Commercials/Banned_Pepsi_vs_Coca_Cola/513528) 2 cans to
reach the button to press Pepsi. It’s a complete unethical way .Also a Ad in India of Pepsi,
imitated a famous actor who promoted Coke in the wrong way .a lot of disturbances did
come up after advertising the Ad on the television. Such unethical ways should be
avoided Or else Pepsi could lose its brand image for being unethical.
6. TARGETING THE YOUNGER GENERATION: PepsiCo has been very successful in
attracting the youth by coming up with slogans like “Generation Next” which has been
one of the best slogans of Pepsi. The ad featured the Spice girls which made it more
attractive to the youth. The other competitor Coca Cola tried its best , but could not
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control=SetCommunity&CommunityID=207&PageID=720&cached=false&space=CommunityP
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Can this snack and soda giant go healthy? CEO Indra Nooyi says yes, but cola wars and corn
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(http://crackle.com/c/Commercials/Banned_Pepsi_vs_Coca_Cola/513528)
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