Competitive Advantage Case Study

Coca-Cola Sticks to Carbonate Beverages

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Abstract:
In December 2005, for the first time in history, Coca-Cola had a market capitalisation which was lower than that of its arch-rival Pepsi. The company's market value was $97.9 billion, compared to $98.4 billion of Pepsi. This sparked a debate among the analysts about the future of the world's largest beverage company. Only five years back, the market value of Coke was three times that of Pepsi. Since the mid-1980s, Coke concentrated on its core business of carbonated soft drinks, which generated huge profits for the company. However, in the mid-1990s, carbonated drinks witnessed slow growth as the consumers' preference shifted to sports and energy drinks. Realising the changing trend, Pepsi quickly expanded into non-carbonated drinks, snack foods and restaurant businesses, while Coke stuck to its cola business. By 2000, Pepsi had a diverse product portfolio which reduced its reliance on cola business. The case attempts to highlight Coke's dependence on carbonated drinks and elaborates on Pepsi's gradual expansion into other businesses. The case also discusses the trends in the snack and soft drink industries and raises a question regarding how Coke would reinforce its leadership position in a slow growth market.

Pedagogical Objectives:

• To discuss Coke’s strategies to reduce its reliance on beverages
• To analyse Pepsi’s strategy of diversifying into non-carbonated drinks and snacks
• To understand the repercussions of relying on a single product
• To understand the benefits of an extensive product portfolio

Keywords : Coca-Cola; Pepsi; Core Competency & Competitive Advantage Case Study; Carbonated drink; Frito-Lay; Coke; Soft drink; Fanta; Diet Coke; Goizueta; Powerade; Dasani; Blak; Non-carbonated drink; Vault; Snack foods