Battlefield between Coca cola and Pepsi
What do you know about coca cola and Pepsi company? Which one do you think is doing a good job, let’s take a look at it in this article.
Together these two companies make up an enormous proportion of the drinks and snacks you may have on a daily basis. Coca Cola (COKE) – Get Report alone claims more than 500 brands worldwide.
These two companies have expanded enormously since their founding in the late 19th century. Still, all the sports drinks and sun chips in the world don’t change their core mission: winning the cola wars.
Ever since Coke and Pepsi (PEP) – Get Report hit the shelves they have been direct competitors, a head-to-head that by now has become a part of American culture.
Some people swear by the bright blue can. Others won’t even use the word “soda” when they can ask for a Coke. Here’s what you (probably don’t really) need to know the next time a waiter asks, “Coke or Pepsi?”
History of coke
Coke was invented in 1886 by a chemist named John Pemberton. While specific stories vary, most records agree that Pemberton was trying to create an anesthetic syrup. (Some records indicate that Pemberton, a Confederate veteran, was trying to replace morphine, upon which he had become dependent during the Civil War.)
Regardless of his plan, what Pemberton actually invented was a combination of the coca leaf and kola nut that had relatively little true pharmaceutical benefit. However, a quirk of history saved the drink from historical irrelevance.
When Pemberton invented his syrup, pharmacies typically had soda fountains in them. While customers didn’t love it as a medicine, when mixed with tonic water to create a soda they thought it made a great treat.
Coke’s history stretches back through several different versions, most including alcohol. When Atlanta passed local prohibition laws in 1885, though, Pemberton locked in on the recipe that we now know as Coca-Cola.
That became a hit, and the rest was history. With one small change… the original recipe had cocaine in it, and the company still uses a non-narcotic coca leaf extract to this day.
History of Pepsi
Pepsi has always been the Apple to Coke’s Microsoft, the Lyft to Coke’s Uber. (Although that might not be fair. If Travis Kalanick had started Coca-Cola each can would cost five times as much in the summer and the company slogan would be “Coke: It would taste better if you smiled more.”)
Still, there’s no dispute that Pepsi was launched to directly compete with Coke.
Again, because people once got their soda and castor oil at the same place, Pepsi was invented by a pharmacist. Caleb Bradham created his product in New Bern, N.C., and labeled it, inventively, “Brad’s Drink.” Bradham later renamed the drink Pepsi Cola because he believed it helped with dyspepsia.
Then again, Pemberton naming his drink after its two main ingredients was hardly more inspired.
Pepsi’s original formula used a variety of spices and flavors such as nutmeg, caramel, sugar and lemon oil to create what Bradham would later market as a “Delicious and Healthful” drink.
In a moment foretelling the American marketplace to come, Pepsi was tangentially saved by Coke in the 1930s. After the Pepsi-Cola Company went bankrupt, it was bought by the Loft Candy Company, who brought Pepsi back to life because Coca-Cola wouldn’t give them a discount on syrup.
Coke vs. Pepsi: Business Models
As a product, customers generally prefer Coke. The red can of cola is one of the most popular products in the world, in some places more common than clean water.
As a business, however, the market increasingly prefers Pepsi. It’s not even close. At time of writing PepsiCo’s stock sold for $117.09 against Coke’s $49.83. The reason is diversity.
In recent years the American market in particular has trended away from sugary drinks like colas. Although both companies have long diversified into a wide range of other drink classes, such as juice, sports drinks and bottled water, many analysts particularly see the future in healthy drink classes.
Pepsi is seen as having occupied that market more successfully than Coke with products like Lipton, Pure Leaf and its organic drinks.
More importantly, PepsiCo isn’t just a beverage company.
Coca-Cola has made what’s known as a “pure play” in drinks. The company has worked harder than Pepsi to establish a global brand, and has been far more successful in marketing its core product line (Coke itself).
On the other hand after its merger with Frito-Lay in the 1960s, Pepsi made a push into snack foods such as potato chips, oatmeal and (in more recent years) hummus. This is a market Coca-Cola hasn’t entered at all.
This gives Pepsi two critical advantages over Coca-Cola. First, there’s size. The snack food market is large and growing. In particular, it’s growing much faster than carbonated drinks.
As a result Pepsi has a much broader footprint than its rival, one which includes high-growth areas that Coca-Cola misses out on.
Second, Pepsi has what’s known as “complementary” or “synergistic” business lines.
Customers who buy snacks will often buy a complementary drink and vice-versa. In fact, frequently purchasing a drink or snack will inspire a consumer to buy the other even if they hadn’t originally planned to. This allows Pepsi to convert many of its customers into double purchases with minimal overhead.
The upshot is that Pepsi’s snack line has grown to a little less than half its total revenues, and its Return on Equity is more than 50% higher than Coca-Cola’s.
Coke vs. Pepsi: Product Differences
So that’s the history, but what’s the difference when the fizz hits the ice?
Part of it is a single ingredient. It’s that coca leaf extract. Coke can get it, Pepsi can’t.
The Coca-Cola company imports coca leaves stripped of their narcotic properties through a New Jersey importer and thanks to all sorts of specially carved out exceptions in federal law.
This isn’t a narcotics trade. Coca-Cola sources these leaves from Peru, where virtually every tourist drinks them as part of the ubiquitous coca tea. Pepsi makes up for that with citric acid, which Coke does not include in its listed ingredients.
But that’s just what’s going on behind the scenes. Here’s how it plays out in your mouth:
Coke has a vanilla-raisin, almost molasses taste to it. Pepsi has a citrus, lemony flavor.
The flavor of Pepsi is sweeter so it’s stronger initially and you taste it faster.
Coke is less sweet and a little bit smoother than Pepsi. Pepsi has more sugar and caffeine than Coke.
As Malcom Gladwell wrote in his 2005 book “Blink,” in which he discusses the differences at length, “Pepsi, in short, is a drink built to shine in a sip test.”
So there it is. What’s the difference between Coke and Pepsi? A little bit of sugar and a whole lot of history.
Drop your favorite in the comment section