The more fiercely brands compete in marketing, the more it proves the battle is insignificant. True life-or-death struggles don't happen in the public eye. The rivalry between Pepsi and Coca-Cola is more like mutual traffic-boosting and flirtation.
In this issue, I want to start with the nearly century-long love-hate relationship between Pepsi and Coca-Cola, and discuss the survival strategy of being the 'second place.'
From a timeline perspective, the two colas were born not far apart, but their fates were vastly different. Coca-Cola had almost all the right conditions: timing, location, and people. In 1886, Coca-Cola was born in Atlanta. At that time, Atlanta had just begun enforcing prohibition laws. Early Coca-Cola contained cocaine, caffeine, and a lot of sugar syrup, making it highly addictive. So it naturally became a substitute for alcoholic beverages. With extensive print ads and free sample coupons, Coca-Cola achieved monthly sales of 25,000 cups by its second year. Soon, a beverage merchant saw its potential. In 1888, businessman Asa Candler bought the rights to Coca-Cola for $2,300, founded the Coca-Cola Company, and put the brand on a corporate track. By 1904, Coca-Cola's annual sales reached 1 million gallons. Six years later, Pepsi's annual sales were only one-tenth of that. It can be said that until the 1980s, Coca-Cola's development was smooth sailing. Pepsi, on the other hand, had a much rougher start. In 1898, twelve years after Coca-Cola's birth, Pepsi was born in North Carolina. Early Pepsi was truly a knockoff; even the name Pepsi-Cola was chosen to ride on Coca-Cola's coattails. For this reason, Pepsi's trademark took five years to register. By the way, the main difference between Pepsi and Coca-Cola in the early days was that Pepsi contained pepsin, which aided digestion. The word 'Pepsi' comes from the root of 'dyspepsia' (indigestion). Perhaps the name wasn't well chosen; Pepsi's development was always bumpy. As one of Coca-Cola's many imitators, Pepsi didn't stand out initially and was long overshadowed by the original. In 1923, Pepsi went bankrupt, and its trademark was bought by a Virginia company. By 1931, during the economic crisis, the company faced bankruptcy again. The one who took over Pepsi was New York businessman Charles Guth. Like Pepsi, Guth harbored a grudge against Coca-Cola. He had previously run a soda fountain and wanted to introduce Coca-Cola, but after haggling, he was flatly rejected. In anger, he not only removed all Coca-Cola from his stores but also invested $150,000 to buy Pepsi, determined to cause trouble for Coca-Cola. In the 'cola' track, Pepsi was always seen as the eternal second. This 'eternal second' positioning can be traced back to Guth's transformation of Pepsi. Early Pepsi, facing a very similar Coca-Cola, could only emphasize freshness, taste, and health from a product perspective, without finding a truly suitable positioning. But Guth had a different idea: Since we're always seen as a knockoff of Coca-Cola, rather than desperately trying to shed that label, why not openly embrace this positioning that fell from the sky? Additionally, Guth discovered that bottled cola had very low production costs—just syrup and water. Even if you gave consumers more per bottle, profits wouldn't drop much. With this in mind, he came up with a strategy: Since Coca-Cola sells 6 ounces (about 170 ml) for 5 cents, we'll sell 12 ounces (about 340 ml) for 5 cents—half the price per ounce. Who wouldn't buy that? So Pepsi launched a 12-ounce bottled cola. It must be said that Pepsi's timing was perfect—right at the tail end of the U.S. economic crisis. During the Great Depression, Americans suddenly found themselves short on cash. When a cola with double the volume appeared, who cared if it wasn't Coca-Cola? Heroes don't ask where they come from; just buy it. 'We're half the price of Coca-Cola' became Pepsi's brand positioning for a long time. In 1939 and 1940, Pepsi launched a national radio ad—'Nickel Nickel'—with lyrics like: Pepsi-Cola, hits the spot, Twelve full ounces, that's a lot, Twice as much for a nickel, too, Pepsi-Cola is the drink for you, Nickel, nickel, nickel, nickel... This ad became the first radio ad broadcast nationwide and was later translated into 55 languages, considered one of the most memorable ads of the 20th century. The ad was very effective; by 1941, Pepsi's market share had risen to 14%. More importantly, this marketing set the tone for Pepsi's future decades: provocation. Making the right decision at the right time, Pepsi rose during the economic crisis and secured its position as the second cola. For Pepsi at that time, being the 'eternal second' was not a curse but a gift. After all, the business world is cruel; many companies struggle just to stay afloat and profitable, let alone rank in the industry. If you asked small business owners, 'Would you take the chance to be the industry's eternal second?' Most would reply, 'Is there such a good thing?' Especially in that era of 'one superpower and many weaklings,' the cola segment was basically Coca-Cola as a giant, with a bunch of unknown generic colas. Pepsi, by seizing the second-place position, gave itself the persona of 'David challenging Goliath,' which made for easy storytelling. Isn't the essence of marketing storytelling? In the 1940s, Pepsi established itself in the market through provocation and low prices. Also in the 1940s, Coca-Cola achieved a leap in brand value. With the attack on Pearl Harbor, the U.S. entered the war. At that time, Coca-Cola made its most correct decision in history: 'No matter where American troops go, no matter the cost, ensure every soldier can buy a bottle of Coca-Cola for just 5 cents.' So Coca-Cola, as a military supply, went with U.S. troops to the European front, and even set up bottling plants on the front lines. Participating in WWII was Coca-Cola's largest and most successful marketing campaign. Domestically, it successfully positioned itself as a symbol of American spirit; internationally, it brought itself beyond U.S. borders, becoming a drink that drove the Western world wild. Facing the powerful Coca-Cola, Pepsi found that even at half the price, its sales were only one-sixth of Coca-Cola's. Anyone who loves cola knows that the taste difference between the two is subtle at best. Unless you're a heavy consumer, it's hard to tell them apart. I always say that a brand is the art of 'selling at a higher price.' If your price is lower, the product is similar, but sales aren't picking up, you need to question whether your brand has a problem. The sales gap showed that Coca-Cola's brand culture at the time was crushing Pepsi. The shift came in the 1960s. In 1963, Donald M. Kendall took over as CEO of Pepsi with a clear mission: lead Pepsi to challenge Coca-Cola. △ Donald M. Kendall Facing Coca-Cola, which had already established a national base, Kendall decided to take a different path: We don't define our product; we define our consumers. So Pepsi defined its consumers as the 'Pepsi Generation' and launched a new slogan: 'Come Alive! You're in the Pepsi Generation!' The Pepsi Generation was a revolutionary concept. After WWII, the U.S. birth rate soared. From 1946 to 1964, 76 million babies were born, known as the Baby Boomers. When Pepsi introduced the 'Pepsi Generation' in 1963, this generation was just starting to have purchasing power. In Kendall's view, since Coca-Cola had already captured the existing market, Pepsi needed to bypass it and target the incremental market—the youth. The Baby Boomer generation was huge, enough to support Pepsi's ambitions. After that, Pepsi aggressively promoted its 'Pepsi Generation' concept, sponsoring youth-oriented music events and sports, while mocking Coca-Cola as old and outdated. They even launched a provocative ad slogan: 'Cool teenagers drink Pepsi, Their fuddy-duddy parents drink Coca-Cola.' Pepsi's low-price strategy also helped again. For brands targeting young people, the worst thing is to be expensive, since young people generally don't have much money. On this point, Lei Jun (CEO of Xiaomi) might have the most say. Pepsi aimed to be the first cola for young people. In the consumer goods sector, generational shifts are natural. Most categories undergo a major reshuffle every 10 years because young people often don't choose brands their parents favored; they want to establish their own identity by distancing themselves. This pursuit of self easily leads to consumerism. That's Pepsi's cleverness. But even while choosing to be the cola for the youth and differentiating, Pepsi never forgot to provoke its old rival. In 1975, Pepsi organized a large-scale street test: participants chose their preferred cola without knowing the brand. The blind test results showed that Pepsi actually beat Coca-Cola. So Pepsi edited the test into ads and aired them repeatedly on TV. What? You say you're the authentic, national drink? I just wiped the floor with you. Pepsi even launched a new slogan: 'Taste that winning taste.' From then on, Pepsi's ads provocatively targeted Coca-Cola as the norm, bringing it higher visibility and traffic, and its market share steadily rose. By the summer of 1978, Nielsen data showed Pepsi outsold Coca-Cola in supermarket channels. Coca-Cola finally felt the pressure from its little brother. But it wasn't over yet. In November 1983, exactly one year after Michael Jackson released his most successful album 'Thriller' and was at the peak of his influence, Coca-Cola offered him $1 million to be its brand ambassador. MJ declined Coca-Cola and instead signed with Pepsi for a record-breaking $5 million endorsement fee. Pepsi's goal in hiring celebrities was to make Pepsi look young and Coca-Cola look old. And MJ indeed delivered; his strong appeal among young people elevated Pepsi's influence to a new level. Most importantly, this signing was a snatch from Coca-Cola's hands and Pepsi's second direct victory over Coca-Cola. This move was undoubtedly successful. It also established Pepsi's marketing strategy of hiring superstars. Many of you might remember that Pepsi's ads in China were star-studded. By 1985, Pepsi had captured 30% of the North American beverage market, closing in on Coca-Cola's dominance. The big brother finally couldn't sit still. Coca-Cola was about to make the biggest mistake in its corporate history. To this day, it's a classic case study in business schools. In 1985, Coca-Cola secretly launched a project, spending $4 million on research in multiple U.S. cities. The goal was simple: use blind tests to verify whether the new formula was better than the old one. Soon, the research team reported that the new formula not only beat the classic Coke but also overwhelmingly beat Pepsi. If launched, it would definitely crush Pepsi. With confidence, Coca-Cola's chairman and CEO Roberto Goizueta held a grand press conference, announcing that Coca-Cola would change its classic formula, reducing carbonation and increasing sweetness. With strong media coverage, the news spread across the country quickly. Goizueta expected a positive market response, but instead, he faced the anger of American consumers. After the new product, named 'New Coke,' hit the shelves, Coca-Cola's complaint lines were flooded. On average, 1,500 angry consumers called daily, demanding the return of the classic taste, or else. Many Coca-Cola fans took to the streets, pouring out the new Coke to protest the company's unauthorized change to the classic formula. Some even claimed that changing the formula harmed the American spirit. Pepsi naturally seized the opportunity to kick its rival while it was down. They launched a new ad—'Why Did Coke Change?'—and mocked the old rival: If you want your taste to be more like Pepsi, why don't consumers just buy Pepsi? They even went so far as to declare the day of the New Coke launch as 'Pepsi Day,' a classic troll move. Given the overwhelming public pressure, New Coke was pulled from shelves after just three months, and the original formula returned, ending the fiasco. Coca-Cola's market share dropped nearly 40% that year. The winner of this cola war was, of course, Pepsi. At the time, Pepsi's North American CEO, Roger Enrico, even sent a public congratulatory letter to employees, stating: 'After 85 years of eye-to-eye confrontation, the other guy blinked.' He also gave all employees a week off. The next year, Enrico published a book titled 'The Other Guy Blinked: How Pepsi Won the Cola Wars.' But even though Coca-Cola made blunders, after it restored the classic formula, Pepsi still couldn't shake the big brother's position. Shaking Coca-Cola's status? Not happening. Pepsi's victory lay in making Coca-Cola truly see it as a serious opponent and respond. And that is the greatest success for the industry's second place. After that, Pepsi continued its provocative marketing against Coca-Cola. And its provocations contributed many classic ads. For example, this Halloween ad: Pepsi wrapped itself in Coca-Cola packaging, mocking it as scary and unpopular. Coca-Cola responded with the same image: 'Every ordinary person wants to be a hero!' There's also this ad where even the straw rejects Coca-Cola, implying it tastes bad. And one mocking Coca-Cola as unwanted: Personally, I think the most classic is this commercial: A little boy wants to buy a Pepsi, but the vending machine is too high, so he buys two Cokes to stand on. But in my view, the more fiercely marketing competes, the more it proves the battle is insignificant. True life-or-death struggles don't happen in the public eye. The Pepsi-Coca-Cola rivalry is more like mutual traffic-boosting and flirtation. At this point, we can see that brands that are 'eternal seconds' always initiate competition and challenges, but what they really hope for is that the 'industry leader' remains standing. Let's return to our earlier topic. Would a company prefer to have revenue of 10 billion and be the eternal second, or be the industry leader but suffer years of losses? Any smart boss would choose the former. In fact, the victory or defeat and ranking between companies exist only in the eyes of spectators, or in a zero-sum game market. The real business world doesn't require being responsible for victory or defeat; it requires being responsible for shareholder wealth, company revenue, and consumer experience. In a fast-growing, expanding industry, the leading company is often the fastest-growing and determines the industry's ceiling. If I were the second place, I'd hope the industry leader could reach tens of billions in market value, so followers could share in the industry's growth dividends. In a shrinking sunset industry, even if you fight to the death, the winner faces an increasingly bleak market. In fact, stories of the top two brands in the same category fighting are not uncommon in business history. And as long as the leader doesn't make fatal mistakes, it's hard for the second to overtake. Imagine: if Coca-Cola flopped, could Pepsi replace it as a hard currency? The answer is very difficult. If that day comes, it would mean the cola category itself was overthrown by a new competitor, not just a reshuffling of brand rankings. The fall of an industry leader often signals a huge wave for the entire industry. When the nest is overturned, how can any egg remain intact? To put it harshly, the greatest success for the industry's second place is to be a 'substitute'—like a stand-in for the beloved. If you've had relationship experience, you might understand what I mean. If you ask me what brand marketing is most like, I'd say it's like falling in love. The ultimate goal of a brand—whether through exposure or showcasing strengths—is to win consumer affection. But just like love, some likes are without reason; efforts don't always pay off. Even if you try your best to please, in consumers' minds, you might not be the 'happy fat guy's cola' but the 'blue toilet cleaner.' No matter how much market research you do, imitate, provoke, or change, you can't know why consumers like the other one instead of you. Because emotional things can't be measured rationally. It's like asking the other person, 'What don't you like about me? I can change,' but you never get an answer—in fact, the moment you ask, the outcome is already decided. So should you give up? I don't think so. The only thing a brand can do is to keep polishing itself and become better. Even a darling like Coca-Cola has people who don't like it; when it changed its formula, it was abandoned. Even the eternal second has people who smile only when they drink Pepsi. Just like in love, being a better version of yourself and finding the right person is more important than anything. As Enrico himself concluded after the cola wars: 'There is no final defeat.' If I've fought hard for it, why say I'm a failure? References: 'Coca-Cola and Pepsi have been fighting for over 80 years; what has changed and what hasn't?' - Curiosity Daily; 'Pepsi's Counterattack in the 70s: What I Bought Was Not Cola, But the Ideal Self' - Cado; 'The 99-Year-Old Father of Pepsi Passed Away: He Made Pepsi the World's 6th Largest Navy, Leaving Coca-Cola in the Dust' - FMCG; 'The Former Pepsi CEO Who Started the Cola War and Broke the Monopoly Passed Away' - Jiemian News; 'In-Depth Analysis: Coca-Cola's 100-Year Marketing History' - TopMarketing; 'Pepsi's 100-Year Marketing Evolution' - Xiao Mingchao, Trend Observer; 'Coca-Cola and Pepsi Join Forces? A Full Review of Their Century-Old Feud' - Fortune China; 'Did Pepsi Beat Coca-Cola?' - Lishi Business Review Source: IC Laboratory (ID: InsightPlusClub) -END-