A:

Approximately 60% of the global nonalcoholic beverages industry is controlled by Coca-Cola and Pepsi. Of this 60%, the split between Coca-Cola and Pepsi, respectively, is about 40% to 20%. This average is on a global and U.S. domestic basis. Both companies face competition from the growing market of healthier alternatives to sugary soda drinks, such as energy and nutritional drinks. This has reduced Coke's operating margin from about 25% to approximately 20% since the year 2000. To adjust to these changing market conditions, both Coca-Cola and Pepsi have developed their own alternative beverages but still face competition and market share erosion from other competitors.

The Coca-Cola Co. (KO) and PepsiCo (PEP) are the two dominating forces in the nonalcoholic beverages industry and have been for decades. The largest nonalcoholic beverage company in the world is Coca-Cola, which owns 500 brands, 17 of which generate approximately $1 billion each, per year, in revenue. Pepsi, however, has a variety of leading brand-name food and beverage products with 22 of those brands generating more than $1 billion each, per year, in revenue.

Both companies span the globe, having a leading presence in over 200 countries. The companies and their respective primary brands are household names recognized worldwide, but are possibly most famous for the rivalry between them, which is typically known as the “cola wars.” In terms of longevity, targeted marketing campaigns and different marketing tricks, this commercial war is considered one of the most epic in history.

Times have changed since the development of carbonated beverages. Consumers have begun to seek out healthier alternatives. Both cola brands have seen recent decline amid increased competition, and analysts foresee a continued downward trend for the two main brands, although these two companies are expected to continue to dominate the overall beverage market.

RELATED FAQS
  1. What countries are driving most of the growth of the food and beverage sector?

    Learn about the countries, primarily emerging market nations, that are currently driving most of the growth in the food and ... Read Answer >>
  2. How does the risk of investing in the food and beverage sector compare to the broader ...

    Find out why investing in the food and beverage sector is generally considered to be less risky than investments in the broader ... Read Answer >>
  3. How attractive is the food and beverage sector for a growth investor?

    Learn how the food and beverage sector's volatility makes it attractive to growth investors, and discover how these investors ... Read Answer >>
  4. What is market cannibalization?

    Market cannibalism is defined as the negative impact a company's new product has on the sales performance of existing products. ... Read Answer >>
  5. How can I hedge my portfolio to protect from a decline in the food and beverage sector?

    Learn why countercyclical investments, such as precious metals, serve as the best hedge against exposure to the food and ... Read Answer >>
  6. What metrics are commonly used to evaluate companies in the food and beverage sector?

    Discover what some of the most commonly used performance metrics are that investors use to evaluate companies in the food ... Read Answer >>
Related Articles
  1. Investing

    Parched For Profits? Try Beverage Stocks

    For diversification and profit potential, add a different kind of "liquidity" to your portfolio.
  2. Investing

    Pepsi's Guilt-Free Approach Means More Revenue

    Healthier products now generate 45% of Pepsi's net revenue.
  3. Investing

    PepsiCo Adds to its 1893 'All-Natural' Colas Line

    Consumer trends and regulatory pressures prompts the beverage giant to go health conscious.
  4. Investing

    Comparing Coca-Cola and Pepsi's Business Models

    Understand more about the Coca-Cola company and the PepsiCo company. Learn about the key similarities and differences that make both companies successful.
  5. Investing

    Pepsico Stock to Trade Ex-Dividend (PEP)

    While Pepsi's top-line results may disappoint, the company's bottom line and capital distribution plan remain impressive.
  6. Investing

    Coca-Cola's 3 Key Financial Ratios (KO)

    Get insight into why some of Coca-Cola's financial ratios are not as good as those of its peers, especially PepsiCo's, and explore how it may do better.
  7. Taxes

    Pepsi, Coca-Cola Shares Fall on Philly Soda Tax (PEP, KO)

    Philadelphia City Council agreed to impose a tax on sweetened drinks, which is broadly interpreted as a setback for the beverage industry.
  8. Investing

    Diet Pepsi Back to Aspartame Per Consumer Demand

    Pepsi's change of mind underscores how much in control consumers are with their spending habits.
  9. Investing

    Pepsi's Partnership with Sodastream

    Examine Pepsi's partnership with SodaStream, what each company hopes to gain, and learn how the latest battle in the cola wars may play out.
  10. Insights

    Pepsi and Coke Losing to Healthier Options

    Sales of SodaStream's at-home beverage systems are soaring while other soda makers struggle with a growing demand for healthy drink options.
RELATED TERMS
  1. Food Industry ETF

    An exchange-traded fund that invests in food and beverage companies, ...
  2. Roger Enrico

    A former CEO of PepsiCo from 1996 to 2001, chairman from 2001 ...
  3. Brand Identity

    Brand identity is how a business presents itself to and wants ...
  4. Brand Management

    Brand management is a function of marketing that uses techniques ...
  5. Brand Awareness

    The likelihood that consumers recognize the existence and availability ...
  6. Consumer Goods Sector

    A category of stocks and companies that relate to items purchased ...
Hot Definitions
  1. Nostro Account

    A bank account held in a foreign country by a domestic bank, denominated in the currency of that country. Nostro accounts ...
  2. Retirement Planning

    Retirement planning is the process of determining retirement income goals and the actions and decisions necessary to achieve ...
  3. Drawdown

    The peak-to-trough decline during a specific record period of an investment, fund or commodity. A drawdown is usually quoted ...
  4. Inverse Transaction

    A transaction that can cancel out a forward contract that has the same value date.
  5. Redemption

    The return of an investor's principal in a fixed income security, such as a preferred stock or bond; or the sale of units ...
  6. Solvency

    The ability of a company to meet its long-term financial obligations. Solvency is essential to staying in business, but a ...
Trading Center