Caso Cola Wars

9-711-462
REV: MAY 26, 2011

DAVID B. YOFFIE
RENEE KIM

Cola Wars Continue: Coke and Pepsi in 2010
For more than a century, Coke and Pepsi vied for “th roat share” of the world’s beverage market.
The most intense battles in the so-called cola wars were fought over the $74 billion carbonated soft
e
drink (CSD) industry in the United States.1 In a “carefu lly waged competitive struggle”that lasted
u
from 1975 through the mid-1990s, both Coke and Pepsi a chieved average annual revenue growth of
h
e
dil
around 10%, as both U.S. and worldwide CSD consumpt ion rose stead y year after year.2 According
to Roger Enrico, former CEO of Pepsi:
The warfare must be perceived as a continuing ba ttle without blood. Without Coke, Pepsi
would have a tough time being an original andlively c ompetitor. The more successful they are,
the sharper we have to be. If the Coca-Cola company didn’t exist, we’d pray for someone to
invent them. And on the other side of the fence, I’m sure the folks at Coke would say that
nothing contributes as much to the present-day succ ess of the Coca-Cola company than . . .
Pepsi.3
That relationship began to fray in the early 2000s, ho wever, asU.S. per-capita CSD consumption
started to decline. By 2009, the average American drank 4 6 gallons of CSDs per year, the lowest CSD
consumption level since 1989.4 At the same time, the tw o companies experienced their own distinct
w
ups and downs; Coke suffered several operational setba cks while Pepsi charted a new, aggressive
course in alternative beverages and snack acquisitions.
As thecola wars continued into the 21st century, Co ke and Pepsi faced new challenges: Could
they boost flagging domestic CSD sales? How could they compete in the growing non-CSD category
that demanded different bottling, pricing, and brand s trategies? What had to be done to ensure
sustainable growth and profitability?

Economics of the U.S. CSD Industry
Americans consumed 23 gallons of CSDsannually in 1970, and consumption grew by an average
o
of 3% per year over the next three decades (see Exhibit 1). Fueling this growth were the increasing
availability of CSDs and the introduction of diet and f lavored varieties. Declining real (inflationadjusted) prices that made CSDs more affordable played a significant role as well.5 There were many________________________________________________________________ ______________ __________________________________
_
Professor David B. Yoffie and Research Associate Michael Slind prepared the orig inal version of this case, “Cola Wars Continue: Coke and Pepsi
in 2006,” HBS No. 706-447. This version was prepared by Professor David B. Yoffi and Research As sociate Renee Kim. This case was developed
fie
from published sources. HBS cases aredeveloped solely as the basis for class discussion. Cases are not intended to serve as endorsements,
sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2010, 2011 President and Fellows of Harvard College. To order copi es or request perm ission to reproduce materials, call 1-800-5457685, write Harvard Business School Publishing, Boston, MA 02163, or goto ww w.hbsp.harvard.e du/educators. This publication may not be
digitized, photocopied, or otherwise reproduced, posted, or transmitted, without t he permission of H arvard Business School.

711-462

Cola Wars Continue: Coke and Pepsi in 2010

alternatives to CSDs, including beer, milk, coffee, bottled water, juices, tea, powdered drinks, wine,
sports drinks, distilled spirits, and tapwater. Yet Americans drank more soda than any other
beverage. Within the CSD category, the cola segment maintained its dominance, although its market
share dropped from 71% in 1990 to 55% in 2009.6 Non-cola CSDs included lemon/lime, citrus,
pepper-type, orange, root beer, and other flavors. CSDs consisted of a flavor base (called
“concentrate”), a sweetener, and carbonated water. The...