International Marketing Case Study

IMB 387 SEEMA GUPTA

COKE AND PEPSI: FROM GLOBAL TO INDIAN ADVERTISING

Coca-Cola and Pepsi-Cola vied for a “throat share” of the soft drinks market for more than a century. Carbonated soft drinks (CSD) contributed to majority of the revenues in soft drinks. The core market was the United States which had high per capita consumption (see Exhibit 1 for per capita consumption of carbonates in select countries). The Americas accounted for 54% of the global CSD market, Europe for 34.5%, and Asia-Pacific for 11%. 1 The industry was characterized by the presence of strong brands – with three brands – Coca-Cola, Pepsi, and Sprite ranked 1, 23, and 61 globally and valued1 $70 billion, $14 billion, and $5.8 billion, respectively by Interbrand, a leading brand valuation and consultancy firm. 2 Advertising had played a major role in building the brands of the two majors which largely competed on parity pricing. Until the mid-1990s, consumption of soft drinks in the United States steadily increased while that of milk and coffee declined. Thereafter, owing to shifting consumer preferences towards healthier beverages, the US market began to plateau. This posed a challenge to the two majors. Was their era of sustained growth and profitability in CSD coming to an end or could they drive growth from emerging markets such as India? How much should they invest in advertising? Should Indian advertising be shaped by global advertising?

GLOBAL SOFT DRINK INDUSTRY

The term “soft drink” was coined to distinguish flavored drinks from hard liquor. The soft drink industry was born when Coca-Cola syrup was formulated in 1886 by John Pemberton, a pharmacist in the United States who sold it at drugstore fountains as a potion for “mental and physical disorders.” 3 In 1894, Coca-Cola granted its first bottling franchise which led to the proliferation of Coca-Cola throughout the United States by 1895. An infrastructure of independent bottlers added sweeteners and carbonated waters to the...