Coca-Cola vs. Pepsi Business Models: An Overview
Coca-Cola Co. (KO) and PepsiCo, Inc. (PEP) are very similar businesses in terms of industry, ideal consumers, and flagship products. Both Coca-Cola and PepsiCo are global leaders in the beverage industry, offering consumers hundreds of beverage brands.
On the surface, Coca-Cola and PepsiCo have similar business models. However, there are differences in the way the two businesses operate and how they attempt to capture market share.
Key Takeaways
- PepsiCo has a diversified product portfolio encompassing the food, snack, and beverage industries.
- PepsiCo typically prices its goods based on consumer demand and demographics.
- Coca-Cola has a centralized focus on the beverage industry, with a presence in numerous and different beverage categories.
- Coca-Cola prices its products in accordance with how industry competitors price comparable goods.
- Though PepsiCo generated more income in 2022, the Coca-Cola brand is more valuable.
Coca-Cola
The Coca-Cola Company was originally founded in 1892. It calls itself a total beverage company and boasts over 200 different brands of drinks. In 2022, it had $43 billion in net revenue. Its international reach is similar to PepsiCo's, though it operates with different market segment groupings. It also approaches pricing differently.
Product Line
Over 2.2 billion servings of Coca-Cola's beverages are consumed every day. Instead of diversifying across the food, snack, and beverage industries, Coca-Cola has concentrated on building an empire of drinks. 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
- Other: Body Armor, Monster Energy, Dunkin' Donuts
Coca-Cola measures operations by dividing its products between sparkling (carbonated) beverages and still (non-carbonated) beverages. In Coca-Cola's fiscal year ending in 2022, sparkling beverages represented over 63% of the company's total bottle/can sales.
Market Presence
Coca-Cola competes with PepsiCo internationally, though Coca-Cola approaches its market segmentation differently. Its operational structure divides its markets into the following divisions:
- North America
- Europe, the Middle East, and Africa
- Latina America
- Asia Pacific
Coca-Cola also created a Global Ventures segment to help new brands scale and to identify ways to maximize the scale of select products around the world. This segment contrasts with Pepsi's more segmented approach of geographical divisions.
Coca-Cola also created the Bottling Investment Group segment to strategically assess how products are bottled, shipped, and stored. While PepsiCo has bottling divisions as well, Coca-Cola's organizational structure places greater emphasis on the bottling division as a top-level segment group.
Pricing Strategy
Coca-Cola has referred to its pricing strategy as "meet-the-competition pricing." The company analyzes the pricing strategies of its competitors, sees where comparable products have been priced, and strives to set its own prices around the same level as its competitors.
This type of pricing strategy often relies heavily on production excellence, exceptional service, and other marketing elements that attract customers to Coca-Cola products, since its prices will be comparable to the competition.
PepsiCo
With roots dating back to 1898, PepsiCo has created a diverse product line of complementary goods across the food and beverage industries. It also has a direct pricing strategy that analyzes consumer demand and sets prices accordingly.
Product Line
PepsiCo has built a highly-diversified product portfolio. In 2022, PepsiCo had 23 different brands and about $86.39 billion in annual sales.
Instead of focusing solely on the beverage market, PepsiCo has specifically and intentionally expanded into other 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
- Other: Ready-to-drink Starbucks products, Quaker
Though seen historically as a beverage/soda company, 58% of PepsiCo's business revenue is generated through its food products.
Market Presence
PepsiCo sells beverages, snacks, and food all around the world through its seven global divisions.
- Frito-Lay North America (branded food and snack business in the United States and Canada)
- Quaker Foods North America (cereal, rice, pasta in the United States and Canada)
- PepsiCo Beverages North America (beverages in the United States and Canada)
- Latina 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)
For 2022, 61% of net revenue was generated by the three North America division lines. PepsiCo Beverages was responsible for 30% of the total.
Pricing Strategy
PepsiCo is an industry price setter, pricing its products in accordance with customer demand. It offers various sizes of beverages at various prices that are determined by the number of drinks supplied and consumed for a given area. For example, though Doritos and Tostitos are comparable products, Doritos is a more globally-recognizable brand that may be priced differently based on its popularity.
Similar to Coca-Cola, PepsiCo prices are also based on targeted customer demographics. Health-centric beverages like Tropicana, niche cross-market products like Lipton, and heavily market-saturated products like Pepsi are all priced differently, based on the underlying customer group.
Which Tastes Better?
Everyone has their own tastes. If you like the taste of Pepsi over Coca-Cola, you're in the minority. In a 2021 worldwide study, about two-thirds of consumers think that Coca-Cola is better than Pepsi.
Special Considerations
Brand Value
In its latest list edition, Coca-Cola was ranked as the #6 brand on Forbes "World's Most Valuable Brands," while Pepsi was ranked #36. Both companies engage customers with advertising, social media, and by expanding existing product lines with new flavors and healthy alternatives.
Future Growth
Coca-Cola and PepsiCo continue to see tremendous market demand for their products. Both have expanded into the energy drink market, which is thriving. And as customers worldwide continue to be concerned with sugar, chemicals, and the sustainability of packaging, the operations, product lines, and pricing of both companies will adjust to meet their changing preferences and demands.
Does Coca-Cola or Pepsi Have a Better Brand?
Both Coca-Cola and Pepsi have internationally recognizable brands. Coca-Cola is the international leader in beverages, while PepsiCo has a stronger brand presence in the snack and food industry. The Coca-Cola brand is also the more highly valued financially.
Is Coca-Cola Larger Than Pepsi?
Looking at revenue, Pepsi is larger. In 2022, Coca-Cola's net revenues grew to $43 billion, while PepsiCo's grew 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 commands a larger market presence in the carbonated soft drink area. Though the rivalry still exists, Coca-Cola has emerged as the more dominant beverage provider today.
The Bottom Line
Coca-Cola and PepsiCo are two successful and venerable American companies that have stood the test of time.
While both are beverage industry giants, PepsiCo has branched out to offer food products in addition to beverages, as Coca-Cola has maintained its focus on beverages alone. They also take different approaches to product pricing.
Both companies market products that consumers continue to demand and each enjoys a brand loyalty that most companies envy.
