Coke And Pepsi May Be Readying Another Cola War - Spokane, North Idaho News & Weather KHQ.com

Coke And Pepsi May Be Readying Another Cola War

MSNBC.COM - Pepsi has announced it will spend $600 million more in marketing. Its recent Super Bowl ad may show how much of that will be used taking on its No. 1 competitor Coke in a new cola war.

At its investor meeting last week, PepsiCo said it would spend on its core brands – Pepsi chief among them – with a particular focus on North America. On Super Bowl Sunday, the company ran an ad featuring a Coca-Cola Zero deliveryman buying a bottle of his competitor's beverage.

Facing declining consumption in North America, the two beverage titans are doubling down on their flagship colas."It looks like it's back to Coke versus Pepsi right now," said Peter Daboll, CEO of Ace Metrix, a company that measures ad effectiveness. "I really think the cola wars are going to be focused on the base brands. Three long polar bear spots in the Super Bowl says something," he said in reference to Coke's big game ads.

Along with the renewed investment in its flagship brand, PepsiCo told investors it plans to undertake aggressive cost-cutting, including cutting 8,700 jobs. Coca-Cola has fared better financially — it announced a 4 percent revenue increase and a 1 percent increase in North American sales volume last week — but, like Pepsi, it's also pouring money into marketing. Executives told investors a $650 million savings plan would benefit brand-building initiatives.

The two companies are fighting not only each other but the flood of other beverages — bottled tea, energy drinks, juice and niche products like coconut water — on the market today. Per-capita soda consumption in the U.S. topped out at 54.9 gallons in 1998, according to research and consulting company Beverage Marketing Corporation. Sales have slipped slightly but steadily every year; preliminary figures indicate that per-capita consumption last year was 43.6 gallons. 

"Having said that, people still drink more carbonated soft drinks than any other beverage in the US," said Gary Hemphill, managing director of Beverage Marketing Corporation. "Nothing else even comes close to it." The second most-popular beverage category in the U.S. is bottled water; last year, per capita consumption was an estimated 29.3 gallons.

"They want to put their resources where their biggest brands are," Hemphill said. "Even with all these new segments that have emerged, carbonated soft drinks are still far and away the biggest category in spite of the recent declines." Increasing sales of Coke or Pepsi by even a small increment would have more of a bottom line impact than increases in other, more narrow business lines.

"Even if they can stabilize and bring the marketplace to flat, that would be a win for them because it would reverse years of declines," Hemphill said. To do that, analysts say both are going to pull out all the stops in their marketing, with more TV advertising, a greater social media presence and more attempts to integrate the brands with pop culture. 

"It's really about trying to show you that Pepsi is something that matters to you," Daboll said. "It's hip, it's connected, it's related to artists you're comfortable with." The Super Bowl ad for Pepsi-Cola would seem to fit the bill, featuring relative unknown Melanie Amaro, winner of singing competition the X Factor, and rock legend Elton John, with a last-second appearance by rapper-turned-reality-TV-fixture Flavor Flav. click here to read more

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