Business Models of Coca-Cola Vs. Pepsi: An Overview
Coca-Cola Co. (K.O) and PepsiCo, Inc. (ZEST) are very similar businesses in terms of industry, ideal consumers, and flagship products. Both Coca-Cola and PepsiCo are world leaders in the beverage industry, offering consumers hundreds of beverage brands.
Coca-Cola and PepsiCo are outwardly similar business models. However, there are differences in the way the two businesses operate and how they seek to gain market share.
- PepsiCo has a diversified product portfolio spanning the food, snack and beverage industries.
- PepsiCo typically prices its merchandise based on consumer demand and demographics.
- Coca-Cola has a centralized focus on the beverage industry with presence in many different beverage categories.
- Coca-Cola prices its products based on how competitors in the industry price comparable goods.
- Although PepsiCo generated more revenue in 2022, the Coca-Cola brand is more valuable.
The Coca-Cola Company was originally founded in 1892. It calls itself a total beverage company and boasts over 200 different beverage brands. In 2022, it had net revenues of $43 billion. Its international reach is similar to that of PepsiCo, although it operates with different groups of market segments. It also approaches prices differently.
More than 2.2 billion servings of Coca-Cola drinks are consumed every day. Instead of diversifying across the food, snack and beverage industries, Coca-Cola focused on building a beverage empire. Its product lines include:
- Soda: Coca-Cola, Barqs Root Beer, Sprite
- Water: Dasani, Glaceau SmartWater and Vitaminwater
- Tea: FUZE, Gold Peak Tea, Honest Tea
- Juices: Minute Maid, Hubert’s Lemonade
- Others: Body Armor, Monster Energy, Dunkin’ Donuts
Coca-Cola measures operations by dividing its products into sparkling (sparkling) and still (non-carbonated) beverages. In Coca-Cola’s fiscal year ending 2022, sparkling beverages accounted for more than 63% of the company’s total bottle/can sales.
Coca-Cola competes with PepsiCo internationally, although Coca-Cola approaches its market segmentation differently. Its operational structure divides its markets into the following divisions:
- North America
- Europe, Middle East and Africa
- Latin America
- Asia and the Pacific
Coca-Cola also created a Global Ventures segment to help new brands expand and identify ways to maximize the reach of select products around the world. This segment contrasts with Pepsi’s more segmented approach to geographic divisions.
Coca-Cola also created a Bottling Investment Group segment to strategically evaluate how products are filled, shipped and stored. While PepsiCo also has bottling divisions, Coca-Cola’s organizational structure places more emphasis on the bottling division as the top-level segment group.
Coca-Cola referred to its pricing strategy as “competitive pricing”. The company analyzes the pricing strategies of its competitors, sees where comparable products have been priced, and tries to set its own prices at about the same level as its competitors.
This type of pricing strategy often relies heavily on manufacturing excellence, exceptional service, and other marketing elements that attract customers to Coca-Cola products because its prices will be comparable to competitors.
With roots dating back to 1898, PepsiCo has created a diverse product line of complementary goods across the food and beverage industry. It also has a direct pricing strategy that analyzes consumer demand and sets prices accordingly.
PepsiCo has built a highly diversified Product portfolio. In 2022, PepsiCo had 23 different brands and annual sales of about $86.39 billion.
Instead of focusing only on the beverage market, PepsiCo purposefully and deliberately expanded into others consumer packaged goods markets:
- Soda: Pepsi, Diet Pepsi, Pepsi Max, 7Up, Sierra Mist, Mountain Dew
- Alternative drinks: Tropicana, Sodastream, Aquafina, Gatorade
- Snacks: Ruffles, Tostitos, Lays, Doritos, Fritos, Cheetos
- Others: Starbucks, Quaker finished products
Although historically considered a beverage and soda company, 58% of PepsiCo’s business revenue comes from its food products.
PepsiCo sells beverages, snacks and food around the world through its seven global divisions.
- Frito-Lay North America (branded food and snack store in the United States and Canada)
- Quaker Foods North America (cereals, rice, pasta in the United States and Canada)
- PepsiCo Beverages North America (beverages in the United States and Canada)
- Latin America (all products in Latin America)
- Europe (all products in Europe)
- Africa, Middle East and South Asia (all products in Africa, Middle East and South Asia)
- Asia Pacific, Australia, New Zealand and China (all products in Asia, Australia, New Zealand and China)
In 2022, 61% of net revenue was generated by the three North American divisions. PepsiCo beverages were responsible for 30% of the total.
PepsiCo is an industrial price maker that sets the prices of its products in accordance with customer demand. It offers different sizes of drinks at different prices, which are determined by the number of drinks delivered and consumed for the area. For example, although Doritos and Tostitos are comparable products, Doritos is the more recognized brand worldwide, which may have different prices depending on its popularity.
Similar to Coca-Cola, PepsiCo’s pricing is also based on targeted customer demographics. Health-oriented drinks such as Tropicana, niche products for different markets such as Lipton, and highly saturated products such as Pepsi are priced differently depending on the customer base.
Which one tastes better?
Everyone has their own taste. If you like the taste of Pepsi over Coca-Cola, you’re in the minority. In a 2021 global study, about two-thirds of consumers think Coca-Cola is better than Pepsi.
In its most recent edition of the list, Coca-Cola was ranked as the #6 brand Forbes “World’s Most Valuable Brands”, while Pepsi was ranked 36th. Both companies reach out to customers through advertising, social media and expanding existing product lines with new flavors and healthy alternatives.
Coca-Cola and PepsiCo continue to see huge market demand for their products. Both have expanded into the energy drink market, which is thriving. And as customers around the world continue to focus on sugar, chemicals and packaging sustainability, both companies’ operations, product lines and pricing will adapt to their changing preferences and demands.
Does Coca-Cola or Pepsi have a better brand?
Both Coca-Cola and Pepsi have internationally recognized brands. Coca-Cola is the international leader in beverages, while PepsiCo has a stronger brand presence in the light and food industries. The Coca-Cola brand is also financially more valuable.
Is Coca-Cola bigger than Pepsi?
When looking at sales, Pepsi is bigger. In 2022, Coca-Cola’s net sales will grow to $43 billion, while PepsiCo’s will grow to $86.39 billion.
What brands does Coca-Cola own vs. Pepsi?
Coca-Cola brands include Sprite, Fanta, Powerade, Dasani and Minute Maid. PepsiCo owns brands including Gatorade, Frito-Lay, Quaker Oats and Rockstar Energy.
Who won the Cola Wars?
Coca-Cola has a larger market presence in the field of carbonated soft drinks. Although the rivalry still exists, Coca-Cola has become the more dominant beverage provider today.
Coca-Cola and PepsiCo are two successful and venerable American companies that have stood the test of time.
While both are giants in the beverage industry, PepsiCo branched out to offer food products in addition to beverages as Coca-Cola continued to focus solely on beverages. They also have different approaches to product pricing.
Both companies sell products that consumers continue to demand, and each enjoys brand loyalty that is the envy of most companies.