Great brands are often started with dubious ideas. The story of the main “drinking opponents” of this world is no exception, because it has roots in medicine.
Coca-Cola’s History
Back in the 1882 in Atlanta, pharmacist John Pemberton saw his black workers drinking syrup, diluted with water – a mixture of his own pharmacy. The syrup was considered a remedy for nervous disorders. Pemberton tried it and was pleasantly surprised with its taste.
Cola was an exotic, patented medicine. It contained cocaine from coca leafs and caffeine from cola nuts. Coca leaves are a favorite drug of Bolivian Indians, who chewed them during their work. Hence there was a Coca-Bola, made by Dr. Mitchell, an early competitor of Cola-Cola. Cola nuts made the same effect, but this time for indigenous people of West Africa. “Hells seed” – as called them some sects that preached complete abstinence.
Having evaluated the flavoring qualities of the drink (syrup was sweet and dense), John took his invention to the “Jacobs” pharmacy, where the first portions of syrup were sold at five cents per glass. Then carbonated water has been added to drink and they called it Coca-Cola. The name and the original font came from Frank Robinson – a friend and a partner of John Pemberton.
At first, they were selling up to nine glasses per day. After the death of Pemberton, the successful businessman Asa Candler acquired the recipe of Coca-Cola from his widow for 2,300$. Placing a drink in a metal bowl, Candler cooked it together with its own proprietary “Balsam of the plants blood.”
By the turn of the centuries, the financial state of Coca-Cola has increased markedly. By 1902, with a budget of $ 120 thousand Coca-Cola became the most famous drink in America. The following year, the company has excluded the cocaine from its composition by replacing it with the extract from used coca leaves.
Supported by the advertising company and the temperance movement, Coca-Cola Company has grown rapidly. By 1907, nearly 825 of 994 counties of former Confederation were drinking Cola. “The great national temperance beverage” and “Holy water of the South” – was the advertising slogan.
Pepsi-Cola’s Successful Start
The depression of the 30’s helped the competitors of Coca-Cola, Pepsi-Cola in particular and the Royal Crown, to make a successful start. The basic idea was to use the 12 ounce bottles, which were sold for the same 5 cents as a bottle of “Coca-Cola” in 6.5 oz. Pepsi-Cola (we call it “Pepsi”) began to implement this vision in 1934, but in 1939 (when Walter Mack came to the leadership of the company) a bottle with a new drink was born.
It was a brilliant strategy, which had a spectacular incarnation. Pepsi brand has become popular, especially among children. In terms of sweets and lemonade, kids always prefer quantity to quality. It happened with minimal advertising budget. In 1939, Coca-Cola advertising expenses were 15 million dollars, Pepsi-Cola – only 600 thousand dollars.
Coca-Cola came to a standstill. They could not increase the size of packaging, because they would have to throw out a billion of small bottles. The Reduction of the price was also not possible, as hundreds and thousands of vending beverages took only 5 cent coins.
Obviously, the guys from Atlanta considered the bottle as their basic trump. She appeared in each advertisement and was even registered as a trade mark. Raymond Loewy called it “the most perfect package.” Promotional activities of “Pepsi” turned this weakness into its strength. The perfect package, which feels so perfectly in your hand.
During the World War II, “Pepsi-Cola” bypassed Royal Crown and Dr. Pepper, and became a â„–2 drink after “Coca-Cola.”
After the war, it seemed that “Cola” finally got lucky. The economy turned from Pepsi. Sugar prices and labor costs rose, and the price of Pepsi grew with it. First up to 6 cents then to 7 cents. The advertising slogan: “Twice as much for the same money” changed to “Twice more and better.”
Pepsi changed the center of application of their efforts to counter sale machines and kiosks with carbonated water for home consumption, again stressing their great bottle. “Be sociable” – sounded the new advertising slogan of “Pepsi”, when it focused on supermarkets. These efforts have paid off. In the early 50’s “Cola” was 5 times ahead of “Pepsi.” At the end of the decade, “Pepsi” reduced this gap by half.
Coca-Cola released the first drink of its kind. It appeared on the market much earlier than “Pepsi.” This was the obvious power of “Cola”, but it led to another, less obvious result. Older people preferred the “Coke.” Youth preferred “Pepsi.” Moreover, the larger bottles were designed mainly for young people. What adult could drink a bottle of “Pepsi” in 12 ounces, as teenager did? For years, Coca-Cola lost the possibility to block “Pepsi” with a second brand in a larger bottle. The motto “Twice as much for the same money” would have worked for her as effectively as for Pepsi. However, in 1970, things changed. “It’s the real thing” – was the new slogan. It is understood that all the rest is just an imitation of “Coca-Cola.” The “real thing” was short-lived. Despite the fact that Coca-Cola has buried a strategy of “the real thing” many years ago, the idea remained. Mention in the conversation the “real thing”, and most people will understand what you are talking about. Ask them: “What’s that?” and they will say: “Quite the cheese.”
The Case of Pepsi and Coca Cola in The Financial Market
Net income of the second world manufacturer of soft drinks – U.S. PepsiCo in 2008 decreased by 9.1% to 5.142 billion dollars against 5.658 billion dollars a year earlier, the company said. In this case, the company’s sales increased by 9.6% to 39.474 billion to $ 43.251 billion dollars. Operating profit decreased by 3.4% to 6.935 billion dollars against 7.170 billion dollars in 2007.
PepsiCo owns about 81% percent of the market of sports drinks in the U.S.. About 23% of PepsiCo profit falls on soft drinks (Coca-Cola in the figure is 85%). PepsiCo is in the 50 largest companies in the world by market capitalization in 2008.
Turnover in 2006 was about $ 35 billion. Revenue in 2008 was more than 43 billion dollars; the expected volume of sales of PepsiCo in retail prices is about 109 billion dollars. The volume of retail sales for each of the eighteen PepsiCo brands exceeds $ 1 billion a year.
The revenues of The Coca-Cola Company for the three quarters of 2011 increased by 44% compared to the same period of 2010, to $ 35.502 billion, net profit – by 15%, to $ 6.918 billion. Growth rates of its main competitor – American PepsiCo Inc., told off on October 12, are significantly lower: revenue in January-September increased by only 17%, to $ 46.35, net profit – by 1.5%, to $ 5.03 billion.
Thus, Coca-Cola surpassed PepsiCo in terms of net profit (approximately $ 1.9 billion, or 38%), and net profit margin (19.5% vs. 10.9%). PepsiCo lag in profitability was also observed in 2010.
October 18 Coca-Cola shares fell on New York’s Stock Exchange 0.15%, market capitalization of $ 153.6 billion Pepsi, in contrast, grew by 0.3%, to $ 97 billion
As PepsiCo expanding a portfolio of brands, for example, by milk and snack brands, its business becomes more and more different from Coca-Cola.
Net profit of PepsiCo Inc. in the first quarter of 2011 fell by 20% to 1.14 billion dollars.
However, the operating profit of PepsiCo in I quarter has doubled and amounted to 1.73 billion dollars, while a year earlier the rate was fixed at 840 million USD Net revenues increased by 27% – up to $ 11.94 billion.
For example, China, with a population of over 1.3 billion people, is the third largest consumer market for Coca-Cola drinks, second only to the United States and Mexico. In 2011, total sales of drinks in China amounted to 2.1 billion standard boxes, which is twice more than the figure recorded five years ago. Currently, per capita consumption of drinks in China is 39 bottles a year in Guangzhou this figure reached 130 bottles.
Recently, sales of PepsiCo are being negatively influenced. The company is trying to sell products at higher and higher prices, while gradually moving away from an approach to stimulate sales with discounts. Selling Pepsi drinks lags behind Coca-Cola Co. in recent years, and the company hopes that increased marketing efforts will help to revive the business. Pepsi also plans to promote new products, such as soft drink Pepsi Next, with average amount of calories, to increase market share in the U.S. PepsiCo reported a decline in profits to $ 1.9 billion, or $ 1.21 per share, from $ 2 billion, or $ 1.25 per share, for the same period last year. Excluding items such as losses associated with the adjustment of the market, and restructuring costs, operating profit fell to $ 1.20 from $ 1.31 per share.
Revenue fell 5.3% to $ 16.7 billion, mainly due to transfer of a franchise agreement with other companies in China and Mexico, as well as the negative impact of changes in the foreign exchange market. Organic revenue growth was 5%.
Analysts, polled by Thomson Reuters, expected a profit of $ 1.16 cents a share on revenue of 16.9 billion dollars.
Despite the decline in net profit, quarterly PepsiCo exceeded market expectations. Adjusted earnings per share were $ 0.74 for the consensus forecast of analysts of 0.73 dollars (Thomson Reuters).
In 2012 once again the Coca-Cola brand is in the lead. Its value is estimated at 77.8 billion dollars. In this case, the main rival brand – Pepsi, is on twenty-second place with a value of 16.6 billion dollars, although it is growing faster than the leader.