The case is about the greatest rivalry between the two companies which are Coca-Cola and Pepsi. These companies are neck to neck on pricing and capturing the market share ofcarbohydrates soda market. Both of these companies are taking many initiatives for capturing the market. The initiatives are through low pricing, introducing varieties of similar drinks, heavy investment in advertising and promotions and improving thedistribution.  Coca-Cola was founded in the year 1886 whereas Pepsi was established in the year 1893.

Ever since Pepsi’s formation it hastaken many steps in capturing the market such as Texas where Coke was the dominant company, Pepsi launched a campaign by the name of Pepsi Challenge in which it demonstrated its taste as better than Coke. This caused the company to capture the market in Dallas and further started to run this campaign “Pepsi Challenge” nationwide.

However, in the early 1990s, both the companies had started to face competition as the customers started to shift from cola drinks to other non-cola beverages such as diet soda, lemon-lime, and other popular drinks. For competing with the non-cola beverages, Coke and Pepsi started to launch new non-cola drinks such as Tropicana, Gatorade, and SoBe.


There are several alternatives available for both of these companies, however, these alternatives have both pros and cons. Following are the alternatives which the companies could take:

  • Lower the prices: The companies could lower the prices of theircola creating attraction to the customer or could offer some money back for returning their plastic bottles. However, if one company would follow this strategy, the other strategy would also adapt it immediately since both the companies are mainly at price wars.
  • Improving distribution: The companies could enhance theirdistribution and target the areas where there is lack of soda and beverages. This would result in thecapture of market share and also improving the overall sales revenue.
  • Introduce healthy products: Both the companies have introduced cola and non-cola beverages, however, they have not much focused on introducing healthy drink products which would attract people who preferhealthy
  • Increase Advertisement and promotion: One of the best strategies for creating differentiation between these two companies is through advertisements and promotions. Another method for creating attraction between the customers is bycreating anattractive bottle with good packaging.


The best alternative for Pepsi and Coca-Cola would be to introduce healthy products in the market since the taste and preference of customers have been switching to other non-carbs or non-soda beverages. Pepsi or Coke could introduce healthy products which would attract consumers who lookfor products which would improve their health.

However, it is difficult topersuading the consumers in buying health beverages which are less tasteful. Most of the customersare loyal to Pepsi and Coke beverages instead of their other productsand it would prove to be difficult in convincing them to try the healthy product.

Barriers to Entry

There are many barriers for a new company to enter in the beverage industry and carbonated soft drinks market. The following are the list of barriers to entry for a new company in the beverage industry:

  • Heavy investment is requirement
  • Formulation of good and tasteful drink
  • Creating Customer Loyalty
  • High advertisement and promotion
  • Creating brand positioning in the minds of the customers
  • Environmental friendly
  • And others………………………………………………..
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