The Cola Battles

I won’t Lie: I love Cola. But every time i go to the corner store to get myself a bottle (or can, whatever floats your boat), I always have a problem of choice. One would say: “Whatever cola you choose, it’s still the same!”. But whenever i stand in front of the soft drink fridge in my local store i always have the dilemma: Coca-Cola or Pepsi?

It is rarely any of the other brands in the store, that take up 90% of space on soda beverage shelves. Don’t forget that Coca-Cola also owns a variety of other beverages than only cola such as: Sprite, Fanta, Minute Maid [=or Cappy as known in Poland], Nestea or Powerade. But Pepsi also engaged in the “Cola War” follows the competitor step by step with beverages such as : 7up, Mirinda, Lipton Ice Tea, Mountain Dew or Gatorade. Of course, there are some other producers in the market, but generally speaking , almost the entire market belongs to these two companies.

This is a situation of Oligopoly- where only a few firms have msot of the market share. Some argue that in certain markets Coca-Cola and Pepsi are a duopoly, where only two firms control the market.

 

The firm in Oligopoly sets the Price ant P1 since any alteration of the price, proves to be destructive for the firm. If Coca-Cola and PepsiCo started a pricewar, they would undercut eachoter’s profits. If one of the companies raised it’s prices, It would lose markte share as they would switch to the other.

This is why companies such as Coca-Cola and PepsiCo, tend to gain customers by non-price competition. Remember the Pepsi Generation featuring Michael Jackson? The animated Coca-Cola commercail, which evolved into a short-movie? What is more, recently, Coca-Cola is recently reviving a masala (an Indian mixture of spices) flavoured cola “RimZim”.

But who is winning the war?

There is not one answer to the question. As of 2010 for example, in the United States – Coca-Cola had 42% of the carbonated beverages as opposed to PepsiCo’s 29.3%, but as a matter of fact, the winner in India is definately Pepsi. What is more, as much as the Hoover(brand name) is the word for a Vacuum Cleaner in the UK, the word “Pepsi” is the indian word for cola.

Despite the differnce in the taste of both beverages: I have no specific favorite in Soda drinks which is why i simply bought one of each to take home today.

 

Sources:

http://online.wsj.com/article/SB10001424052748703818204576206653259805970.html

http://www.dineshbakshi.com/ib-economics/microeconomics/161-revision-notes/1771-oligopoly

http://en.wikipedia.org/wiki/Cola_Wars

http://www.dineshbakshi.com/as-a-level-economics/price-system-theory-of-firm/119-revision-notes/1776-oligopoly

Bloomber Businessweek, Issue 38/12

 

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