In one corner, with 36.4% of the soda market in 1984 and companywide revenue of $7.4 billion, is Coca-Cola Co., maker of Coca-Cola and 16 other brands. With its red-and-white trademark on millions of signs from Miami to Hong Kong, it is arguably the best-known brand name in the world.
In the other corner, with 25.6% of the soda market and companywide sales of $7.7 billion, is PepsiCo Inc., whose "Pepsi Challenge" has taken on new urgency. The company has backed its perennial taste-test dare with a multimillion-dollar television ad campaign featuring pop singer Lionel Richie, Democratic vice presidential candidate Geraldine Ferraro and NFL quarterbacks Dan Marino and Joe Montana.
The ads have once again focused consumers' attention ringside, as the reigning heavyweight, Coca-Cola, battles a resurgent Pepsi and a host of other brands seeking a bigger share of the $21-billion domestic soft-drink market.
Although in the past observers have been moved to predict--inaccurately, as it turned out--that Pepsi was gaining on Coke, this time there is evidence that those forecasts may be realistic.
Boosted Market Share
"Last year Pepsi was the only major brand of cola to increase its market share," said Larry Jabbonsky, editor of Beverage World, a Great Neck, N.Y., trade publication. It also made inroads last November when it offered the only diet cola sweetened totally with NutraSweet, G. D. Searle & Co.'s enormously successful artificial sweetener.
Other manufacturers, such as Phillip Morris Co.'s Seven-Up Co., which last year posted its first profit since 1980, on revenue of $734 million, are also hoping to land punches on Coca-Cola. Seven-Up, which spent more than $30 million on product advertising in 1984, said it will launch the most expensive marketing campaign in its history this year.
More than just corporate pride is at stake.
Soft drinks are the most widely consumed beverages in America, with per-capita consumption last year exceeding even that of free tap water, reports Beverage Industry, a Cleveland-based trade publication.
Other companies besides beverage makers stand to gain handsomely as consumers quaff more soft drinks. Because 36% of these products are packaged in aluminum cans, the increased demand could invigorate the aluminum industry, which has suffered from the nation's housing slump, experts say. Television also stands to benefit as beverage makers fight it out over the airwaves.
Use of Sugar Down
However, sugar makers won't be so fortunate. Sugar use has plunged 58% since 1980--when the industry sold 2.16 million tons of its crop to beverage makers--as nearly all bottlers have switched to cheaper corn syrup, the Agriculture Department says. And sales of diet sodas sweetened with saccharin or NutraSweet are growing at three times the rate as that of regular brands. Those diet sodas now account for about 20% of total soft-drink sales, according to the National Soft Drink Assn. in Washington.
"This is a huge industry," said Rob Martin, a Coca-Cola USA spokesman. And Coca-Cola is "deadly serious about our business," he added.
For all its implications, the current soda war began by happenstance.
An errant firework ignited singer Michael Jackson's hair during filming of a Pepsi commercial in the Shrine Auditorium in Los Angeles in January, 1984.
Although Jackson recovered quickly from second-degree burns, the incident propelled Pepsi's name into headlines, bringing the company publicity worth $3 million by its own estimate. In the wake of the commercials, Pepsi's flagship label boosted its market share by 1.5 points last year.
"Almost immediately, within a month or two, . . . sales of Pepsi started to take off," said Alan Pottasch, senior vice president of advertising at Pepsi, which markets six Pepsi brands as well as Mountain Dew and Teem.
Pepsi Cashes In
Former vice presidential candidate Ferraro's Pepsi ad this year fueled debate about the ethics of politicians doing commercials. As the controversy swirls, Pepsi continues to cash in on its higher profile. Emanuel Goldman, a beverage analyst at Montgomery Securities in San Francisco, forecasts that the growth rate for all Pepsi's soft drinks in 1985 may match that of Coca-Cola USA's products.
But Coca-Cola has not exactly knuckled under to Pepsi's onslaught.
At a time when consumers appear to be tiring of the glut of celebrity product endorsements, Coca-Cola's commercial featuring comedian Bill Cosby berating Pepsi for being too sweet is a hit, according to Video Storyboard Tests Inc. The New York-based research group says the Cosby commercial has consistently ranked among viewers' 10 favorite commercials, even though a separate study by the group found that only 19% of 1,000 consumers felt that celebrities increased their interest in products.
What's more, Coca-Cola, which derives between 60% and 75% of its soft-drink sales volume from 155 foreign countries, seems almost impervious to attack overseas.