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 is the average debt/equity ratio for the food and beverage sector?

    Find out more about the categories in the food and beverage sector and the average long-term debt-to-equity ratio for the ... Read Answer >>
  2. 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 >>
  3. Profit margin for food and beverage sector

    Learn which profit margin is common for a company in the food and beverage sector based on different statistical measures ... Read Answer >>
  4. How does brand image and marketing affect market share?

    Building a positive brand image is a must for companies that want an edge over the competition. Learn how marketing and branding ... Read Answer >>
  5. Why did Warren Buffett invest heavily in Coca-Cola (KO) in the late 1980s?

    Discover why Warren Buffett found Coca-Cola an attractive investment in 1987. One criteria of a Buffett stock pick is a moat ... Read Answer >>
  6. What is Warren Buffett's largest holding?

    Coke? IBM? American Express? Buffett's Berkshire Hathaway has a stake in several major companies. Find out which company ... Read Answer >>
Related Articles
  1. Investing

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

    Consumer trends and regulatory pressures prompts the beverage giant to go health conscious.
  2. 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.
  3. 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.
  4. Investing

    Looking to Invest in Coca-Cola? Here's What to Expect (KO, PEP)

    Learn about the Coca-Cola company as well as the industry in which it operates. Understand what its investors should expect of the company.
  5. Investing

    Pepsi Beats, Declares $7 Billion Dividend, Buyback (PEP)

    Despite management's tepid guidance, Pepsi can still satisfy.
  6. Investing

    Coca-Cola to Sell Alcoholic Beverages in Japan

    The beverage giant is using Japan as a test market as it diversifies its product offerings.
  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

    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.
  9. 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.
  10. Investing

    Pepsi Has ‘Fallen Victim to Media Hype’ as Soda Sales Dwindle: Analyst

    RBC and Goldman suggest that the beverage giant's proactive shift has been detrimental to sales.
RELATED TERMS
  1. Roger Enrico

    Roger Enrico is a former CEO of PepsiCo from 1996 to 2001, chairman ...
  2. Brand

    A brand is an identifying symbol, mark, logo, name, word and/or ...
  3. Brand Awareness

    Brand awareness is the extent to which consumers are aware of ...
  4. Brand Potential Index (BPI)

    The brand potential index (BPI) is the correlation between a ...
  5. Alternative Investment

    An alternative investment is an atypical asset not traditionally ...
  6. Equity

    Equity is the value of an asset less the value of all liabilities ...
Trading Center