The Cola Wars: Dallas 1975

Abstract

This case covers the marketing strategies used by Pepsi and Coca-Cola during the 1975 "Cola Wars." It includes brief histories of the companies and relevant marketing data from the 1970s.

Excerpt

UVA-M-0900

Rev. Mar. 31, 2017

The Cola Wars: Dallas 1975

In 1975, Pepsi-Cola (Pepsi) had collected nationwide consumer research data supporting the hardest-hitting advertising in its history, the “Pepsi Challenge.”

Coca-Cola (Coke) was founded in Atlanta, Georgia, in 1886. Pepsi emerged shortly after and others, including Dr. Pepper and Royal Crown Cola (RC), also introduced their own cola brands. In 1933, Pepsi hit on a successful marketing strategy: it sold a 12-ounce bottle for the same price as a 6.5-ounce bottle of Coke (“Twice as much for a nickel”). In 1934, the success of Pepsi's strategy was evident by its need for increased bottling capacity to capitalize on the impact of the move to the 12-ounce size. The network of independent Pepsi bottlers grew and, by 1970, Pepsi had reduced Coke's overall lead to 2 to 1 and in food stores to only 1.2 to 1.

Pepsi's marketing organization reflected the importance of distribution and the teamwork that was required to achieve the company's strategic goals through the 500 bottlers, some of which were company owned. Brand marketing recommended the plans by which Pepsi's resources should be allocated among distribution channels, consumer segments, new product types, geographic areas, package types, and advertising media. Field sales was responsible for implementing Pepsi marketing programs through the independent bottler systems, adapting to the variations in local conditions (share, competitive strength, and package mix) and bottler capability (financial strength, staff resources, and trade relationships). The Pepsi Bottling Group was charged with implementing strategic programs through company-owned plants. Creative services oversaw the development of national, local, and trade advertising copy. It normally expected the locally initiated copy strategies (such as the “Pepsi Challenge”) to position the company in a manner consistent with national campaigns.

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Keywords: Pepsi, Coca-Cola, marketing, pepsi challenge