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Cola Wars
Cola Wars Cola Wars Stephen Brennan Accounting II Tue/Thur. 3-4:30 The Wall Street Journal recently did an article on how the soft-drink battleground has now turned toward new overseas markets. While once the United States, Australia, Japan, and Western Europe were the dominant soft-drink markets, the growth has slowed down dramatically, but they are still important markets for Coca-Cola and Pepsi. However, Eastern Europe, Mexico, China, Saudi Arabia, and India have become the new "hot spots." Both Coca-Cola and Pepsi are forming joint bottling ventures in these nations and in other areas where they see growth potential. As we have seen, international marketing can be very complex. Many issues have to be resolved before a company can even consider entering uncharted foreign waters. This becomes very evident as one begins to study the international cola wars. The domestic cola war between Coca-Cola and Pepsi is still raging. However, the two soft-drink giants also recognize that opportunities for growth in many of the mature markets have slowed. Both Coca- Cola, which sold 10 billion cases of soft-drinks in 1992, and Pepsi now find themselves asking, "Where will sales of the next 10 billion cases come from?" The answer lies in the developing world, where income levels and appetites for Western products are at an all time high. Often, the company that gets into a foreign market first usually dominates that country's market. Coke patriarch Robert Woodruff realized this 50 years ago and unleashed a brilliant ploy to make Coke the early bird in many of the major foreign markets. At the height of World War II, Woodruff proclaimed that Awherever American boys were fighting, they'd be able to get a Coke. By the time Pepsi tried to make its first international pitch in the 50s, Coke had already established its brand name and a powerful distribution network. In the intervening 40 years, many new markets have emerged. In order to profit from these markets, both Coke and Pepsi need to find ways to cut through all of the red tape that initially prevents them from conducting business in these markets. This paper seeks to examine these markets and the opportunities and roadblocks that lie within each. In 1972, Pepsi signed an agreement with the Soviet Union which made it the first Western product to be sold to consumers in Russia. This was a landmark agreement and gave Pepsi the first-mover advantage. Presently, Pepsi has 23 plants in the former Soviet Union and is the leader in the soft-drink industry in Russia. Pepsi outsells Coca-Cola by 6 to 1 and is seen as a local brand. Also, Pepsi must counter trade its concentrate with Russia's Stolichnaya vodka since rubles are not tradable on the world market. However, Pepsi has also had some problems. There has not been an increase in brand loyalty for Pepsi since its advertising blitz in Russia, even though it has produced commercials tailored to the Russian market and has sponsored television concerts. On the positive side, Pepsi may be leading Coca-Cola due to the big difference in price between the two colas. While Pepsi sells for Rb250 (25 cents), Coca-Cola sells for Rb450. For the economy size, Pepsi sells 2 liters for Rb1,300, but Coca- Cola sells 1.5 liters for Rb1,800. Coca-Cola, on the other hand, only moved into Russia 2 years ago and is manufactured locally in Moscow and St. Petersburg under a license. Despite investing $85 million in these two bottling plants, they...This is ONLY a preview of the article. If you would like to view the entire document, you must subscribe to Electronic References. Please register below now! Get This Full Article After Registration
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