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Pepsi vs Coca Cola

coke, pepsi

The Middle East is a challenging market for global soft drink makers Pepsi and Coca-Cola: the region displays mouth-watering specifics (a fast growing, young and wealthy population; restricted alcohol consumption; warm weather all year long…) but also demonstrates sometimes violent anti-American sentiments, boycotts, political instability, and politicized competitors (Mecca Cola, Zam Zam Cola). Despite denials by religious officials, rumors keep spouting that Pepsi stands for “Pay Every Penny to Save Israel,” and that if put in front of a mirror, the Coca-Cola logo reads “No Mohammed, No Mecca” in Arabic.

In 1967, the Middle East even turned a no-go area for Coca-Cola after the Arab League boycotted the company because of ties with Israel, and remained so until 1991. It is the only part of the world where archrival Pepsi dominates.

Arm wrestling But Coca-Cola has been back with a vengeance, and the famed cola wars are going on harder than ever: handicapped by its long absence, the red brand made its ambitious point by quickly introducing half-liter bottles, re-sealable PET bottles and heat-resistant bottles, adapted to small retail points not always equipped with state of the art refrigerating systems. Some vendors were even treated to free fridges. This focus on both customers and retailers was all the more so appreciated that on the other hand, Pepsi was suffering a typical “monopolistic behavior syndrome”, allegedly taking the market for granted.

So it comes a no surprise that today, Pepsi, which used to sell 95 percent of all soda in the Gulf through a network of ten local bottlers across the GCC, spares no effort not to gain, but to retain its market share: Coke now enjoys up to a quarter of the region’s and a fifth of the Saudi’s $1 billion soft-drink market. Saudi Arabia (where Coke was previously and ominously known as “red Pepsi”) is Pepsi’s largest foreign market after Mexico and Canada, but Coke’s Saudi factory now produces 1.2 billion cans per year.

The blue, red and white brand first retaliated by deep discounting but the pair quickly gave up price war. Instead, Pepsi expanded its product line, revamping Seven Up and Mirinda and successfully launching Mountain Dew, Pepsi X (its own energy drink), and recently zero sugar Pepsi Max. Pepsi also started e-vending in 2003 in partnership with its UAE distributor Dubai Refreshments Company, and the state-owned telecommunications firm Etisalat.

Image issues But nothing’s safe in the Middle East. In 2002, following the US’ invasion of Iraq, another boycott on all American goods trimmed around $40 million off Coca-Cola’s profits in the Gulf and the company retreated from its Bahrain’s headquarters to Athens in 2003. Since, management has been at pain explaining that Coke is an “international symbol, rather than an American one”. With bottling partners, Coca-Cola Middle East has 24 factories and more than 50 distribution centers worth over $500 million; it employs over 20,000 people (against 8,000 for Pepsi), with a majority of Arab nationals. So Coke stresses on its positive impact on the region and puts Palestine on the forefront: “In Palestine, our business is among the top five investors and is the third largest employer, providing over 300 direct jobs and 3000 indirect ones”, says its website.

Coca-Cola is also heavily involved in local charity works, be it in Egypt, (youth centers, trash pick-up drives, children’s cancer hospital), Palestine (school supplies), Lebanon (planting cedar trees), Saudi Arabia (with the Disabled Children Association), UAE (with the Red Crescent Society). In 2003, competitor Pepsi announced a million dollars donation to support educational projects in the region, but Coke keeps the lead in the humanitarian field. Still, Pepsi - that in 2005 was the single biggest spending brand and outspent Coke by 84 percent in the region - is a step ahead on the advertising side.

Soda and songs While Coca Cola (that sponsors the Olympic Games since 1928) is more into international events such as the World Cup Soccer, the National Football League, The Rugby World Cup, etc., Pepsi has focused on local sports in order to help improve regional perception, with, for instance, its Street Football Challenge in Bahrain, Saudi Arabia and Oman, or $5 million worth promotion offers revolving around football during the summer 2006.

But more significantly, to fend off their hampering identification with America, Coca-Cola and Pepsi have been highlighting regional traits, shooting local commercial and scrapping international ones, and most importantly turning Arabic pop stars into smart advertising tools. Lebanese Nancy Ajram and Saudi Abdelmajeed are now the faces of Coca-Cola in the region but Pepsi pushed the envelope much further, first by combining local and international stars (singers Elissa and Christian Aguilera, Haifa Wehbe and soccer player Thierry Henry), then with its “Sea of stars” concept: the original campaign presents not one but five Arab music sensations and includes a full length feature musical film to be released by the end of next year.

The pair is definitely gearing up for the next fight, both experiencing a double-digit growth in the region where carbonated drinks consumption is expected to increase by an average 4.8 percent annually over the next five years. But Coca-Cola’s claim to be the number one brand “within the next few years” still remains to be seen.

 
 

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