Historically, the war was born with the series ofsuits and countersuits between Coca-Cola and Pepsi in the 1930’s. Pepsi’smarket share began to grow and started a long journey in the beverage industry.One of the most important points that the competition brought, is to break themonopoly that Coca-Cola had in the CSD industry. The war escalated quickly withPepsi’s Steele statement “Beat Coke”, pushing both firms into coming up withmore innovation, turning to consumer-centricity and looking to increase itsmarket share.
The war affected not only producers but bottlers also. After thesuccess of the “Pepsi Generation” campaign, Pepsi had huge initiatives toimprove its bottlers plants and modernize processes, while at the same time,keeping prices lower than Coca-Cola. Even more, this war in specific took partin broadening the range of CDS by the launch of sprite (7up), fanta andmountain dew, increasing market shares, profits and popularity of these 2 firmsin the beverage market (with case volumes increasing of at least 1.
5 times –water from 3,221mn to 4,589mn – sports drink from 488mn to 843mn – etc.). Toadd, the cola war escalated to a beverage war by the purchase and manufacturingof juices, coffee, tea and other non-CDS, hence, transforming the industry froma coke only to a large beverage based on synergies between plants andmanufacturers. In 1974, Pepsi was able to make Coke cut down prices and be moreaggressive and direct in advertising, creating a strong effect on both, Coca-Cola’sprofits and the industry’s harsh competition for the first place inconglomerations. The “Pepsi Challenge” was a major breakthrough for theindustry, proving for both firms that there is no monopoly but a duopoly,affecting prices, advertising strategies, and bottlers relationship. Back tothe push of new innovation and finding solutions and services for customers,the introduction of the Diet coke in 1982 pushed the industry into a newdimension, especially with the “coke” branding.
This proved that not only thebrand name has reached high importance among customers, but also there is aneed for new products, hence, augmenting the firms’ market shares and profits.In the whole CSD industry, the war has pressured smaller producers, during thepeak, the growth of Coca-Cola and Pepsi, their intensive sales and spending onadvertising and retail, have put some smaller firms’ products in the corner ofshelfs, hence, the firm itself in the corner of the industry. On the other sideof the production line, the war has highly affected bottlers in several ways. Whileprofit margins were clearly affected for Coca-Cola and Pepsi, it got severelysmaller for bottlers. Even more, producers were always managing to increaseprices and make consumers pay for it, while bottlers had to keep fighting to modernizeplants, advertise more, and keep their best places at retailers’ stores(margins of 32% for producers compared to 8% for bottlers in 2009). Finally,competing in this long-term war, and looking for every possible way to increaseprofit and market share, Coca-Cola and Pepsi had to buy their smaller/weakerbottlers, invest in them, and transform them in a growing regional asset. Eventhough this cause increasing debts ($1 bn. For Coca-Cola) and more spending insuch project ($7 bn.
For Coca-Cola in 1997), in quickly made larger sales, anda growing profit.