Coca-Cola Vs. PepsiCo: Difference in Their Business Model

ATHUL C K ATHUL C K
Jan 22, 2021 8 min read
Coca-Cola Vs. PepsiCo: Difference in Their Business Model

There are hundreds of beverage brands offering a variety of drinks to consumers. But PepsiCo, Inc. and Coca-Cola Co. are leaders in the global beverage industry. They are the world's largest beverage manufacturers. Their business models are similar in terms of flagship products and ideal consumers and industry.

The Coco-Cola company was founded in 1892 with its headquarters situated in Atlanta, USA. The PepsiCo Company was founded in 1898. At that time, its name was Pepsi-Cola. The company merged with Frito-Lay, Inc. in 1965. After that, its name changed to PepsiCo. The headquarters of the company situated in New York, USA.

The PepsiCo operates several brands including Tropicana, Frito-Lay, Gatorade, Quaker, etc. The world's top soft drink brands, such as , Coke  Sprite, Fanta are the brands owned by Coca-Cola company. We can find so many key similarities and key differences between these two business models. The comparisons between these two business models are given below. Also, we've listed pricing strategies of coca cola and PepsiCo and Marketing Strategies of Coca Cola and PepsiCo.

Strengths: PepsiCo Vs Coca Cola Company
Weaknesses: PepsiCo Vs Coca Cola Company
Coca Cola Business Model
PepsiCo Business Model
Coca-Cola Pricing Strategy
PepsiCo Pricing Strategy
Coca Cola Marketing Strategies
PepsiCo Marketing Strategy

Strengths: PepsiCo Vs Coca Cola Company

Pepsi has a brand value of over $18.2 billion and has ranked 36th in the most valuable brands in the 2020 list prepared by Forbes. Sales of beverages and snack foods of the company are coming under one umbrella. It made PepsiCo a diversified and stronger business. It's 54% of revenue is from food business and the remaining 46% is from beverage industry.

Marketing Strategies of PepsiCo
Products of PepsiCo

The company has 22 brands, including Pepsi, Fritos, Doritos, Pepsi Max, Diet Pepsi, etc. Each one makes more than $ 1 billion annually from sales. PepsiCo has a strong global presence in more than 200 countries around the world. It utilizes Direct Store Delivery (DSD) for its distribution network and supply chain. So the distributors deliver snacks and the beverages directly to small stores.

The target audience of PepsiCo is the younger generation. They stand as a brand for the youth. To face the challenges and to increase resource sustainability, the PepsiCo Company works with so many community-based organizations.

In the case of Coco-Cola, it has strong a and unique brand identity. In 2011, it got "highest brand equity award" from Interbrand. The company has a larger global presence. They are selling products in more than 200 countries. They also sell 9 billion products per day.

Customer loyalty is another strength of Coca-Cola. They are one of the most emotionally-connected brands in the US. It is difficult to find substitutes for them. Coca-Cola has the 3rd rank in the Best Global Brand list annually prepared by Interbrand. According to Forbes List of Most Valuable Brands it ranked 6th with a brand value of $64.6 Billion in 2020. Also, it has more market share than PepsiCo in the beverage industry.

Diet Coke, Sprite, Limca, Maaza, and Fanta are top growing brands of Coca-Cola. The distribution network of the company is more extensive and efficient in the world. They have almost 250 bottling partners. In 2016, Coco-Cola acquired the largest soy-based beverage brand in Latin America named "Ades" and expanded its their beverage portfolio through this.


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Weaknesses: PepsiCo Vs Coca Cola Company

The PepsiCo is over-dependent on soft drinks and packaged foods. It decreases the agility and flexibility of the company. Most soft drinks of PepsiCo are high sugar concentration and its snacks contain chemical additives. It is not good for your health. Unsuccessful PepsiCo products, such as Pepsi Blue, Crystal Pepsi, etc. have made employees frustrated, and it allowed the growth of competition.

Companies must use their highest position to achieve the common good of society. But in 2017, PepsiCo’s advert featured by Kendall Jennifer received criticism. That advert trivialized the Black Lives Matter movement.

Marketing Strategies of Coca Cola
Products of Coca-Cola

Coca-Cola's biggest competitor is Pepsi and it is preventing them from becoming a leader in the beverage market. In the case of Coca-Cola, the product diversification of the company is very low. They are lacking in the snack food category. At the same time, PepsiCo presented snacks items like Kurkure and Lays. This puts Pepsi ahead of Coca-Cola.

Carbonated beverages are one of the main sources of sugar consumption. It causes health problems such as diabetes and obesity. Coca-Cola is the largest producer of carbonated beverages. Most health experts give the advice to decrease the use of soft drinks. The company hasn't found any solution to this problem yet.



Coca Cola Business Model

The business of Coco-Cola Company has been weakened because of Covid-19 epidemic. Coca-Cola reported that they have revenue of $8.60 billion in the first quarter of 2020. They stated that the closure of stadiums, cinema theaters, and restaurants because of the coronavirus pandemic has affected the company.

Business model of coca cola
Coca Cola Business Model

The volume of Coca-Cola’s unit cases had a 3% increase at the end of February, except in China. During March, the demand for beverages from e-commerce channels and grocery stores increased in the market. Products like Simply Orange juices and Minute maid had higher sales before the crisis.

The unit case volume has fallen 7% in the Asia-Pacific region because of Covid-19. It also decreased in Latin America and Europe, the Middle East and Africa. Sports drink's unit case volume has 2% increase during the quarter, but it is the only segment that has seen an increase in volume in the Asia-Pacific region.

The unit case volume of soft drinks fell 2%. In the quarter, the segment of juices, dairy products, plant-based beverages fell 6%. Company officials said that Chinese sales began returning to normal level due to reopening of the country.


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PepsiCo Business Model

In the case of PepsiCo, the Company has revenue of $13.88 billion in the first quarter of 2020.  PepsiCo has a 7.7%  increase in Net sales. Pepsi announced that they closed its $3.85 billion deal to buy Rockstar Energy and decided to offer the distribution deals with other energy drink producers. Also, they signed a distribution contract with Vital Pharmaceuticals.  

Business model of PepsiCo
Total revenue of PepsiCo from 2016 to 2019

The North American beverage business experienced a 6% increase in organic revenue. But, CEO Ramon Laguarta said, that the change in customer purchasing habits will affect the amount of company's profit in the first quarter. Also, the closure of movie theaters and stadiums and restaurants will made an impact on the Pepsi's business in the 2nd quarter.

Although consumers have reduced the use of carbonated soft drinks, PepsiCo is focused to diversify the products of the company. But, Coca-Cola's franchising business, made a decrease in its revenue base.


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Coca-Cola Pricing Strategy

Coca-Cola's pricing is based on the value that its products create to customers in different situations. The pricing strategy of Coca-Cola is what they refer to as "meet-the-competition pricing": Coca-Cola product prices are set around the same level as their competitors because Coca-Cola has to be perceived as different but still affordable.

PepsiCo Pricing Strategy

Pepsi is taking this value-based pricing strategy a bit further with its “Hybrid Everyday Value” model. This pricing strategy is an effort to make customers buy Pepsi not only when it is on sale. They have various sizes of bottles offered at various rates. This is priced according to the quantity of the drinks supplied. The promotion is also done keeping in mind the targeted customers.

Coca Cola Marketing Strategies

Coca Cola introduced five strategic actions to achieve its goals which are as follows:

  • Market segmentation.
  • Brand establishment and Customer relationship.
  • Increasing financial efficiency.
  • Increasing process efficiency.
  • Focusing on core competencies and business models.

PepsiCo Marketing Strategy

A large part of Pepsi's marketing budget goes to digital marketing and advertising. Apart from that, a large sum is also spent on television advertising and other traditional methods of advertising. Any leading brand is investing heavily in digital technology for marketing and better customer experience.


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FAQs

What is the structure of Coca Cola?

The organizational structure for Coca-Cola is designed in such a way so as to suit the changing needs of the customers. It uses a decentralized system of management, which divided into two operating groups; the Bottling Corporate and Bottling Investment.

What is the production cost of Coca Cola?

It should be around 15–16 Rs, including the cost of sugar which is over 100 Mg in one litre of the bottle.

What is the pricing strategy of Coca Cola in India?

The pricing strategy of Coca-Cola is what they refer to as "meet-the-competition pricing": Coca-Cola product prices are set around the same level as their competitors because Coca-Cola has to be perceived as different but still affordable.

What is the difference between Coca-Cola and Pepsi marketing strategy?

A large part of Pepsi's marketing budget goes to digital marketing and advertising. Apart from that, a large sum is also spent on television advertising and other traditional methods of advertising. Any leading brand is investing heavily in digital technology for marketing and better customer experience.

Coca Cola works on building Customer relationships and making their production and distribution more efficient and cost effective.

What is Coca Cola's business strategy?

Coca-Cola is evolving its business strategy to become a total beverage company by giving people more of the drinks they want – including low and no-sugar options across a wide array of categories – in more packages sold in more locations.

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