The Col(a)d War
Well, the “Cold War” between Coca Cola and Pepsi has a long history. 10 years after Coca Cola came into existence, Caleb D. Bradham produced first Pepsi, in 1898. Twice the company was almost on the verge of going bankrupt. But it still survived the competition against Coca Cola.
Till 1963, Pepsi was nowhere near Coca Cola. With a modest $300 Million turnover, Pepsi had a market share of merely 20%. At Coca Cola, Pepsi was referred to as an “Imitator” – another “Also ran”. Coca Cola had kept its formula and their trademark bottles unchanged over the years whereas Pepsi had unsuccessfully tried number of sizes and shapes for their bottles.
But the situation was soon going to change.
In 1963, Donald “Don” Kendall became the president of Pepsi. Under the able leadership of Kendall, the company steadily started making progress. The market share rose to 40%. Late 70s saw the rise of another star for Pepsi – John Sculley*. An architect turned marketer, Sculley was the youngest Vice President in Pepsi. Incidentally, while completing his MBA, Sculley had worked with Coca Cola’s Advertising Agency – McCann Ericsson!
As the Marketing Head of Pepsi, Sculley portrayed Pepsi as the Drink of the Generation Next. While Coca Cola was enjoying the status of the American Symbol, Sculley wanted Pepsi to be the icon of young exuberance. In association with advertising agency BBD & O (Baton, Bargin, Dussenberry and Osborne), Sculley successfully carried out the “Generation Next” campaign. This made Pepsi so much popular in young people that even middle aged and old people started having Pepsi instead of good old Coca Cola. Suddenly, Coca Cola became old fashioned!
The next blow by Pepsi was even subtle. It was the “Blind Test” or “the Pepsi Challenge”. The participants were blindfolded and asked to taste a set of samples having Coca Cola, Pepsi. Appropriate publicity was given to it, with event happening in front of the cameras and audience gathered to see it at the public places. Pepsi would emerge as the obvious choice selected by even the ardent Coke fans! ** John Sculley
This further increased Coke’s paranoia. The final alarm went off for Coca Cola when, in 1978, the Nielsen numbers (Survey results for Soft Drink consumption) came out, clearly showing Pepsi taking over Coca Cola. Pepsi had a 30.8% market share compared to 29.2% for Coke and this difference of 1.6% was of staggering $3 Billion!
Something had to be done about this “Pepsi Challenge.” Coca Cola urgently recalled Bryan Dyson*** from their Brazil Operations to fight against increasing threat of Pepsi.
But before Coke could take on Pepsi, it had to sort out its own domestic issues – the bottlers. Unlike Pepsi who owned all the bottlers, Coke had made a contract with bottlers in 1921, already outdated. The Bottlers’ association was adamant on not renewing the contract. Finally, Coke thought of buying the biggest bottler – the “Crass Bottling”. Coke used every trick of the business to convince the bottlers. Finally, in 1978, at a big convention of 3000 bottlers and Coke officials, the deal was struck and the matter ended.
Coke decided to take on Pepsi on the “Diet” front. Diet Pepsi was convincingly beating Coke’s “Tab” So, Coke decided to launch “Diet Coke” Coke’s management was also a big worry. Due to old age, Robert Woodruff was almost out of the active business. The then Chairman Paul Austin was diseased with Alzheimer’s disease and couldn’t remember his decisions. So they found a managing committee of 6 executives. The 6 headed monster was busy fighting internally. Finally, Woodruff had to intervene and select Robert Guizeta as the chairman.
Guizeta immediately started with Diet Coke Project. Sergio Zymann was made the head of the project named “Project Harvard” Every formula was researched and refined. Blind tests were carried out and plans were made in case participant selects other products. Diet Coke successfully passed the test. Then came the positioning, marketing and branding. Coke made McCann Ericsson hire John Bargin (the second “B” in BBD & O) to handle the Coke account.
Guizeta invited 50 top executives to a meeting and asked them to take head on with Pepsi. The design for the Diet Coke packaging was given to one Schechter who had earlier made popular package design like Budweiser Beer and Camel Cigarettes. He prepared about 150 designs with utmost care for single line, curve, font etc. To mislead the people, Diet Coke was named as Lucy, Shrimp, BPS etc.
Bargin thought of many punch lines and finally settled with “Coke is it” In another convention of about 2500 bottlers and officials, the Atlanta Symphony played the fast paced song launching Diet Coke. Same night, at 9:15 PM, the ad was shown across all the national networks. Soon, Coke launched another advertisement featuring many film stars. It ad apparently cost Coke $2.5 Million! Instead of opting for conventional “Test Marketing” in small test markets, Coke directly launched the “Diet Coke” in big malls and super markets. This was a very bold move to make.
At last, Diet Coke entered the market with all its guns blazing.
Of course, Sculley was not behind to retaliate with launching “Caffeine Free” Pepsi the very next day at New York.
How Coca Cola then came up with “New Coke” in 1985 and how it bombed and resulted in Coke losing big share of the market and moreover faith of its loyal customers, how Coca Cola had to revert their decision are all well known. The “New Coke” disaster now stands as a lesson to learn for all the Marketers.
Even when Coca Cola has now established itself as the undisputed leader in the soft drinks industry, the fight still continues to date…
Regards,
Abhishek
Note:
*: John Sculley left Pepsi in 1983 to join Apple. Legend goes that Steve Jobs had convinced him saying,” Would you like to continue selling sugarated water or would you like to change the world?” Finally, Sculley chose the latter one.
** In a book named “Blink”, author Malcolm Gladwell claims that Pepsi is sweeter than Coke. So when participant tastes just a sip, he/she finds it better than Coke. But if the participant were to consume the whole bottle of Pepsi, he would have found it annoyingly sweet. So even when Pepsi had won the Blind Test, in the daily usage over a longer duration Coke was the preferred choice)
*** Brian G. Dyson, vice chairman and chief operating officer of The Coca-Cola Company, joined the Company in Venezuela in 1959, working in South America, the Caribbean, and Mexico. He held several positions in the Company, including president of Coca-Cola USA, the Company’s U.S. soft drink division; president of Coca-Cola North America; president and CEO of Coca-Cola Enterprises (CCE); and vice chairman of CCE. Dyson retired from the Coca-Cola system in 1994, but remained active as a consultant to the Company. In August of 2001, he came out of retirement and accepted the position of vice chairman and chief operating officer of The Coca-Cola Company.
Till 1963, Pepsi was nowhere near Coca Cola. With a modest $300 Million turnover, Pepsi had a market share of merely 20%. At Coca Cola, Pepsi was referred to as an “Imitator” – another “Also ran”. Coca Cola had kept its formula and their trademark bottles unchanged over the years whereas Pepsi had unsuccessfully tried number of sizes and shapes for their bottles.
But the situation was soon going to change.
In 1963, Donald “Don” Kendall became the president of Pepsi. Under the able leadership of Kendall, the company steadily started making progress. The market share rose to 40%. Late 70s saw the rise of another star for Pepsi – John Sculley*. An architect turned marketer, Sculley was the youngest Vice President in Pepsi. Incidentally, while completing his MBA, Sculley had worked with Coca Cola’s Advertising Agency – McCann Ericsson!
As the Marketing Head of Pepsi, Sculley portrayed Pepsi as the Drink of the Generation Next. While Coca Cola was enjoying the status of the American Symbol, Sculley wanted Pepsi to be the icon of young exuberance. In association with advertising agency BBD & O (Baton, Bargin, Dussenberry and Osborne), Sculley successfully carried out the “Generation Next” campaign. This made Pepsi so much popular in young people that even middle aged and old people started having Pepsi instead of good old Coca Cola. Suddenly, Coca Cola became old fashioned!
The next blow by Pepsi was even subtle. It was the “Blind Test” or “the Pepsi Challenge”. The participants were blindfolded and asked to taste a set of samples having Coca Cola, Pepsi. Appropriate publicity was given to it, with event happening in front of the cameras and audience gathered to see it at the public places. Pepsi would emerge as the obvious choice selected by even the ardent Coke fans! ** John Sculley
This further increased Coke’s paranoia. The final alarm went off for Coca Cola when, in 1978, the Nielsen numbers (Survey results for Soft Drink consumption) came out, clearly showing Pepsi taking over Coca Cola. Pepsi had a 30.8% market share compared to 29.2% for Coke and this difference of 1.6% was of staggering $3 Billion!
Something had to be done about this “Pepsi Challenge.” Coca Cola urgently recalled Bryan Dyson*** from their Brazil Operations to fight against increasing threat of Pepsi.
But before Coke could take on Pepsi, it had to sort out its own domestic issues – the bottlers. Unlike Pepsi who owned all the bottlers, Coke had made a contract with bottlers in 1921, already outdated. The Bottlers’ association was adamant on not renewing the contract. Finally, Coke thought of buying the biggest bottler – the “Crass Bottling”. Coke used every trick of the business to convince the bottlers. Finally, in 1978, at a big convention of 3000 bottlers and Coke officials, the deal was struck and the matter ended.
Coke decided to take on Pepsi on the “Diet” front. Diet Pepsi was convincingly beating Coke’s “Tab” So, Coke decided to launch “Diet Coke” Coke’s management was also a big worry. Due to old age, Robert Woodruff was almost out of the active business. The then Chairman Paul Austin was diseased with Alzheimer’s disease and couldn’t remember his decisions. So they found a managing committee of 6 executives. The 6 headed monster was busy fighting internally. Finally, Woodruff had to intervene and select Robert Guizeta as the chairman.
Guizeta immediately started with Diet Coke Project. Sergio Zymann was made the head of the project named “Project Harvard” Every formula was researched and refined. Blind tests were carried out and plans were made in case participant selects other products. Diet Coke successfully passed the test. Then came the positioning, marketing and branding. Coke made McCann Ericsson hire John Bargin (the second “B” in BBD & O) to handle the Coke account.
Guizeta invited 50 top executives to a meeting and asked them to take head on with Pepsi. The design for the Diet Coke packaging was given to one Schechter who had earlier made popular package design like Budweiser Beer and Camel Cigarettes. He prepared about 150 designs with utmost care for single line, curve, font etc. To mislead the people, Diet Coke was named as Lucy, Shrimp, BPS etc.
Bargin thought of many punch lines and finally settled with “Coke is it” In another convention of about 2500 bottlers and officials, the Atlanta Symphony played the fast paced song launching Diet Coke. Same night, at 9:15 PM, the ad was shown across all the national networks. Soon, Coke launched another advertisement featuring many film stars. It ad apparently cost Coke $2.5 Million! Instead of opting for conventional “Test Marketing” in small test markets, Coke directly launched the “Diet Coke” in big malls and super markets. This was a very bold move to make.
At last, Diet Coke entered the market with all its guns blazing.
Of course, Sculley was not behind to retaliate with launching “Caffeine Free” Pepsi the very next day at New York.
How Coca Cola then came up with “New Coke” in 1985 and how it bombed and resulted in Coke losing big share of the market and moreover faith of its loyal customers, how Coca Cola had to revert their decision are all well known. The “New Coke” disaster now stands as a lesson to learn for all the Marketers.
Even when Coca Cola has now established itself as the undisputed leader in the soft drinks industry, the fight still continues to date…
Regards,
Abhishek
Note:
*: John Sculley left Pepsi in 1983 to join Apple. Legend goes that Steve Jobs had convinced him saying,” Would you like to continue selling sugarated water or would you like to change the world?” Finally, Sculley chose the latter one.
** In a book named “Blink”, author Malcolm Gladwell claims that Pepsi is sweeter than Coke. So when participant tastes just a sip, he/she finds it better than Coke. But if the participant were to consume the whole bottle of Pepsi, he would have found it annoyingly sweet. So even when Pepsi had won the Blind Test, in the daily usage over a longer duration Coke was the preferred choice)
*** Brian G. Dyson, vice chairman and chief operating officer of The Coca-Cola Company, joined the Company in Venezuela in 1959, working in South America, the Caribbean, and Mexico. He held several positions in the Company, including president of Coca-Cola USA, the Company’s U.S. soft drink division; president of Coca-Cola North America; president and CEO of Coca-Cola Enterprises (CCE); and vice chairman of CCE. Dyson retired from the Coca-Cola system in 1994, but remained active as a consultant to the Company. In August of 2001, he came out of retirement and accepted the position of vice chairman and chief operating officer of The Coca-Cola Company.
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