Preview: Cola Wars Case Study

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Foundation Degree in Business Unit 1: Marketing Cola Wars Case Study There is aggressive worldwide competition between major suppliers of co1a drinks. The ‘weapons used are all aspects of marketing aimed to make individual brands more desirable than competitors. Coca-Cola has been winning in the volume sales growth, whilst Pepsi Cola is second place. In the UK, although only 60 per cent of the population actually drink colas there are more men than women consumers, and the percentage of drinkers is much higher for the younger age groups when compared to the older age range. Thus the young are the main target market. For many years Coca-Cola has been the leading brand, outselling Pepsi Cola by more than two to one in the UK and by four to one worldwide (although in Scotland, the soft drink Irn-Bru is more popular than Coca-Cola). Diet Coke shows a similar dominance over Diet Pepsi. However, more than a decade ago in the US, Pepsi gained significant market share as a result of the

effective marketing campaign featuring the ‘Pepsi challenge which concentrated on the product taste. This led to the well documented launch of the ill fated New Coke. Coca-Cola has now recovered and one of the secrets of its success is its widespread distribution coverage. Former Coke President, Bob Woodward, pledged ‘to put Coke within an arm’s reach of desire. The emphasis on availability complements other aspects of the way Coke is offered. More recently it has been Pepsi that has changed the presentation of its product with Pepsi Max and project blue - the re-packaging of the product. However, the re-launch was reported as not successful. Pepsi worldwide (excluding the USA) made a loss in the year following the re-launch. Although Max is now performing well, the losses on the other two products (regular and Diet) have been a problem. Things however have not been running smoothly for Coca-Cola. They suffered bad publicity and a drop in share price after being accused of

mishandling a contamination scare in Belgium. The company was forced to destroy millions of cases of both Coca-Cola and Fanta when hundreds of people in Belgium became 1 Foundation Degree in Business Unit 1: Marketing ill after drinking the products. The bad publicity was more from the fact that it took the company longer than a week to act upon the rumours. In Europe, Pepsico and Virgin complained that Coca-Cola was using unfair practices. They alleged that Coke used discounts and rebates to entice wholesalers and retailers to grant them exclusive distribution. Similar problems are facing the company in other parts of the world and in Russia, Cokes plants are operating far below capacity. Coke is using several measures to fight back. The future will see much more use of the traditional glass bottle with its easy to recognise shape. ‘Enjoy Coca Cola will replace the slogan ‘Always Coca-Cola and prices are likely to increase slightly to improve profit margins. Recent major

advertising campaigns in the UK have encouraged consumers to collect on pack tokens from Coca-Cola and exchange them for a prepaid mobile phone. The mobile phone has a Coca-Cola fascia, and a ring tone that plays the jingle from the Coke television advert. Pepsi also offered goods to promote products; they included Sony Mini-Discs and Technics turntables at discounted prices, in return for a specified number of ring-pulls. It is interesting to watch how the brands develop and how they compete with each other, but in the UK, the war has not been won completely. Companies such as Virgin who produce a variety of soft drinks and Barrs the makers of Irn-Bru are innovative and hungry for success. The future may yet be orange - the colour of Irn-Bru. It has been a runaway success in Scotland, is catching up in England, is especially popular when mixed with Vodka in Russia, and is about to be launched in America. The soft drinks war is not static; it is indeed a tough market to be in. 2

Foundation Degree in Business Unit 1: Marketing QUESTIONS 1. Given the facts above, what differences do you identify in the UK market between Coke and its competitors? 2. Do you think these are the cause of the ‘runner-up position of Pepsi? 3. What changes do you think Pepsi could make to strengthen its position? The answer is not to spend more on advertising, which has been tried, although you could discuss the benefits from association, such as those when Pepsi sponsored various international superstars. 4. Compare the competition between the following companies from the marketing viewpoint: i. Coca-Cola and Pepsi ii. McDonalds and Burger King iii. British Airways and Virgin Atlantic iv. Unilever and Proctor and Gamble 3

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