Coke vs. Pepsi—how the Cola Wars are changing and who’s winning

Brand Battles is a new regular feature from Ad Age profiling competing brands and the ways they are going to market, including marketing, media and agency strategies. When it comes to battling brands, few are more iconic than Coke vs. Pepsi. The two soda giants have duked it out for decades. Each has landed marketing punches, most memorably in 1985, when Coke surrendered its original formula in reaction to Pepsi’s growing market share, only to revert amid public outcry—a blunder that some believe actually won the war for Coke. While not quite as ferocious as they may once have been, there are new fronts in the Cola Wars today with a lot still at stake. Both Coke and Pepsi have revamped their zero-sugar formulations to take on today’s more health-conscious consumers, each has harnessed their brands as platforms for innovation, and each is evolving its marketing strategies to take advantage of those pockets of growth. Check out the latest Ad Age events and award programs Parent companies Coca-Cola Co. and PepsiCo also rely less on cola today than they did in the 1980s, especially PepsiCo, which runs a massive snacks division. Today, about half of PepsiCo’s U.S. revenue comes from its Frito-Lay and Quaker foods businesses. “Do we still have the cola wars? At the store level, where the merchandisers and bottlers are fighting it out, it’s trench warfare,” said Duane Stanford, editor and publisher of the beverage industry trade brand Beverage Digest, in an interview. “The cola wars are very much alive in the convenience stores and the grocery store aisles. When you raise up the ladder though, the cola wars are definitely less significant.” “The cola wars still exist but there tends to be fewer, bigger battles. They are not fighting every month, rather, just around big consumption events,” said Burt P. Flickinger III, managing director, Strategic Growth Partners. Also read: Coke debuts its first TikTok Shop soda One former beverage industry executive, speaking on condition of anonymity, suggested that “the only people who care about cola wars is the media. Consumers don’t care—they’d rather they come together and learn to use less plastic and less water. Retailers want the companies to build the category, not steal share from each other in a declining category, and so the cola wars are an antiquated concept. It was about seizing upside of a growing category. That is not the case anymore.” But there are still billions of dollars of cola sales up for grabs—not to mention massive opportunities for ad agencies and ad sellers that still rely on the category for significant revenue. Below, a closer look at how the cola wars have evolved, including changing innovation, media and marketing priorities: The latest on the Cola Wars The U.S. cola category generated $48 billion in sales in 2023, according to Beverage Digest’s all-channel data, which includes retail, fountain/foodservice and vending. Coke trademark brands (Coca-Cola, Diet Coke, Coke Zero Sugar and others) controlled 69% of the segment while Pepsi (Pepsi-Cola, Diet Pepsi and Pepsi Zero Sugar) captured 27%. Cola accounted for half of the $96 billion that U.S. consumers spent on all soft drinks in 2023, Beverage Digest figures show. Over the last decades, a barrage of beverage options—many guided by Coke or Pepsi—have knocked colas out of occasions they once had to themselves. There was a time when athletes drank colas, before the morning was conquered by Starbucks, and before the mid-afternoon pick-me-up belonged to energy drinks. The health and wellness megatrend helped to effect these changes while reflecting quite poorly on sugary colas. These factors have left Coke and Pepsi struggling to maintain their domestic cola sales base, while reaching for new consumers through flavor, formulation and packaging innovations, or attention-getting brand collabs such as Pepsi x Peeps. Their parent companies are each managing revenue through pricing and package architecture, and looking for sales growth around the globe. Brands on the rise A look at up-and-coming brands disrupting their categories Read more here The nitrogen-infused Pepsi Nitro debuted in 2022, meant to draw non-cola drinkers to cola. Nitro’s development was helped along by an internal process at Pepsi that identifies trending product attributes by monitoring social media, retail data, tastemakers and venture capitalists—though these insights benefit PepsiCo’s entire portfolio and not just cola. Read more: Inside Pepsi’s innovation approach Coca-Cola has been attacking innovation through its Creations series—oddly named colas meant to evoke feelings or associations, marketed to Gen Z almost entirely online. The platform, which launched in April of 2022 behind a brand called Coca-Cola Starlight, has now seen 10 Creations releases including Byte (inspired by the metaverse), Dreamworld (meant to taste like a dream); Ultimate (a collaboration with the League of Legends video game franchise) and most recently Coca-Cola K-Wave, inspired by Korean pop stars. Oana Vlad, senior director for global strategy at Coca-Cola, said Creations on average engages young consumers about twice as much as other Coke trademark products. And around 75% of Creations’ customers are new to the brand. “Creations is a really interesting experiment … Just the fact that Coca-Cola has developed a Skunk Works, and just go do some interesting, experimental stuff. I just think it’s really smart,” James May, industry executive for food and beverage sector, Kantar, said in an interview. Both Pepsi and Coke are looking to grow through innovation in packaging. The goal is to find new formats that can attract new users while boosting profitability and commanding higher per-ounce prices, according to experts. Also read: Coca-Cola reveals AI-inspired drink Coke this year will be utilizing what it calls the sleek can, a narrower, taller vessel that is attractive to those who may not have reached for a Coke in some time, said Jennifer Mann, executive VP and president, North American operating unit, for Coca-Cola, speaking at the Beverage Digest Future Smarts event in December. The sleek can initiative is a part of Coke’s revenue growth management strategy. Sleek cans began rolling out last year in the New York market and they’re now being used with brands such as Coca-Cola Spiced. “The consumer research so far is really fantastic,” Mann said. “It is engaging, it is bringing in new drinkers.” Both Coke and Pepsi have firmly determined that the future of cola is sugar-free. Both companies are touting recent reformulations of their offerings (Coca-Cola Zero Sugar and Pepsi Zero Sugar) with descriptors that appear to have done a better job at marketing their propositions than previous iterations (Coca-Cola Zero and Pepsi Max, respectively). PepsiCo CEO Ramon Laguarta referred to Pepsi Zero Sugar as a $9 billion brand during a recent presentation at the Consumer Analysts Group of New York conference. Pepsi Zero Sugar touted its 2023 relaunch with a pair of Super Bowl commercials starring Steve Martin and Ben Stiller. Flavored colas are also trending. Pepsi introduced Pepsi Mango in 2021 and in January of this year, the company put a new marketing push behind Pepsi Wild Cherry, which saw its first national advertising campaign in three years. Coca-Cola followed in February by introducing Coca-Cola Spiced, a permanent new line extension built around raspberry flavors. New products such as Zero Sugar and Coke Creations signal an opening for sparkling beverages overall, said Bonnie Herzog, managing director of Goldman Sachs, speaking at the Beverage Digest event. “I think the CSD (carbonated soft drink) category has opportunity. What you’re seeing is the big manufacturers leaning in on innovation, whether it's Coca-Cola Creations or [PepsiCo’s lemon lime] Starry and definitely, Zero Sugar. I think in the context of CSDs some of those brands as they have further extended into other areas, will continue to strengthen.” Also at stake for Coke and Pepsi is their combined dominance of the sparkling beverage industry as functional foes take aim. Prebiotic soda brands Poppi and Olipop, marketed primarily on social media channels like TikTok, have demonstrated that fizzy drinks are still wildly popular with young consumers. Poppi, which made clear its intentions to challenge the soda industry in a Super Bowl commercial this year, is reportedly being pursued by Coca-Cola. These companies are “a huge threat,” said May, noting their rising valuations and advantages of having aligned their brands with function. “I think one of the taglines is ‘bringing soda back,’ as if it ever went away. But it’s certainly drawing a clear line in the sand by saying, we’re the soda of the next generation.” Read more: How Poppi’s Super Bowl ad buy came together What are Coke and Pepsi’s marketing strategies? Since introducing the “Real Magic” marketing platform in 2021, Coke has been increasingly filtering its equity in happiness and togetherness through virtual reality, artificial intelligence and social media, showing that these emotions can thrive in a modern world while showcasing Coke’s brands. Just about every Coke campaign over the last year has included an AI element. A recently released Coca-Cola Zero campaign was built around the idea that the drink is communicating through AI. The technology created a font constructed from Coke Zero bubbles, and musical notes drawn from the sounds of the soda’s pop and fizz. Other efforts have used AI artwork to elevate the Coca-Cola brand, such as last year’s stunning “Masterpiece” film which showed a Coke bottle passed between paintings in an art gallery in the service of inspiring a young artist. Coke celebrated the launch of Coca-Cola Spiced with an installation in New York last week that invited consumers to express what they taste and feel having a Coke Spiced while generative AI creates an illustration based on that input. The event reinforces AI’s role in selling the notion that the taste of the new drink couldn’t be described by words alone. Pepsi has been pushing a notion of “unapologetic enjoyment” that has run through its creative advertising for several years now and played into the design of the in-your-face logo introduced last year. The new look is meant to better stand out on retail store shelves while supporting Pepsi’s embrace of a “challenger mindset,” as described by Todd Kaplan, Pepsi’s chief marketing officer. Also read: Designers react to Pepsi’s new logo The new logo incorporates the color black to signal the role Pepsi Zero Sugar will have as the brand’s growth driver, Kaplan said. Zero Sugar led Pepsi’s NFL sponsorship in 2023. Both Pepsi and Coke have chased opportunity in food. Pepsi’s “Better with Pepsi” campaign has used clever marketing stunts with an eye on “situational salience” when it comes to associating the Pepsi brand with food. Coke’s “Recipe for Magic” platform made home-cooked meals a focus of a campaign utilizing an army of TikTok influencers around the globe last year, and has launched a program this year known as Foodmarks that highlight places where moments of food and Coke intersect. Pepsi has traditionally recruited celebrities and sports stars in its marketing. Most recently the brand rekindled a marketing partnership with Shaquille O’Neal, a star of the brand’s 1990s ads, pairing him with rapper Skee-Lo (nostalgia is another theme of Pepsi marketing as the brand celebrated its 125th anniversary in 2023). O’Neal is pushing 7.5-ounce Pepsi Mini Cans, one of the brand’s best-selling (and profitable) packages. Also read: Pepsi alters Shaq’s sneakers to transport a soda can How much do Coke and Pepsi spend on advertising? PepsiCo and Coca-Cola Co. remain massive ad spenders, ranking No. 24 and No. 33, respectively, in Ad Age Datacenter’s most recent ranking of the top 200 spenders in the U.S. Coca-Cola Co. still dedicates the majority of its measured media to Coke—the cola trademark (which includes varieties such as Diet Coke) in 2022 got $327.4 million in U.S. measured-media out of $645.4 million spend across all brands, according to the latest Datacenter figures from Vivvix. Become an All Access subscriber Get access to exclusive resources including Leading National Advertisers, World’s Largest Advertisers, Agency Report, Agency Review Tracker and TV Pricing Report. Click here The Pepsi trademark is also the top supported brand at PepsiCo by U.S. measured-media. But because PepsiCo has a huge snacks division and beverage brands such as Gatorade to support, the cola brand consumes only about 20% of the company’s total U.S. measured media (about $204 million out of roughly $1 billion in 2022.) According to its annual regulatory filing, Coca-Cola Co. spent a company record $5 billion on advertising worldwide in 2023 compared with $4.3 billion in 2022 and $4.1 billion in 2021. PepsiCo reported global advertising expenses totaled $3.8 billion in 2023, an all-time high, and $3.5 billion in both 2022 and 2021. Source: Total U.S. ad spending from Ad Age Datacenter. U.S. measured-media spending from Vivvix, including paid social data from Pathmatics. More info: vivvix.com. Numbers rounded. Industry data: Beverage Marketing Corp. Market share data for refreshment beverages based on U.S. sales volume in gallons. Brand includes brand extensions. Both companies are making significant spending strategy shifts. For instance, Pepsi in 2022 did not review its longtime title sponsorship of the NFL’s Super Bowl Halftime Show (which now belongs to Apple), citing a “strategic shift” in how it presents music and entertainment to fans. “Pepsi has abandoned the sponsorship that was most endemic to it in the halftime show,” one former beverage industry executive said. “I’ll never understand why Pepsi, with this huge legacy it has in music, would not want to retain ownership of one of the largest events in music.” When the deal ended, Pepsi said it remained committed to bringing “the level of access and engaging experiences fans have come to expect from the brand.” In the 2024 Super Bowl, Pepsi pushed non-cola brands Starry and Mtn Dew Baja Blast with in-game commercials but Pepsi wasn’t shut out entirely, illustrating its post-halftime sponsorship strategy. Leveraging its NFL sponsorship, the brand “took over” Las Vegas behind events on the Strip, advertisements on the Las Vegas Sphere and hosting a Wild Cherry-sponsored “Flavortown BBQ” with Guy Fieri. ICYMI: Pepsi Wild Cherry brought the flavor to Flavortown for the wildest SBLVIII tailgate 😊 #GetWild @GuyFieri @GuysTailgate pic.twitter.com/wutV68vcxg— Pepsi (@pepsi) February 21, 2024 Coke has arguably evolved its media spending strategy even more radically in recent years, with nearly two-thirds of Coca-Cola’s marketing spend now in digital, according to Coca-Cola Co. CEO James Quincey. “What they’re doing makes strategic sense, financial sense and societal sense,” Flickinger said of Coke. “We’re close to reaching the point of planned obsolescence for TV and TV advertising.” What agencies work with Coke and Pepsi? After a massive agency review, Coca-Cola Co. selected WPP as its global agency for all of its brands in late 2021. WPP created a bespoke unit, WPP OpenX, to run the account. Coke uses a variety of WPP agencies to work on its campaigns including to lead its campaigns including David, Oglivy, VML and AKQA. The Pepsi brand works in an interagency team model, utilizing roster shops on a campaign-by-campaign basis and working closely with partners on creative. Participants include VaynerMedia, TracyLocke, Motive and OMD. Pepsi’s internal agency, known as CLS, and Pepsi’s internal design team also participate. Who are the key marketing executives at Coke and Pepsi? Kaplan was named Pepsi’s chief marketing officer two years ago, overseeing the Pepsi brand along with the Mug root beer and Bubly sparkling water brands. His time with Pepsi has been marked by Pepsi’s brand refresh and an elaborate 125th-anniversary event for the brand. Also read: Inside the Pepsi rebrand Kaplan was promoted to his current role after a four-year stint as Pepsi’s VP of marketing during which he helped lead the Pepsi brand to a sales turnaround. Kaplan is credited with creating the Lifewtr and Bubly brands for Pepsi in his role as VP of marketing of its water division from 2016 to 2018. Kaplan is a former sports marketer with Visa and a self-described Los Angeles Lakers fan and “sneakerhead.” “The fact that they put Todd Kaplan in that [CMO] role says that there’s this recommitment to colas and to brand Pepsi,” said Stanford, editor and publisher of the beverage industry trade brand Beverage Digest. “There’s definitely a commitment that this is a step change from where they were several years ago.” Manuel “Manolo” Arroyo, a 29-year Coca-Cola veteran, was named executive VP and global chief marketing officer of Coca-Cola Co. in 2020. He oversaw the global agency review and has prescribed what he has called “the most radical marketing transformation in our history,” shifting media dollars to digital channels and embracing AI as Coca-Cola courts the next generation of customers. AI, Arroyo has said, makes marketing more efficient by synthesizing large amounts of data. This has led to any number of applications, such as a Coca-Cola Creations flavor meant to evoke how young consumers see the future, or Coca-Cola Spiced, which was developed in just seven weeks vs. a year for a typical new product, according to Shakir Moin, chief of marking for Coca-Cola America. Data from the company’s Freestyle machines helped to inform Spiced’s flavor. Arroyo’s team includes Thakar and Islam ElDessouky, senior global creative strategy director. ElDessouky has been at Coca-Cola for more than 17 years—but has some familiarity with PepsiCo, holding brand management roles in Cairo from 2004 to 2006, according to his LinkedIn. Who’s winning the Cola Wars? Coca-Cola is larger than Pepsi in the U.S. and much larger internationally, but a major difference between the brands is that Coke is more central to Coca-Cola’s fortunes than Pepsi is to PepsiCo’s, Stanford said. “For Coca-Cola, everything ties back to that red-can Coca-Cola, even Coke Zero, the juggernaut that it is,” said Stanford. “With PepsiCo, your business needs to perform at a certain level. You don’t want your clock cleaned by Coke, but you’re not necessarily trying to go head-to-head with them because you have this broader strategy that includes this very important, highly profitable snacks business.” Kantar’s BrandZ ratings, which set a brand’s value based on consumer interviews, valued Coca-Cola as the eighth most valuable brand in the world in 2023, with a brand value of $106.1 billion, an 8% increase from the previous year. Pepsi ranked 91st overall with a brand value of $18.8 billion, up 17%. Beverage Digest figures showed that Coke outperformed Pepsi in 2023, but both brands lost volume. Among all carbonated soft drinks at retail, trademark Coke commanded a 16.3% share of category dollars, growing dollars by 9.5% for the year. Coke’s share of category volume was 15.8%; its volume was down by 2.8% for the year. Pepsi, which captured 7.8% of category dollars, saw its dollar share increase by 4.3% in 2023. Pepsi volume tumbled by 8.4% for the year; its volume share of the category was 8.3%. Pepsi Beverages North America saw 7% organic growth in 2023, comprised of a 12% increase in pricing and a 5% volume decline, according to PepsiCo’s annual report. Coca-Cola said its North American operating unit saw 2023 volume dip by 1% and “price, product and geographic” mix increase by 8%. When considering all beverages, as PepsiCo does, the market share race with Coca-Cola is tight, with PepsiCo holding a 19% share to Coca-Cola’s 20%, according to IRI figures shared in PepsiCo’s annual report. But Coke has a “significant” share advantage when considering carbonated soft drinks globally, the report noted. Coca-Cola frames the market a bit differently, seeing itself alone in an industry that also includes about 80 “medium-sized” players (including Pepsi); and a rotating slate of 2,000 small companies. According to Quincey, the company grew market share from 26% to 28% of North American ready-to-drink beverages since 2017, with the middle tier losing two share points (43% to 41%) and small players holding steady at 31%. The message: Coke is gaining share over time. What’s next for the Cola Wars? Observers expect colas will continue to grow slowly if at all, behind increasing acceptance of Zero Sugar and other innovations and line extensions. The brands may also cross over more aggressively to alcoholic beverages as Coke has done with Jack & Coke, its collaboration with Jack Daniel’s. PepsiCo has also experimented with alcohol, notably through a partnership with Boston Beer Co. for Hard Mtn Dew. (Pepsi last week said it would discontinue an attempt to distribute such drinks, transforming its Blue Cloud Distributors to Blue Cloud National, serving to license brands to alcohol companies in a manner not unlike Coca-Cola does through its Red Tree Beverages division). Also read: How Pepsi is challenging the rum and Coke Such “convergence” in beverage is a coming trend, said May. “There used to be very hard lines between the different categories, and certainly between beverage alcohol and a non-alcoholic beverage,” May said. “I think the blurring of those lines, the experimentation, that’s an interesting play.” A spate of price increases in recent years has accounted for growth but that’s a difficult path to maintain, the former industry executive said. “Both companies have been pricing up under the guise of inflation the past two or three years and I think this year will be very tough for the both of them,” one former beverage industry executive said. “The growth has come from pricing rather than innovation or marketing, and I think the rubber is going to hit the road hard this year.”

Coke vs. Pepsi—how the Cola Wars are changing and who’s winning

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