Coke or Pepsi?
I just watched a documentary on the “Cola wars” – and something obvious jumped out at me.
First I’ll volunteer that I prefer Pepsi – but this is 100% because Coke tends to disturb my stomach MORE than Pepsi disturbs my stomach.
full disclosure – I get the symptoms of “IBS” if I drink multiple “soft drinks” multiple days in a row. I’m sure this is a combination of a lot of factors – age, genetics, whatever.
Of course – put in perspective the WORST thing for my stomach (as in “rumbly in the tummy”) when I was having symptoms was “pure orange juice” – but that isn’t important.
My “symptoms” got bad enough that I was going through bottles of antacid each week, and tried a couple “over the counter” acid reflux products. Eventually I figured out changing my diet – getting more yogurt and tofu in my diet, drinking fewer “soft drinks” helped a LOT.
The documentary was 90 minutes long – and a lot of time was spent on people expressing how much they loved one brand or the other. I’m not zealous for either brand – and I would probably choose Dr Pepper if I had to choose a “favorite” drink
Some folks grew up drinking one beverage or the other and feel strongly about NOT drinking the “competitor” – but again, my preference for Pepsi isn’t visceral.
Habit
The massive amount of money spent by Coke and Pepsi marketing their product becomes an exercise in “marketing confirmation bias” for most of the population – but I each new generation U.S. has to experience some form of the “brand wars” – Coke vs Pepsi, Nike vs Adidas, PC vs Mac – whatever.
e.g. As a “technology professional” I will point out that Microsoft does a good job of “winning hearts and minds” by getting their products in the educational system.
If you took a class in college teaching you “basic computer skills” in the last 20 years – that class was probably built around Microsoft Office. Having taught those classes for a couple years I can say that students learn “basic computer skills” and also come away with an understanding of “Microsoft Office” in particular.
When those students need to buy “office” software in the future, what do you think they will choose?
(… and Excel is a great product – I’m not bashing Microsoft by any means 😉 )
Are you a “Mac” or a “PC”? Microsoft doesn’t care – both are using Office. e.g. Quick name a spreadsheet that ISN’T Excel – there are some “free” ones but you get the point …
The point is that human beings are creatures of habit. After a certain age – if you have “always” used product “x” then you are probably going to keep on using product “x” simply because it is what you have “always used.”
This fact is well known – and why marketing to the “younger demographic” is so profitable/prized.
ALL OF WHICH MEANS – that if you can convince a sizable share of the “youth market” that your drink is “cool” (or whatever the kids say in 2022) – then you will (probably) have created a lifelong customer
Taste Tests
Back to the “cola wars”…
The Pepsi Challenge deserves a place in the marketing hall of fame — BUT it is a rigged game.
The “Pepsi challenge” was setup as a “blind taste test.” The “test subject” had two unmarked cups placed in front of them – one cup containing Pepsi and the other containing Coke.
The person being tested drinks from one cup, then from the second cup, and then chooses which one they prefer.
Now, according to Pepsi – twice as many people preferred Pepsi to Coke by a 2:1 margin. Which means absolutely nothing.
The problem with the “taste test” is that the person tastes one sugary drink, and then immediately tastes a second sugary drink. SO being able to discern the actual taste difference between the two is not possible.
If you wanted an honest “taste test” then the folks being tested should have approached the test like a wine tasting. e.g. “swish” the beverage back and forth, suck in some air to get the full “flavor”, and then spit it out. Maybe have something to “cleanse the pallet” between the drinks …
(remember “flavor” is a combination of “taste” and “smell”)
For the record – yes, I think Coke and Pepsi taste different – BUT the difference is NOT dramatic.
The documentary folks interviewed Coke and Pepsi executives that worked at the respective companies during the “cola wars” – and most of those folks were willing to take the “Pepsi Challenge”
A common complaint was that both drinks tasted the same – and if you drink one, then drink another they DO taste the same – i.e. you are basically tasting the first drink “twice” NOT two unique beverages.
fwiw: most of the “experts” ended up correctly distinguishing between the two – but most of them took the time to “smell” each drink, and then slowly sip. Meanwhile the “Pepsi Challenge” in the “field” tended to be administered in a grocery store parking – which doesn’t exactly scream “high validity.”
ANYWAY – you can draw a dotted line directly from the “Pepsi Challenge” (as un-scientific as it was) and “New Coke” – i.e. the “Pepsi Challenge” convinced the powers that be at Coke that they needed to change.
So again, the “Pepsi Challenge” was great marketing but it wasn’t a fair game by any means.
fwiw: The documentary (“Cola Wars” from the History Channel in 2019) is interesting from a branding and marketing point of view. It was on hoopladigital, and is probably available online elsewhere …
Difference between “sales” and “Marketing”
If you are looking at a “business statement”/profit and loss statement of some kind – the “top line” is probably gonna be “total revenue” (i.e. “How much did the company make”). The majority of “revenue” is then gonna be “sales” related in some form.
SO if you make widgets for $1 and sell them for $2 – if you sell 100 widgets then your “total revenue” will be $200 (top line) your “cost of goods sold” will be $100 and then the “Net revenue” (the “bottom line”) will be “widgets sold” – “cost of widgets” i.e. $100 in this extremely simple example.
In the above example the expense involved in “selling widgets” is baked into the $1 “cost of goods sold” – so maybe the raw materials for each widget is 50 cents, then 30 cents per widget in “labor”, and 20 cents per widget for sales and marketing.
Then “sales” involves everything involved in actually getting a widget to the customer. While “marketing” is about finding the customer and then educating them about how wonderful your widgets are – and of course how they can buy a widget. e.g. marketing and sales go hand in hand but they are not the same thing.
The “widget market” is all of the folks that might want to use widgets. “Market share” is then the number of folks that use a specific company’s widgets.
Marketing famously gets discussed as “5 P’s” — Product, Place, Price, Promotion, and People.
Obviously the widget company makes “widgets” (Product)- but should they (A) strive to make the highest quality widget possible that will last for years (i.e. “expensive to produce”) or should they (B) make a low cost, disposable widget?
Well, the answer is “it depends” – and some of the factors involved in the “Product” decision are the other 4 P’s — which will change dramatically between scenario A and B.
A successful company will understand the CUSTOMER and how the customer uses “widgets” before deciding to venture into the “widget market space”
This is why you hear business folks talk about “size of markets” and “price sensitivity of markets.” If you can’t make a “better” widget or a less expensive widget – then you are courting failure …
SO Coke and Peps are both “mature” companies that have established products, methods and markets – so growing their market share requires something more than just telling folks that “our product tastes good”
In the “Cola Wars” documentary they point out the fact that the competition between Coke and Pepsi served to grow the entire “soft drink market” – so no one really “lost” the cola wars. e.g. in 2020 the “global soft drink market” was valued at $220 BILLION – but the market for “soft drinks” fragmented as it grew.
The mini-“business 101” class above illustrates why both Coke and Pepsi aggressively branched out into “tea” and “water” products since the “Cola wars.”
It used to be that the first thing Coke/Pepsi would do when moving into a new market was to build a “bottling plant.” So then “syrups” can be shipped to the different markets – and then “bottled” close to where they will be consumed – which saves $$ on shipping costs.
I suppose if you are a growing “beverage business” then selling “drink mix” online might be a profitable venture – unless you happen to have partners in “distant markets” that can bottle and distribute your product – i.e. Coke and Pepsi are #1 and #2 in the soft drink market and no one is likely to challenge either company anytime soon.
“Soft drinks” is traditionally defined as “non alcoholic” – so the $220 billion is spread out over a lot of beverages/companies. Coke had 20% of that market and Pepsi 10% – but they are still very much the “big players” in the industry. The combined market share of Coke and Pepsi is equal to the combined market share of the next 78 companies combined (e.g. #3 is Nestle, #4 Suntory, #5 Danone, #6 Dr Pepper Snapple, #7 Red Bull).
My takeaway …
umm, I got nothing. This turned into a self-indulgent writing exercise. Thanks for playing along.
In recent years PepsiCo has been driving growth by expanding into “snacks” – so a “Cola wars 2” probably isn’t likely …
I’m not looking to go into the soft drink business – but it is obviously still a lucrative market. I had a recipe for “home made energy drink” once upon a time – maybe I need to find that again …