A Paper on Cola Wars that I wrote
yeah yeah its boring, but humor me as I take up space on your friends list with text.
Cola Wars?
Are you young and healthy? Do you want to be? Young and healthy people drink Pepsi and find its refreshing sweet taste a great addition to their lives! This was the decoded message that Pepsi sent to consumers with the “Pepsi Generation” advertising campaign. The “Pepsi Generation” campaign captured the attention of its audience and increased product awareness. The following “Pepsi Challenge” campaign built on the consumers’ awareness and challenged them to blind taste tests. These tests indicated a definitive preference for Pepsi. Why drink Coke when Pepsi tastes better? Together the “Pepsi Generation” and “Pepsi Challenge” campaigns sparked a significant transition away from the soft drink industry that the world had grown used to. While Pepsi was focused on this industry, it did not pigeon-hole itself into the classification as just a soft-drink producer. Pepsi continues to capitalize on new opportunities in the snack-food and beverages industries and it is this diversification that has led Pepsi to maintain higher growth rates than Coke.
Coke was outspending Pepsi in advertising, had twice as many vending machines, dominated the fountains and had more shelf-space yet was still losing market-share. These factors all led Coke and Goizueta to believe that it was a taste problem. A four million dollar test ensued with the hope of developing a new flavor of Coke. While this was the correct mindset, the researchers neglected to inform the testers that it would be replacing the old Coke. Coke was seeking to win back its old customers and steal market-share away from Pepsi, yet it did not adequately reflect on its current consumers’ response. Goizueta thought that bottlers and retailers would be resentful and that market share cannibalization would leave Pepsi as the number one soft drink. It was this reasoning which led to the decision to replace the old Coke formula rather than supplement it with another flavor. The resulting backlash from their loyal consumers proved just how flawed this decision was. The later reintroduction of Coke Classic was a success that allowed Coke to reestablish itself as the number one cola.
Under Goizueta, Coke’s emphasis on the international market intensified as it recognized the importance of the global market. Pepsi generated seventy percent of its profits domestically, while eighty percent of Coke’s profits were from overseas. This disparity cannot be attributed solely to Pepsi’s lack of interest but rather it is more of a testament to Coke’s entrenchment in these markets. Coke’s reliance on foreign bottlers and the breadth of Coke’s distribution operation, taxed the quality assurance controls too much and several contamination issues shook the overseas market. Eventually, there was a sluggish response from the CEO. Coke was allowed to recover but only because of a very expensive PR campaign, and a silent response from Pepsi.
Several of Coke’s policies were formed on the basis of flawed marketing and business principles. A CEO of Coke believed that the Coke brand was at a stage where it could sell itself. The result of the depleted marketing budget was what one could expect from inadequate funding: ineffective ads which failed to capture new consumers. Additionally, instead of diversifying, Coke looked to products that had as high of a profit margin as its cola, passing up numerous opportunities that Pepsi took advantage of. Coke’s board of director’s chose to remain in the mindset of its old CEO Goizueta and did not recognize that Coke was at a different stage of the product life cycle than when Goizueta had been CEO.
McDonald’s, in the previous Burger Wars case could be said to almost parody Coke’s situation. Coke essentially had the mindset that it was a seller of carbonated drinks, nothing else, in the same way that McDonald’s believed itself to be only a seller of hamburgers. Both of these companies overlooked the general service that they provide and limited the scope of their possible operations. This limited scope resulted in their growth stagnating and may eventually threaten their companies’ future if these products face product obsolescence caused by a more health-conscious consumer. McDonald’s also showed how the bigger an operation becomes, and the more it expands how the quality controls can falter. The message that is to be learned as a manager is to not be close-minded, to consider how other opportunities can add value to the business and to not sacrifice quality standards or any other cornerstones of the business, for growth.
Cola Wars?
Are you young and healthy? Do you want to be? Young and healthy people drink Pepsi and find its refreshing sweet taste a great addition to their lives! This was the decoded message that Pepsi sent to consumers with the “Pepsi Generation” advertising campaign. The “Pepsi Generation” campaign captured the attention of its audience and increased product awareness. The following “Pepsi Challenge” campaign built on the consumers’ awareness and challenged them to blind taste tests. These tests indicated a definitive preference for Pepsi. Why drink Coke when Pepsi tastes better? Together the “Pepsi Generation” and “Pepsi Challenge” campaigns sparked a significant transition away from the soft drink industry that the world had grown used to. While Pepsi was focused on this industry, it did not pigeon-hole itself into the classification as just a soft-drink producer. Pepsi continues to capitalize on new opportunities in the snack-food and beverages industries and it is this diversification that has led Pepsi to maintain higher growth rates than Coke.
Coke was outspending Pepsi in advertising, had twice as many vending machines, dominated the fountains and had more shelf-space yet was still losing market-share. These factors all led Coke and Goizueta to believe that it was a taste problem. A four million dollar test ensued with the hope of developing a new flavor of Coke. While this was the correct mindset, the researchers neglected to inform the testers that it would be replacing the old Coke. Coke was seeking to win back its old customers and steal market-share away from Pepsi, yet it did not adequately reflect on its current consumers’ response. Goizueta thought that bottlers and retailers would be resentful and that market share cannibalization would leave Pepsi as the number one soft drink. It was this reasoning which led to the decision to replace the old Coke formula rather than supplement it with another flavor. The resulting backlash from their loyal consumers proved just how flawed this decision was. The later reintroduction of Coke Classic was a success that allowed Coke to reestablish itself as the number one cola.
Under Goizueta, Coke’s emphasis on the international market intensified as it recognized the importance of the global market. Pepsi generated seventy percent of its profits domestically, while eighty percent of Coke’s profits were from overseas. This disparity cannot be attributed solely to Pepsi’s lack of interest but rather it is more of a testament to Coke’s entrenchment in these markets. Coke’s reliance on foreign bottlers and the breadth of Coke’s distribution operation, taxed the quality assurance controls too much and several contamination issues shook the overseas market. Eventually, there was a sluggish response from the CEO. Coke was allowed to recover but only because of a very expensive PR campaign, and a silent response from Pepsi.
Several of Coke’s policies were formed on the basis of flawed marketing and business principles. A CEO of Coke believed that the Coke brand was at a stage where it could sell itself. The result of the depleted marketing budget was what one could expect from inadequate funding: ineffective ads which failed to capture new consumers. Additionally, instead of diversifying, Coke looked to products that had as high of a profit margin as its cola, passing up numerous opportunities that Pepsi took advantage of. Coke’s board of director’s chose to remain in the mindset of its old CEO Goizueta and did not recognize that Coke was at a different stage of the product life cycle than when Goizueta had been CEO.
McDonald’s, in the previous Burger Wars case could be said to almost parody Coke’s situation. Coke essentially had the mindset that it was a seller of carbonated drinks, nothing else, in the same way that McDonald’s believed itself to be only a seller of hamburgers. Both of these companies overlooked the general service that they provide and limited the scope of their possible operations. This limited scope resulted in their growth stagnating and may eventually threaten their companies’ future if these products face product obsolescence caused by a more health-conscious consumer. McDonald’s also showed how the bigger an operation becomes, and the more it expands how the quality controls can falter. The message that is to be learned as a manager is to not be close-minded, to consider how other opportunities can add value to the business and to not sacrifice quality standards or any other cornerstones of the business, for growth.