Coke or Pepsi?

--for decades, the debate of personal preference between the

soft drink giants beverages has ceased to let up. The close competition between these
two brands is typical in the soft drink manufacturing industry. PepsiCo Inc. has
historically positioned itself as one of the frontrunners in a highly competitive market by
sticking with one of the worlds favorite beverages and diversifying their other products
to capture and maintain a large portion of the food and beverage industry.
Pepsi-Cola is widely considered as the second favorite soft drink in the United
States behind Coca-Cola (Dominguez, 2015). However, with diet-conscious consumers
growing by the day, soft drink consumption is steadily declining. It is important that
companies in the soft drink manufacturing industry like PepsiCo recognize this and
protect themselves from revenue losses by diversifying their product lines. PepsiCo has
excelled at this diversification and edges out Coca-Cola because of Pepsis effort
towards increasing their complementary product portfolio lines. Just like buying milk
with cereal and peanut butter with jelly, consumers tend to buy salty snacks with soft
drinks. Pepsi has capitalized on this by providing some of the most popular snack
brands to complement their various soft drink lines. PepsiCo owns Doritos, Cheetos,
Fritos, Ruffles, and Lays. Inc., providing an excellent cushion for the lost revenue
experienced by decreasing soft drink sales (Bailey, 2014). PepsiCo also owns
Gatorade, which appeals to athletes and further diversifies their product line to protect
them from the risks of an ever-changing market. Realizing these risks, PepsiCos food
products now make up 52% of their total product line, with beverages making up the
remaining 48%.

PepsiCo has not only done well with entering the food market, but it reaches a
wide range of customers in this market through the wide array of products it offers. As
consumers have recently shifted to focus on healthier eating, PepsiCo has responded
by expanding two categories of its products, which are Good for You and Better for
You (Explore PepsiCo Brands, n.d.). Good for You brands, including Tropicana
Farm Stand and Trop50, Aquafina, Naked, Sabra, Quaker and Gatorade, are PepsiCos
line of nutritious products that have healthier ingredients and limited sodium, sugar, and
saturated fat. Better for You brands include SoBe Life Water, Stacys, Baked!Lays,
PepsiNext and Propel and typically have snacks with lower fat content and more whole
grains, and beverages with zero calories or less added sugar.
In addition to expanding its product lines, a recent focus of PepsiCo has been
penetrating new markets. In 2008, PepsiCo announced plans to invest $1B into China
as part of its strategy to expand its presence in emerging markets as well as broaden its
portfolio of locally relevant products (Our History, n.d.). In 2011 PepsiCo and Tingyi
Holding, which is one of the major food and beverage companies in China, announced
an agreement to form a strategic alliance in China (Our History, n.d.). Also in 2011,
PepsiCo acquired Mabel, a leading snack producer in Brazil (Our History, n.d.).
Moves like these have helped the company substantially build and maintain its global
presence.
In 2012, PepsiCo created a design function to deliver new, uplifting, dynamic,
and emotional experiences for consumers that would elevate PepsiCo both inside and
outside the company (Our Mission, n.d.). Products of the design function include the
Pepsi Spire Family, which is a customizable soda-dispensing machine, which allows up
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to a thousand drink combinations, NSPIRE, which is an innovation kitchen on wheels,

among many others (Our Mission, n.d.). In the digital age, these innovations have
helped the brand remain relevant by creating unique, memorable brand experience for
its consumers.
Providing products other than soft drinks is a common practice throughout the
industry and has been since the industry began experiencing significant decline in 2006
(Deichert, Ellenbecker, Klehr, Pesarchick, & Ziegler, 2006). With much of the US
market saturated, PepsiCo and its competitors have been concentrating on global
distribution. Coca-Cola has excelled globally, commanding a whopping 17% of the
market in the US with 94% global recognition (Hartlaub, 2011). In 2014, Coca-Cola
generated 57.7% of its revenue internationally and their share continues to increase. If
PepsiCo is to remain competitive globally, the company must focus on driving their
international distribution, especially in China and India, where there is a lot of market
opportunity due to low saturation levels of soft drinks available.
Regulations in the soft drink industry are imposed by the FDA in the US and
similar governing agencies internationally. With growing concerns over health issues in
the United States, driven particularly by diabetes, the soft drink industry has been under
increasing scrutiny. Some states have implemented Sugar-sweetened beverage taxes,
or SSBs, in an effort to discourage consumption of soft drinks. For example, in
Arkansas, distributors must pay an additional $.02 per 12 ounces of soft drink
distributed (Sierra Services, Inc., 2012). States use these additional funds to pay for
Medicaid or other funds. Soft drink manufacturers have lobbied heavily against SSB
taxes and have offered other avenues to improve their impact on consumers like
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lowering sugar contents and printing dietary information on the sides of their products
(Sierra Services, Inc., 2012).
Apart from SSB taxes, there is no more regulation faced by soft drink
manufacturers than any other food and beverage company. PepsiCo and its
competitors must follow bottling and packaging guidelines to prevent contamination or
spread of food-borne illnesses. Because PepsiCo and Coca-Cola have been in the
industry for such a long time, they have continued to remain dominant while adapting to
new regulations. This dominance protects them from new entrants to the market, who
cannot compete with Pepsi or Cokes level of recognition or distribution chain.

References
Bailey, S. (2014, December 12). Must-know: An investors guide to PepsiCo. Retrieved
from http://marketrealist.com/2014/12/pepsico-company-overview/
Deichert, M., Ellenbecker, M., Klehr, E., Pesarchick, L., & Ziegler, K. (2006, February
22). Industry Analysis: Soft Drinks. Retrieved from
https://www.csbsju.edu/Documents/libraries/zeigler_paper.pdf
Dominguez, R. (2015, March 26). Pepsi overtakes Diet Coke as second-most popular
soda. Retrieved from http://www.nydailynews.com/news/national/pepsi-overtakesdiet-coke-second-most-popular-soda-article-1.2163963
Explore PepsiCo Brands. (n.d.). Retrieved from
http://www.pepsico.com/Brands/BrandExplorer#top-global-brands
Hartlaub, P. (2011, March 25). Sweet! America's top 10 brands of soda. Retrieved from
http://www.nbcnews.com/id/42255151/ns/business-us_business/t/sweet-americastop-brands-soda/#.VyTNqvkrLIU
Our History PepsiCo. (n.d.). Retrieved from http://www.pepsico.com/Company/OurHistory
Our Mission. (n.d.). Retrieved from http://design.pepsico.com/our-mission.php?
v=20#section5
Sierra Services, Inc. (2012). Breaking Down the Chain: A Guide to the soft drink
Industry. Retrieved from http://www.changelabsolutions.org/sites/default/files/
ChangeLab-Beverage_Industry_Report-FINAL_(CLS-20120530)_201109.pdf
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