The Coke Pepsi Rivalry

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The Rivalry on Various Fronts Contd...

III - PRODUCT LAUNCHES Pepsi beat Coke in the Diet-Cola segment, as it managed to launch Diet Pepsi much before Coke could launch Diet Coke. After the Government gave clearance to the use of Aspertame and Acesulfame-K (potassium) in combination (ASK), for use in low-calorie soft drinks, Pepsi officials lost no time in rolling out Diet Pepsi at its Roha plant and sending it to retail outlets in Mumbai. Advertisements and press releases followed in quick succession. It was a major victory for Pepsi, as in certain parts of the world, Coke's Diet Coke sold more than Pepsi Cola itself. Brand visibility and taste being extremely important in the soft drink market, Pepsi was glad to have become the first-mover once again. Coke claimed that Pepsi's one-upmanship was nothing to worry about as Coke already had a brand advantage. Diet Coke was readily available in the market through import channels, while Diet Pepsi was rarely seen.

Hence, Diet Coke has a brand advantage. Coke came up later with a high-profile launch of Diet Coke. However, as expected, diet drinks, as a percentage of the total cola demand, did not emerge as a major area of focus in the years to come. Though the price of the cans was reduced from Rs 18 to Rs 15 in July 2000, it failed to catch the fancy of the buyers. In September 2000, both the companies again slashed the price of their diet cans by over 33% per cent to Rs 10. Both the companies were losing Rs 5-6 per can by selling it at Rs 10, but expected the other products to absorb these losses. A Pepsi official said that the diet cola constituted only about 0.4% of the total market, hence its contribution to revenue was considered insignificant. However, both companies viewed this segment as having immense potential and the price-cuts were part of a long-term strategy.

Coke claimed that it was passing on the benefit of the 5% cut in excise duty to the consumer. Industry experts, however, believed that the price cut had more to do with piling up inventories. Diet drinks in cans had a rather short shelf life (about two months) and the cola majors were simply clearing stocks through this price cut. However, by 2001, the diet-cola war had almost died out with the segment posting extremely low growth rates.

IV – POACHING
Pepsi and Coke fought the war on a new turf in the late 1990s. In May 1998, Pepsi filed a petition against Coke alleging that Coke had 'entered into a conspiracy' to disrupt its business operations. Coke was accused of luring away three of Pepsi's key sales personnel from Kanpur, going as far as to offer Rs 10 lakh a year in pay and perks to one of them, almost five times what Pepsi was paying him. Sales personnel who were earning Rs 48,000 per annum were offered Rs 1.86 lakh a year. Many truck drivers in the Goa bottling plant who were getting Rs 2,500 a month moved to Coke who gave them Rs 10,000 a month. While new recruits in the soft drinks industry averaged a pay hike of between 40-60% Coke had offered 300-400%. Coke, in its reply filed with the Delhi High Court, strongly denied the allegations and also asked for the charges to be dropped since Pepsi had not quantified any damages. Pepsi claimed that this was causing immense damage as those employees who had switched over were carrying with them sensitive trade-related information. After some intense bickering, the issue died a natural death with Coke emerging the winner in another round of the battle.

Pepsi also claimed that its celebrity endorsers were lured into breaking their contracts with Pepsi, and Coke had tried to pressure the Board of Control for Cricket in India (BCCI) to break a sponsorship deal it had signed for the Pepsi Triangular Series. According to Pepsi's deal with BCCI, Pepsi had the first right of refusal to sponsor all cricket matches played in India where up to three teams participated. The BCCI, however, was reported to have tried to break this contract in favor of Coke. Pepsi went to court protesting against this and won. Pepsi also alleged that Coke's Marketing Director Sanjiv Gupta was to join Pepsi in 1997. But within days of his getting the appointment letter, Coke made a counter offer and successfully lured Gupta away.

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