Cola industry Summary

  • Last updated on November 10, 2022

The cola industry produced one of the earliest nationwide, mass-produced consumer products that appealed to popular tastes. Driven in part by consistently innovative advertising campaigns, the giants of the industry, Coca-Cola and Pepsi-Cola, grew to become international brands, selling their products throughout the world.

The Soft drink industrysoft drink industry is one of the most competitive in the world, with companies employing global advertising campaigns to reach every available market. As a result, these companies have both produced and co-opted several American icons in their attempts to develop and maintain brand identity and loyalty. Although the industry has been dominated by the Coca-Cola Company[Coca Cola Company]Coca-Cola Company and PepsiCoPepsiCo, the maker of Pepsi-Cola, other companies have sought entry into the market and have affected the business practices of these two giants.Cola industry

The formula for Coca-Cola (also known as Coke) was created by John Stith Pemberton, John StithPemberton, who mixed a coca extract syrup and carbonated water. His invention was first sold in Atlanta as a patent medicine, before it was served at soda fountains and mixed by hand in drug stores. During the early twentieth century, the Coca-Cola Company expanded through the United States. Then, during the 1920’s, it began to expand overseas, as the company created a foreign bureau to sell the drink. During World War II, Coca-Cola became the favorite drink of American soldiers, with bottling plants being built near the front lines in Europe and North Africa. As the war ended, Coca-Cola became an American icon.

Coca-Cola vs. Pepsi Cola

The Pepsi-Cola company (which became PepsiCo in 1965 when it merged with Frito-Lay) also had ordinary beginnings, as Caleb Bradham, a North Carolina druggist, developed a formula for what would become a sweeter soft drink in 1898. Pepsi-Cola (also known as Pepsi) became a perennial also-ran to Coca-Cola, until Depression-era cost-cutting led to the development of the twelve-ounce bottle, which gave consumers of Pepsi more product for the same price as the much smaller Coca-Cola. Suddenly, impoverished consumers had a cheaper version of their favorite beverage, and Pepsi-Cola challenged Coca-Cola’s supremacy during the postwar era.

PepsiCo used several tactics to seize market share from Coca-Cola. Marketing;cola drinksIts most famous and effective was the Pepsi Challenge of the 1980’s: Consumers were asked to take blind taste tests, comparing Pepsi-Cola and Coca-Cola. The results touted in Pepsi-Cola’s advertising campaign favored Pepsi-Cola. The ads worked, and Coca-Cola lost market share to Pepsi-Cola, setting the stage for the disastrous gamble of New Coke.

Preparing to celebrate a century of Coca-Cola, the company embarked on one of the worst public relations disasters in corporate history, reformulating Coca-Cola from the original recipe. Intended to recharge the Coca-Cola brand and defeat the challenge from Pepsi-Cola, New Coke instead energized a consumer revolt against the new formula. For months, fans of the original formula collected the old Coca-Cola under the assumption that it would run out, then they began a media campaign to convince the company to return to the original formula. With its new formula under attack, the company relented, selling New Coke alongside the original formula drink, which it renamed Coca-Cola Classic. Eventually New Coke would disappear from the shelves, ending the brief and disastrous attempt to change an icon.

Getting the product to customers is important for increasing market share. This Pepsi-Cola truck delivered the company’s beverages to restaurants in 1943.

(Library of Congress)

The rivalry between Coca-Cola and PepsiCo moved from the companies’ main products to their subsidiary ones; both corporations purchased or developed competing brands of bottled water, teas, and sports drinks such as Gatorade and Powerade. Old products, such as vanilla-flavored or cherry colas, were reintroduced and repackaged for a generation that had not known them. PepsiCo went a step further by expanding into the fast-food business, purchasing Pizza Hut (1977), Taco Bell (1978), and Kentucky Fried Chicken (1986; later KFC), and using these chains’ thousands of outlets to sell PepsiCo products, thus creating a permanent market for Pepsi-Cola and its other soft drinks. In 1997, PepsiCo spun off these fast-food restaurants, creating Tricon Global Restaurants, which in 2002 acquired Long John Silver’s and A&W Restaurants and became Yum! Brands.

Other Competitors

A third major competitor in the cola wars entered the market in 1905. Royal Crown colaRoyal Crown cola was also invented by a curious chemist and quickly became the third leading cola in the United States. It was best known for its innovations, including being the first to use the taste-test format to compare itself with its rivals during the 1940’s. In 1962, Royal Crown introduced the first diet cola, sending its popularity soaring, as healthy eating became the newest trend. Although Royal Crown enjoyed a third-place position in the competition during the 1960’s and 1970’s, it suffered from its image as a cheap imitation of Coca-Cola and Pepsi-Cola, appealing to consumer purse strings rather than their taste. Even its introduction of a caffeine-free cola in 1980 could not stop the brand’s slide, and in 2000, it was purchased by the Canadian firm Schweppes. Since then Royal Crown cola has been one of several soft drinks sold by conglomerates.

In 1994, British billionaire Richard Branson challenged Pepsi-Cola and Coca-Cola, introducing his Virgin Cola into the English market, and at the turn of the century he sought to invade the American market. Unfortunately for Branson, his plans fizzled: Virgin Cola was unable to grasp a foothold in the United States, even with Branson’s billions backing it. Because of this, few new colas are offered nationally, although supermarkets routinely carry regional products, such as Jones Soda, or discount colas under the stores’ own logos.

Further Reading
  • Allen, Frederick. Secret Formula. New York: HarperBusiness, 1995. Highlights the development and growth of the Coca-Cola Company.
  • Hays, Constance. The Real Thing. New York: Random House, 2004. Recounting of the rise of Coca-Cola and its battle with PepsiCo and other soft drink companies.
  • Pendergrast, Mark. For God, Country, and Coca-Cola. New York: Basic Books, 2000. Explains how Coca-Cola and PepsiCo have battled for loyalty of consumers.
  • Rothacher, Albrecht. Corporate Cultures and Global Brands. Hackensack, N.J.: World Scientific, 2004. Examines how international brands of products have spread across the world and includes discussion of the Coca-Cola and PepsiCo companies.

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