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Cola Wars - Is Pepsi Conceding Defeat in the Great War of the Cola?

Author J. Davis. Published on May 31, 2011 - 8:06 pm (1781 views — 902 words)

The latest development in the cola wars are that for the first time in history Diet Coke has replaced Pepsi as the number-two-best selling soft drink in the world. This is a major upheaval in Cola Wars that have been going on for over 50 years.

With rampant obesity and growing demand for lower-calorie versions, the long-term outlook for full-calorie beverages looks grim. In 2000, diet brands accounted for only 20% of most popular sodas. Today that number has doubled to 40%. Only iconic brands with the market leadership and staying power of Coca-Cola are in the best position to hang on in the face of the diet/light onslaught, while challenger brands like Pepsi are forced to play catch-up.

Perhaps the most important lesson for PepsiCo is that losing this battle may not be so bad if they’re smart about it. What they should do is continue on with a path to deliver healthy, low-calorie foods and beverages to increasing numbers of consumers demanding these products instead of coming out swinging in a predictable attack mode. There is no longer a need to spend massive amounts of advertising dollars or a new wave of "Pepsi Challenge" ads against Coke to restore Pepsi to its former glory.

History suggests that the latter response is the expected path. According to The Los Angeles Times, Massimo d'Amore, chief executive of PepsiCo Beverages Americas, already has declared, "We want to reclaim the place that belongs to this company." To this end, Pepsi is strengthening its media presence and has signed on to spend $60 million on Simon Cowell's The X Factor heralding a return of the cola wars that marked music and entertainment in the 1980s and 1990s to American television screens," according to The Financial Times.

In addition, cola brand spending is purportedly going up by 30%.

The Coca-Cola Company should welcome a re-ignition of the Cola Wars. Spending substantial sums on old guard Pepsi will simply delay, not reverse, Pepsi's slide in the rankings. Furthermore, diverting marketing funds to prop up Pepsi in lieu of supporting longer-term better-for-you-products risks forfeiting their early leadership position in this growing category. Remember, this is the company that led the industry in addressing trans fats by eliminating those offending oils in all of its Frito-Lay snack chips. They have also established a platform dedicated to improving "human sustainability," a noble and potentially highly profitable direction for the company.

No doubt senior executives at PepsiCo are taking heat from Wall Street analysts, Pepsi bottlers, and their board of directors and are scrambling to bolster efforts behind brand Pepsi, find new management, and/or fire the advertising agency. This is the expected visceral reaction. If the company acts wisely, however, it will forge on with the current path that will reward it in the long term.

U.S. sales of Diet Coke overtook those of Pepsi-Cola for the first time in 2010, making the diet soda the No. 2 carbonated soft drink in the country behind Coca-Cola, industry data are expected to confirm Thursday.
Occupying the top two rankings is a historic win for Coca Cola in the cola war. In its decades-old rivalry with PepsiCo Inc, which is trying to retool its marketing.
The two companies have fought over the past decade to win market share from one another as cola sales overall have dropped.

Pepsi-Cola held only a slight lead over Diet Coke in 2009, when each brand had slightly less than a 10% market share among carbonated soft drinks. That year, regular Coke won the cola wars with a 17% market share, according to Beverage Digest, a trade publication and data service.

Market-share data released Thursday by Beverage Digest confirms Diet Coke pulled ahead in 2010.
Last month, Beverage Digest reported Pepsi-Cola's market share fell 0.5 percentage point while Diet Coke slipped just 0.1 percentage point in U.S. supermarkets, convenience stores and other retail outlets. This week's comprehensive data will includes food-service data, including restaurant fountain sales, where Coca-Cola is larger.

PepsiCo made a big bet in 2010, when it didn't market its flagship cola on the Super Bowl or in other TV spots. Instead, it launched the Refresh Project, an online charitable-giving program that disbursed $20 million in donations "for refreshing ideas that change the world.''

Some industry analysts have questioned whether that program would translate into cola sales. PepsiCo says that the initiative improved its corporate profile as more than 87 million votes were cast for charitable projects, and that it will help boost revenue in the long run.

Coca-Cola has ramped up its traditional TV marketing in recent years to focus on its core brands. After a nine-year hiatus, it has advertised its flagship Coke brand during the past five Super Bowls. It has also pitched Diet Coke during the past five Academy Awards.

PepsiCo says it will continue its Refresh Project but also plans more traditional ads to try and boost Pepsi-Cola and Diet Pepsi.It plans to promote Pepsi-Cola on "X Factor," a televised music competition created by Simon Cowell to compete against "American Idol," which Coca-Cola sponsors.

PepsiCo also returned to the Super Bowl this year to promote Pepsi Max, a diet cola that targets males and competes against Coke Zero, another diet cola.

Increasing the stakes, Coca-Cola and PepsiCo also spent billions of dollars last year to acquire their largest independent U.S. bottlers in a bid to bring drinks to stores more quickly.