Overall Award Winner:
Cola Wars Continue: Coke and Pepsi in 2010
When launched, Coca-Cola's two key ingredients were cocaine (from the coca leaf) and caffeine from the kola nut. Pepsi was named after the digestive enzyme pepsin used in the original recipe, which also included kola nuts, sugar and vanilla. Both Pepsi and Coca-Cola recipes are now trade secrets.
Coca-Cola famously changed its recipe in 1985 which prompted an outcry. Six months later, the original recipe was reinstated as the company’s flagship brand.
The rivalry between Coca-Cola and Pepsi is legendary and for more than a century, they have been competing for the lion’s share of the world’s beverage market. Starting in the late 1990s, the two companies faced new challenges with a decline in the sale of fizzy drinks and health fears over sugary drinks. Alternative products and strategies had to be considered.
The Coca-Cola drink was formulated in 1886 by John Pemberton, a pharmacist in Atlanta, Georgia, who sold it at drug store fountains as a ‘potion for mental and physical disorders’.
Pepsi-Cola was invented in 1893 in North Carolina by another pharmacist, Caleb Bradham. However, the company struggled and declared bankruptcy in 1923 and again in 1932. Business picked up during the Great Depression when Pepsi made its drink almost half the price of Coke’s.
By the 21st century, Coke relied on international markets far more than Pepsi with Coca-Cola being served in more than 200 countries worldwide and 80% of its sales coming from international markets.
Pepsi still depended on the US for roughly half its total sales, but by the early 2000s was focusing on emerging markets in Asia, the Middle East and Africa.
‘The warfare must be perceived as a continuing battle without blood. Without Coke, Pepsi would have a tough time being an original and lively competitor. The more successful they are, the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to invent them.’ – Roger Enrico, former CEO of Pepsi, 1996-2001
Declining sales of carbonated soft drinks, decreasing cola sales, and the rapid emergence of non-carbonated drinks appeared to be changing the game in the cola wars. Billions of dollars had been spent bringing bottling operations back under Coke’s and Pepsi’s direct control.
However, observers were asking if this was a fundamental shift in the cola wars, or just another skirmish in their 100-year rivalry. Would it be possible to boost flagging sales? How could they compete in the growing non-carbonated market?
David B. Yoffie and Renee Kim
David explains why he believes the case is so popular and offers some key insights into writing successful cases.
Easy yet complicated
The ‘Cola Wars’ have been a classic competitive dynamic and industry analysis case for three decades. It is an industry that is easy to understand, but complicated to analyse, which always works well in the classroom. Understanding why this industry has been so profitable for so long makes it stand out.
Seeing both sides
I have written four versions of the case over the past 21 years: the original version was written with Pepsi’s cooperation in 1994. That case, which I wrote with Sharon Foley, was called, The Cola Wars Continue: Coke vs. Pepsi in the 1990s.
Widely applicable lessons
One of the most important lessons to be learnt from the Cola Wars case is that managers can have an impact on the structure of their industry and how they manage the competition with their biggest competitors. This is an important insight for companies of all sizes and shapes.
Writing a successful case
The keys to writing a successful case are:
Find out more about the ‘Cola Wars’, read the original recipes, and see how the companies’ logos have changed over the years on the Business Insider website.
David also won The Case Centre’s Strategy and General Management Award for his case, Apple Inc. in 2012, co-written with Penelope Rossano.
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