Coke has been leading the competition from 1998-2002 in terms of higher market capitalization, gross margin and net income. However, Pepsi was leading the fight in terms of growth in revenue and net income. However, Pepsi’s stock performed 45% better than Coke’s stock. Overall, Pepsi was a smaller company but it was growing faster than Coke. Coke had a strong foundation, however, their revenue during this period increased due to summer months artificially increasing the demand. Pepsi, on the other hand, had consistent growth. The market for carbonated beverages was slowing down and other newer segments were growing. Water and Sports beverages grew at 26% and 15%. Pepsi’s growth was largely due to acquisitions that it had made and new product introductions. Pepsi acquired Gatorade and gained 81% market share in sports beverage segment. Pepsi’s Lipton was outperforming Coke’s Nestea. Pepsi’s Tropicana defeated Coke’s Minute Maid in every market. Pepsi also targeted the profitable segments such as convenience stores and youth market (with new youth sports beverage, Mountain Dew). Pepsi was focusing on domestic market, while coke was targeting international growth. Despite Coke’s attempt to leverage on its competencies, it faced scams and negative publicity. In our view, Pepsi is performing better than Coke in this battle as they are concentrating on building their brand. Pepsi’s focus on domestic market will result in opportunities in future to grow internationally better. On the other hand, Coke is capitalizing on its huge brand image, tarnishing it and changing it (to be a local brand over an American icon).
Coke was facing a difficult situation due to some risky decisions it took to enter new international markets and the management wasn’t able to handle to grow ...