---
title: "Pepsi and Coca-Cola Transformation Strategies: Who Will Dominate the Global Beverage Market?"
description: "As carbonated soft drinks decline, Coca-Cola and Pepsi are diversifying into healthier categories. This article compares their strategies in areas like coconut water, bottled water, energy drinks, and ready-to-drink coffee, highlighting their moves to capture future growth."
author: "姜珊"
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published: "2017-07-29"
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# Pepsi and Coca-Cola Transformation Strategies: Who Will Dominate the Global Beverage Market?

> As carbonated soft drinks decline, Coca-Cola and Pepsi are diversifying into healthier categories. This article compares their strategies in areas like coconut water, bottled water, energy drinks, and ready-to-drink coffee, highlighting their moves to capture future growth.

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Source: FBIF Food & Beverage Innovation (ID: FoodInnovation)
Carbonated drinks are no longer in vogue: should they be abandoned or retained?
Which categories are they targeting for diversification? Where is the future of the beverage industry headed?
Learn from the transformation strategies of Pepsi and Coca-Cola to gain an edge in the beverage market!
Nowadays, consumers are increasingly health-conscious, and the carbonated beverage market has been declining. The FMCG market is experiencing a "cold winter," prompting both Coca-Cola and Pepsi to launch new products to counter sluggish growth.
**We have specially organized a PK of the product lines and strategic layouts of the two carbonated giants. Let's take a look at the similarities and differences in their strategies! Feel free to leave a comment below and tell us which one you favor and whether you like their new products!**
Coca-Cola vs. Pepsi
Image source: Sina Blog
**1. Transformation and Diversification: Similarities and Differences**
**Similarities: Youthful, diversified, and health-oriented strategies**
**Consumers are now prioritizing "natural," "healthy," and "organic"** factors when choosing food. Both giants are transforming, **adopting youthful, diversified, and health-focused strategies.** By **acquiring young, healthy, and strong-performing brands**, they quickly enter new sectors, avoiding the risks and time costs of independent R&D, to win over health-conscious consumers. Simultaneously, they are turning to **startups and establishing incubators** to gain new technologies and markets.
**Differences: Pepsi vs. Coca-Cola Transformation PK**
Coca-Cola and Pepsi have been rivals for a century, both making bold moves to counter the health trend.
**Coca-Cola established its incubator "Coca-Cola Founders" three years ago**, focusing on areas like personnel management, operations, mobile apps, and data analytics, aiming to **use emerging tech to solve operational and product development issues**. However, due to differences in pace between the company and startups, **Coca-Cola announced the discontinuation of its incubator program at the end of last December**, deciding to focus marketing innovation resources on **core innovation projects within the beverage sector**. Coca-Cola stated it would not terminate relationships with existing startups but would not invest in new ones.
In contrast, **this April, Pepsi launched its European incubator, Nutrition Greenhouse**, with eight startups selected for the first cohort, **focusing on insect snacks, algae protein, birch water, and other health foods.**
Both giants have gone all-in on diversification, sparing no effort.
**In May, Coca-Cola officially abolished the CMO (Chief Marketing Officer) role and created the CGO (Chief Growth Officer)** to unify marketing, business strategy, and customer service. **Meanwhile, Coca-Cola's COO James Quincey succeeded Muhtar Kent as CEO. He announced a 20% reduction in corporate staff, about 1,200 employees.** At least half of the savings will be used to acquire non-carbonated beverage businesses and adjust the product portfolio.
Compared to Coca-Cola, Pepsi has a richer non-carbonated portfolio, including Lay's chips, Quaker oats, and Gatorade, offering more food choices. **But Pepsi is not resting on its laurels; it has proposed a health initiative—beyond regular carbonated soft drinks, it will launch a series of "daily nutrition" products by 2025, including grains, dairy, and hydration drinks.**
To expand its beverage portfolio, Pepsi established **Naked Emerging Brands** to attract consumers with emerging brands. Coca-Cola relies mainly on its **Venturing and Emerging Brands** unit to find new beverage opportunities. Currently, both giants have comprehensive matrices in alternative water, bottled water, energy drinks, cold-pressed juices, dairy, plant-based drinks, ready-to-drink tea, and ready-to-drink coffee, with similar but distinct strategies.
**2. Upgrading Traditional Carbonated Drinks: New Flavors and Sugar-Free Options as Growth Drivers**
The global carbonated beverage market has been largely built by Coca-Cola and Pepsi. **Facing a sluggish market, they are innovating in flavor, calories, and sugar content, unwilling to cede their dominance.**
In low-sugar and low-calorie offerings, Coca-Cola has launched Diet Coke, Coke Zero, and Coca-Cola Life. Pepsi countered with Diet Pepsi. Last October, Pepsi announced its strictest sugar reduction plan: by 2025, two-thirds of its 12-ounce drinks will have fewer than 100 calories.
To keep attracting consumers, both are innovating in flavors. In May, Coca-Cola launched Cherry Coke, featuring 80-something investment legend Warren Buffett as spokesperson. Pepsi introduced Cinnamon Cola, described as "a spicy twist beyond classic cola." **Consumers are increasingly individualistic, and millennials are curious, willing to try new flavors; quirky colas with buzz and IP appeal may become popular.**
Recently, Coca-Cola launched **Coke No Sugar**, a sugar-free cola developed over five years with a taste closer to the classic, to gradually replace Coke Zero. It is not yet available in China. On June 13, Pepsi launched **a black can cola with "refreshing taste, sugar-free formula"**, already available in Shanghai and other cities, seizing the Chinese market early. **Sugar-free carbonated drinks allow consumers to enjoy cola healthily and may rescue the sluggish market.**
**3. Alternative Water Sees High Growth, Promising Future**
According to Zenith Global, the alternative water market reached $2.7 billion in 2016, growing 21%, and is expected to double to $5.4 billion by 2020, with global volume reaching 1.9 billion liters[1]. As consumer demands evolve, beverage giants are turning to alternative water.
**Star of Alternative Water: Coconut Water**
Coconut water, with its **"natural," "healthy," "vitamin C," and "low sugar"** advantages, is the largest category in plant-based alternative water, maintaining strong growth amid a downturn. According to recent reports, the global coconut water market is projected to grow at a CAGR of 26.75% by 2020[1].
Reuters recently cited sources saying **Pepsi is preparing to acquire All Market, owner of the top-selling coconut water brand Vita Coco**. Pepsi already owns coconut water brands O.N.E., Kero Coco, and Naked. If the acquisition succeeds, Pepsi would control nearly 75% of the global coconut water market, almost a monopoly.
Vita Coco coconut water
Image source: Vita Coco official website
Compared to Pepsi, Coca-Cola owns coconut water brands Zico and Innocent. In April 2012, **Coca-Cola acquired Zico, the second-largest coconut water brand in the U.S., for $200 million**. Zico is 100% fresh-pressed from Thai coconuts, with "all-natural," "low sugar," "non-concentrated," and "zero fat" attributes. Last May, Zico entered the Chinese market and sold out within three days.
Zico coconut water
Image source: Zico official website
Given China's growing health demands, both giants are positioning coconut water in China, **which could become the next hotspot for coconut water.**
**Rising Star: Aloe Water**
While coconut water leads plant-based alternative water, other options have opportunities. Aloe vera juice contains 200 active bio-amino acids, vitamins, minerals, and antioxidants, benefiting skin and cardiovascular health, making it stand out.
**Last June, Coca-Cola invested in U.S. organic aloe beverage brand Aloe Gloe[2]**. Founded in 2012 in Los Angeles, the brand has seen sales grow 64% in two years, thanks to its **"low sugar," "low calorie," and "sustainably cultivated aloe"** labels.
Aloe Gloe organic aloe juice
Image source: HALEY & JORDAN official website
**4. Bottled Water Boom: Premium Water to Lead New Trends**
Carbonated drink growth has plateaued, while bottled water is booming. From 2010 to 2015, China's bottled water sales grew from RMB 47 billion to RMB 102 billion, **surpassing carbonated drinks, with 15%-20% annual growth[3]**. Initially, both giants focused on affordable water, but low margins and little differentiation led them to pivot to premium water.
**In the past two years, China's premium water has grown 80% annually, capturing more market share. In April, Coca-Cola launched Valser premium bottled water on its Tmall flagship store**. Valser's source is Alpine snowmelt surface water, with a "Swiss imported" label, priced from RMB 20 to 64 per liter.
Valser premium bottled water
Image source: Valser official website
Pepsi's premium water has not yet entered China. However, **in February, Pepsi launched Lifewtr in the U.S., buying $5 million in Super Bowl ad time**. **Lifewtr's connection to creativity, design inspiration, and hydration**, along with its distinctive bottle design, has made it a fashion icon among millennials.
Lifewtr premium water
Image source: Lifewtr official website
**The "premium water battle" in China has not yet begun, but Coca-Cola's early move may be a signal**. This summer, the two giants competing for China's premium water market could be a unique spectacle.
**5. Energy Drinks See Rapid Growth, Poised for Rise**
Functional and healthy drinks are increasingly popular, and the rapid growth of energy drinks is a hot topic. Energy drinks and probiotic drinks fall under this category.
**Energy Drinks**
In 2015, the global energy drink market grew 10% to 8.8 billion liters. **From 2014 to 2015, China's energy drink consumption grew fastest at 25% annually**, nearly four times the U.S. rate[4]. Coca-Cola is targeting this trend.
**In 2014, Coca-Cola acquired 16.7% of energy drink producer Monster Beverage for $2.15 billion[5].** Last September, Monster launched in China. Compared to rival Red Bull, **Monster precisely targets post-90s and post-00s youth**, attracting them with a broader product line, larger packaging, aggressive marketing, and a bolder brand culture.
Monster energy drink
Image source: 5888.com
**Probiotic Drinks**
The probiotic drink market is expanding. On June 30, dairy expert Wang Dingmian stated at the 2017 (4th) International Probiotics Summit that the global probiotic market reached $24.6 billion in 2016. **In the next five years, the probiotic industry could reach a market of 100 billion yuan, with probiotic drinks nearly 50 billion[6]**. This huge potential has caught Pepsi's attention.
**In November 2016, Pepsi acquired probiotic drink company KeVita for about $200 million[7].** Founded in 2009, KeVita produces sparkling probiotic drinks, kombucha, and vinegar drinks, **with natural, organic, low-calorie, sugar-free, non-GMO, and gluten-free selling points, rich in nutritional value**.
KeVita probiotic drink
Image source: KeVita official website
**6. Cold-Pressed Juice Defies Global Juice Market Slump**
According to Persistence Market Research, the global cold-pressed juice industry earned $492 million in 2016, with a CAGR of 7%, **expected to reach $845 million by 2024[8].**
**In 2015, Coca-Cola acquired a stake in juice maker Suja Life[9].** **Previously, Coca-Cola also acquired juice leader Innocent.** Suja, founded in 2012 and headquartered in San Diego, features **organic, non-GMO, cold-pressed** juices, following **detox and healthy eating trends**. Despite retail prices above $9, sales soared, reaching $42 million in 2014.
Suja juice
Image source: Suja Juice official website
**In 2006, Pepsi acquired Naked Juice[10].** Naked, based in California, offers juices with **natural, non-GMO, organic, healthy, and fresh** labels, no preservatives or added sugar, and was once the fastest-growing premium juice company. Currently, Naked offers nine flavors in its Naked Pressed line.
Naked juice
Image source: Naked Juice official website
Cold-pressed juice is still nascent in China, and neither giant has entered this segment yet. But as consumer demands evolve, **cold-pressed juice could become a new growth point in China's juice market.**
**7. Dairy Market Battle Begins: Health as Core Competitiveness**
With carbonated drinks weakening, the healthy dairy market offers broader prospects.
**In 2014, Coca-Cola and partners launched premium milk brand Fairlife**. Using cold filtration, it features **high protein, high calcium, and low lactose**, retailing at $4, double regular milk. In North America, Fairlife's novel concept and strong distribution drove double-digit growth in Coca-Cola's dairy sales. Beyond Fairlife, Coca-Cola has invested in high-value dairy brands in Latin America, Africa, and Asia.
Fairlife milk
Image source: Venturing and Emerging Brands official website
Pepsi also has a dairy presence, with investments in Russia, Europe, and Brazil. In 2015, Pepsi used JD.com as a sales platform to **launch Quaker High-Fiber Oat Milk Drink in China**, a drinkable milk-oat beverage with texture and nutrition meeting consumer needs.
Quaker High-Fiber Oat Milk Drink
Image source: JD.com
**8. Coca-Cola Doubles Down on Natural Plant-Based Drinks**
Mintel's 2017 trends for global food and beverage markets mentioned **"Power of Plants"[11]**, with natural, simple, plant-based products gaining consumer favor. Natural plant-based drinks, positioned as healthy and nourishing, have broad prospects.
**In June 2014, Coca-Cola entered the soy beverage market, buying Latin American soy milk company AdeS from Unilever for $575 million**. AdeS focuses on soy drinks and juices, with 2015 sales of $284 million and a 46% share of the Latin American non-dairy milk alternative market.
AdeS soy milk
Image source: AdeS official website
**In April 2015, Coca-Cola entered the fast-growing grain beverage market, buying the beverage business of China's Culiangwang for $400 million**. Xiamen Culiangwang, a subsidiary of China Green, held its beverage production and sales in China. Beverages were Culiangwang's main business, contributing 78.9% of revenue.
China Green Culiangwang Grain Thick Drink
Image source: JD.com China Green official store
**9. Ready-to-Drink Tea and Coffee: Potential Hot Picks**
In recent years, ready-to-drink tea and coffee have gained consumer favor, attracting beverage companies.
**Ready-to-Drink Tea**
Zenith's 2017 report on RTD tea innovation notes it is the fastest-growing soft drink type. **Zenith predicts RTD tea consumption will grow 4.4% annually, reaching 44 billion liters by 2020[12]**. This momentum has drawn both giants.
**In 2003, Pepsi and Unilever formed a 50-50 joint venture, Pepsi Lipton International**. In April 2015, Pepsi launched Lipton British Fruit Tea nationwide in China. This product **creatively blends classic black tea with fruit for a colorful, new experience**, offering a fresh sensation.
Lipton British Fruit Tea
Image source: Lipton China official website
Coca-Cola owns RTD tea brand Gold Peak, not yet in China. Launched in 2006, Gold Peak, with its "home-brewed," "pure filtered water," and "perfect sweetness," **became a billion-dollar brand for Coca-Cola in 2014.**
Gold Peak RTD tea
Image source: Gold Peak official website
China is the birthplace of tea, and consumers traditionally view it as healthy. **RTD teas emphasizing heritage and origin**, with **fresh, light, healthy, natural, pleasant taste, and convenience**, may have broad potential in China.
**Ready-to-Drink Coffee**
**RTD coffee is growing rapidly worldwide, potentially creating a $2 billion new market in North America by 2020**, becoming an industry favorite.
After launching RTD coffee Georgia for Asian markets, **last September, Coca-Cola announced its tea brand Gold Peak would enter the RTD coffee market**, launching cold brew and matcha latte in the U.S. this year. Cold brew has **lower caffeine, less bitterness, and better taste**. Additionally, Coca-Cola partnered with Dunkin' Donuts to launch bottled RTD coffee in the U.S.
Gold Peak RTD coffee and matcha latte
Image source: Gold Peak official website
Pepsi has not stood still. **In 2015, Pepsi and Starbucks formed a joint venture, North American Coffee Partnership, holding 97% of the North American RTD coffee market**. Leveraging Pepsi's distribution, new and exciting Starbucks bottled Frappuccino drinks are now available in China.
Starbucks bottled Frappuccino
Image source: Tmall official website
With the RTD coffee battle heating up, Pepsi and Coca-Cola are partnering with different companies to intensify their efforts. Whether they can withstand market tests and what the final landscape will be remains to be seen.
**Summary:**
As consumer health awareness grows, the era of rapid carbonated drink growth is over. Both giants must explore new markets and diversify their portfolios to sustain growth and meet rapidly changing consumer needs.
**Behind their diversification and new product launches lies a judgment about future consumer demand. Which one do you favor? Leave a comment to discuss!**
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