| Elements | Coca-Cola | Pepsi | Similarities | Differences | Competitive Advantage |
|---|---|---|---|---|---|
| Customer Segments | Global consumers, restaurants, retailers | Global consumers, restaurants, retailers | Both target global consumers and have strong partnerships with restaurants and retailers. | Coca-Cola has a broader portfolio of beverage brands, including non-carbonated drinks. PepsiCo includes a diverse range of snacks and food products in addition to beverages. | Extensive brand recognition and global presence (Both). |
| Value Proposition | Refreshing, iconic beverage brands, emotional appeal | Refreshing, iconic beverage brands, diverse portfolio | Both provide refreshing, iconic beverage brands with emotional appeal. Coca-Cola offers a wide range of carbonated and non-carbonated drinks. PepsiCo combines beverages with a diverse portfolio of snacks and food products. | Coca-Cola emphasizes its beverage brands and their emotional connection with consumers. PepsiCo positions itself as a diversified food and beverage company with a broader product range, including snacks and foods. | Wide beverage portfolio and emotional appeal (Both). |
| Channels | Distributors, retail stores, vending machines | Distributors, retail stores, vending machines | Both use similar channels such as distributors, retail stores, and vending machines to reach consumers. | Coca-Cola focuses more on the distribution and sale of beverages through partnerships with restaurants and retailers. PepsiCo extends its presence into snack and food aisles, utilizing its diversified product portfolio. | Extensive distribution networks (Both). |
| Customer Relationships | Brand loyalty, marketing campaigns, customer service | Brand loyalty, marketing campaigns, customer service | Both build customer relationships through brand loyalty, marketing campaigns, and customer service efforts. | Coca-Cola’s primary focus is on beverage-related customer relationships. PepsiCo maintains relationships in both the beverage and snack/food segments. | Strong brand loyalty and marketing (Both). |
| Key Activities | Beverage production, marketing, brand management | Beverage production, marketing, brand management | Both engage in beverage production, marketing, and brand management. | Coca-Cola primarily focuses on beverage-related activities. PepsiCo engages in both beverage and snack/food production, marketing, and brand management. | Beverage specialization (Coca-Cola). Diversified portfolio (PepsiCo). |
| Key Resources | Beverage brands, production facilities | Beverage brands, production facilities | Both rely on key resources such as iconic beverage brands and production facilities. | Coca-Cola’s key resources are concentrated on beverage brands and related production. PepsiCo’s resources are diversified to include beverage, snack, and food brands, along with production facilities. | Iconic beverage brands (Both). |
| Key Partnerships | Bottling partners, distribution networks | Bottling partners, distribution networks | Both collaborate with bottling partners and utilize distribution networks to ensure global reach. | Coca-Cola maintains strong partnerships with bottlers and distributors for its beverage products. PepsiCo extends these partnerships to include snacks and food products in addition to beverages. | Well-established bottling partnerships (Both). |
| Revenue Streams | Beverage sales, licensing, advertising | Beverage sales, licensing, advertising | Both generate revenue primarily from beverage sales, licensing of brands, and advertising. | Coca-Cola derives most of its revenue from beverage sales, while PepsiCo generates revenue from a diversified product portfolio that includes beverages, snacks, and foods. | Diversified revenue streams (PepsiCo). |
| Cost Structure | Production costs, marketing expenses | Production costs, marketing expenses | Both incur costs related to production, marketing, and distribution. | Coca-Cola’s cost structure is primarily associated with beverage production and marketing. PepsiCo’s cost structure is more complex due to its diversified product range, encompassing beverages, snacks, and foods. | Beverage-focused cost structure (Coca-Cola). |
Coca-Cola generated over $43 billion in revenue, compared to PepsiCo’s over $86 billion in 2022.
PepsiCo has its primary operations in the US. Coca-Cola is the largest beverage company in the world. PepsiCo got diversified between beverages and food, where food represented 53% of its revenues in 2017.
Both companies have massive distribution strategies, and nonetheless the size, they have a relatively quick decision-making process.
That is critical as both companies top into consumer habits. Therefore, they need to be fast in adapting to them. Both companies also spend massive resources on demand generation via marketing activities.
Why do Coke and Pepsi have different business models
At first sight, Coca-Cola and Pepsi might seem to have a business model which not only is similar but, in a way, compete with each other.
While this is true, it is also true that those companies have two different business model and a portfolio of products that, in many cases, doesn’t overall.
Indeed, we’ll see why and in which respect the Coca-Cola Company and PepsiCo business model are similar and where they differ.
Product: where Coca-Cola is about beverages, PepsiCo is quite diversified
One aspect in which Coca-Cola and PepsiCo differ quite a lot in their product offering. While Coca-Cola is primarily about beverages, PepsiCo is about food and drink.
Coca-Cola Portfolio: from Coca-Cola Annual Report
PepsiCo Portfolio: from PepsiCo Annual Report
Thus, while Coca-Cola is the largest beverage company in the world, PepsiCo has a vast array of products ranging from food and beverage.
If you look at the mix of revenues of PepsiCo, food represented 53%, while beverage represented 47%.
Therefore, where in the minds of consumers Coke and Pepsi might be perceived as direct competitors, if we look at their business models, those look entirely different regarding product offerings and mix.
Where Coca-Cola is a beverage company, PepsiCo draws its strength from offering snacks, complimentary to soft drinks.
This, in a way, allows PepsiCo to compete with Coca-Cola at a better level. Imagine the scenario of a consumer buying a Coke and a packet of Lay’s potatoes.
Organizational structure: both are large yet efficient
When companies get too big, the risk is that they also get too slow in making a decision. However, for companies, like Coca-Cola and PepsiCo, which focus on the consumer markets, it is critical to have a lean decision-making process, where layers of management need to be avoided.
Indeed, where the two companies are too slow to adapt to consumer changing habits, this would kill the business model in the long run.
For instance, both Coca-Cola and PepsiCo, as more consumers perceive their products as unhealthy, they are focusing on diversifying their product portfolio to have more “healthy” choices.
PepsiCo’s change in portfolio composition
Distribution strategy: both Coca-Cola and PepsiCo distribution systems are their key advantage
One of Coca-Cola’s key ingredients is its distribution system of branded beverages available to consumers in more than 200 countries through a network of company-owned or controlled bottling and distribution operations, independent bottling partners, distributors, wholesalers, and retailers.
Coca-Cola has the world’s most extensive beverage distribution system.
Also, PepsiCo has a massive distribution system based on manufacturing and licensing agreements with several brands.
Both companies know how to tap into consumer habits
Demand creation is crucial for any company that wants to access consumer desires.
However, that requires massive marketing resources and campaigns to “enhance consumer awareness,” which means generating demands for their product portfolio.
Coca-Cola spent over six billion dollars in 2017 on promotional and marketing programs. PepsiCo marketing activities amounted to over four billion dollars.
This process requires a rigorous brand positioning developed around consumer insights.
Coca-Cola franchise leadership
Coca-Cola bottling partners are a crucial ingredient in its success. Coca-Cola also designs business models in specific markets to have maximum penetration.
PepsiCo digital strategy
PepsiCo is putting a massive effort into a digital strategy to grow its brands. Some of those initiatives include, as reported in PepsiCo’s financial statements:
- Frito-Lay North America is using Big Data to help make sure consumers can help find their favorite snacks in local stores
- In India, PepsiCo set up a Digital Command Center to analyze links between consumer behavior and business results
- In China, we leveraged social media to launch the latest “Bring Happiness Home” Chinese New Year campaign, including a 20-minute video that generated more than 1 billion views.
Those are some examples of how PepsiCo is doubling down on those initiatives.
Who has the best business model?
In my opinion, and that is an aspect I like the most about any business model, I like the fact that PepsiCo has a well-diversified portfolio between beverage and food.
This allows the company to tap into larger consumer pieces of the market while successfully competing with Coca-Cola on a larger scale.
Where a consumer might prefer Coca-Cola beverages over PepsiCo, the company can still leverage its large snack portfolio to tap into the same market segments.
PepsiCo is swiftly moving toward “more healthy” choices and digitalization by leveraging organic business growth.
Key Highlights
- Revenue Comparison: In 2022, Coca-Cola generated over $43 billion in revenue, while PepsiCo’s revenue surpassed $86 billion.
- Primary Operations: PepsiCo’s main operations are in the United States. Coca-Cola holds the title of the world’s largest beverage company.
- Diversification: PepsiCo has diversified its business between beverages and food. In 2017, food represented 53% of its revenues. In contrast, Coca-Cola focuses solely on beverages.
- Decision-Making Process: Despite their size, both companies maintain relatively quick decision-making processes, which are crucial for adapting to changing consumer habits and trends.
- Distribution Strategies: Both Coca-Cola and PepsiCo have extensive distribution strategies, with a global network of operations, bottling partners, distributors, and retailers.
- Consumer Habits and Adaptation: Both companies invest heavily in demand generation through marketing activities to align with and influence consumer habits.
- Product Portfolio: Coca-Cola primarily focuses on beverages, while PepsiCo has a wide array of products ranging from food to beverages.
- Organizational Structure: Both companies have efficient organizational structures that facilitate quick decision-making, critical for consumer-focused businesses.
- Distribution Advantage: Both companies have robust distribution systems, with Coca-Cola having the world’s most extensive beverage distribution system.
- Marketing and Demand Creation: Both Coca-Cola and PepsiCo invest substantial resources in marketing to create and enhance consumer awareness and demand.
- Coca-Cola’s Franchise Leadership: Coca-Cola’s success is attributed to its bottling partners and specific market-focused business models.
- PepsiCo’s Digital Strategy: PepsiCo is heavily invested in a digital strategy, leveraging initiatives like data analytics and social media campaigns to enhance its brand presence.
- Diversification Advantage: The diversified portfolio of PepsiCo allows it to tap into broader consumer segments, competing effectively with Coca-Cola on multiple fronts.
- Focus on Healthier Choices: Both companies are adapting to changing consumer preferences by incorporating more “healthy” options into their portfolios.
- Conclusion: The differences in product offerings, diversification, distribution strategies, and marketing approaches highlight the distinct business models of Coca-Cola and PepsiCo. While both compete, they cater to different consumer needs, with PepsiCo’s diversification allowing it to tap into a broader market spectrum.
Read Next: Coca-Cola’s Business And Distribution, Coca-Cola Mission Statement and Vision, Coca-Cola Competitors, What Does Coca-Cola Own?, Coca-Cola PESTEL Analysis, Coca-Cola SWOT Analysis, Coca-Cola Vs. Pepsi.
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