The Coke Pepsi Rivalry

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The Rivalry on Various Fronts

I - BOTTLING Bottling was the biggest area of conflict between Pepsi and Coke. This was because, bottling operations held the key to distribution, an extremely important feature for soft-drink marketing. As the wars intensified, both companies took pains to maintain good relationships with bottlers, in order to avoid defections to the other camp. A major stumbling block for Coke was the conflict with its strategic bottling partner, Ramesh Chauhan of the Parle group of companies. Coke alleged that Chauhan had secretly manufactured Coke's concentrate. Chauhan, in turn, accused coke of backtracking on commitments to grant him bottling rights in Pune and Bangalore and threatened legal action. The matter almost reached the courts and the strategic alliance showed signs of coming apart. Industry observers commented that for a company like Coke that was so heavily franchisee driven, antagonizing its chief bottler was suicidal.

While all this was going on, Pepsi wasted no time in moving in for the kill. It made huge inroads in the north, particularly in Delhi where Chauhan had the franchise and also snapped up the opportunity to buy up Coke's bottler Pinakin Shah in Gujarat. Ironically, the Gujarat Bottling Company owned by Shah, also belonged in part to Chauhan for whom the sell-out was a strategic counter-move in his battle with Coke. Coke moved court and obtained an order enforcing its bottler's agreement with the Gujarat company, effectively freezing Pepsi's right to use the acquired capacity for a year. Later, Coke made a settlement of $10 million in exchange for Chauhan foregoing bottling rights in Pune and Bangalore.

Towards the end of 1997, bottling agreements between Coke and many of its bottlers were expiring. Coke began pressurizing its bottlers to sell out and threatened them that their bottling agreements would not be renewed. Media reports claimed that Coke's bottlers were not averse to joining hands with Pepsi. They said they would rather offer their services to Pepsi than selling out to Coke and discontinuing a profitable business. In November 1997, Pepsi made a bid to gain from the feud between Coke and its franchised bottlers. It declared that it was ready to join hands with 'any disgruntled Coke bottler, provided the latter's operations enhanced Pepsi's market in areas where Coke was dominant.' Pepsi was even willing to shift to a franchisee-owned bottling system from its usual practice of focusing on company-owned bottling systems supplemented by a few franchisee-owned bottling companies, provided it found bottlers who would enhance both the quantity and quality, especially in areas where Coke had a substantial marketshare. Pepsi won over Goa Bottling Company, Coke's bottler in Goa and became the market leader in that city.

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