Cola industry: Coca-Cola vs. Pepsi Cola
The Pepsi-Cola company (which became PepsiCo in 1965 when it merged with Frito-Lay) also had ordinary beginnings, as Caleb Bradham, a North Carolina druggist, developed a formula for what would become a sweeter soft drink in 1898. Pepsi-Cola (also known as Pepsi) became a perennial also-ran to Coca-Cola, until Depression-era cost-cutting led to the development of the twelve-ounce bottle, which gave consumers of Pepsi more product for the same price as the much smaller Coca-Cola. Suddenly, impoverished consumers had a cheaper version of their favorite beverage, and Pepsi-Cola challenged Coca-Cola’s supremacy during the postwar era.
PepsiCo used several tactics to seize market share from Coca-Cola. Its most famous and effective was the Pepsi Challenge of the 1980’s: Consumers were asked to take blind taste tests, comparing Pepsi-Cola and Coca-Cola. The results touted in Pepsi-Cola’s advertising campaign favored Pepsi-Cola. The ads worked, and Coca-Cola lost market share to Pepsi- Cola, setting the stage for the disastrous gamble of New Coke.
Preparing to celebrate a century of Coca-Cola, the company embarked on one of the worst public relations disasters in corporate history, reformulating Coca-Cola from the original recipe. Intended to recharge the Coca-Cola brand and defeat the challenge fromPepsi-Cola, New Coke instead energized a consumer revolt against the new formula. For months, fans of the original formula collected the old Coca-Cola under the assumption that it would run out, then they began a media campaign to convince the company to return to the original formula. With its new formula under attack, the company relented, selling New Coke alongside the original formula drink, which it renamed Coca-Cola Classic. Eventually New Coke would disappear from the shelves, ending the brief and disastrous attempt to change an icon.
The rivalry between Coca- Cola and PepsiCo moved from the companies’ main products to their subsidiary ones; both corporations purchased or developed competing brands of bottled water, teas, and sports drinks such as Gatorade and Powerade. Old products, such as vanilla-flavored or cherry colas, were reintroduced and repackaged for a generation that had not known them. PepsiCo went a step further by expanding into the fast-food business, purchasing Pizza Hut (1977), Taco Bell (1978), and Kentucky Fried Chicken (1986; later KFC), and using these chains’ thousands of outlets to sell PepsiCo products, thus creating a permanent market for Pepsi-Cola and its other soft drinks. In 1997, PepsiCo spun off these fast-food restaurants, creating Tricon Global Restaurants, which in 2002 acquired Long John Silver’s and A&W Restaurants and became Yum! Brands.