BEIRUT — In one commercial, Arab pop star Nancy Ajram hands bottles of Coca-Cola to a young couple quarreling, and instantly, the two lovers make up as colorful hearts and flowers flood out from the bottles.
In another, Haifa Wehbe, a model-turned-singer and Arab world sex symbol, turns heads as she walks confidently through a film set in a blue, figure-hugging dress, putting her cool can of Pepsi up against the face of a sweating technician.
Prompted by a recent surge of prosperity in the Middle East, the giant American beverage companies have engaged in a fierce race to win the soft-drink allegiance of Arabs, especially youth. In the last few years, Coca-Cola Co. and PepsiCo Inc. have recorded more than 10% growth in their annual sales in the region, and executives from both companies say future prospects look promising.
Though the two soda giants have been global rivals for decades, the Arab world until recently was almost exclusively Pepsi territory. For almost 25 years, Coca-Cola was boycotted in many Arab countries over its alleged support for Israel. It started selling again in the Middle East in 1990 and has built its market share to about 35%, according to Ahmed Rady, the company's Bahrain-based Middle East marketing manager.
"Coca-Cola has finally found its ground here," Rady said. "What's beautiful about this part of the world is its thriving youth, and we are here to get these young people closer to their passions."
He said his company's sales exceed $70 million annually in the Middle East, with double-digit growth figures for the last four years. That's a small fraction of Coke's worldwide revenue of $27.4 billion in 2007. But with its burgeoning population of Muslim youth who avoid alcoholic beverages for social, religious or legal reasons, the Arab market offers opportunities to soft-drink multinationals.
Middle East markets are also less saturated than those in Europe and the United States when it comes to nonalcoholic drinks, offering greater room for growth, according to representatives of Pepsi and Coke.
Both companies have focused their marketing on young people through association with the region's pop stars.
"Most of television content here focuses on entertainment and more specifically music," said Ali Araj, a manager at MBC, a Dubai satellite television media group. "So it is not surprising to see that soft-drink companies look for endorsement by stars with a clear-cut sexual appeal to reach the youth here."
The two soft-drink firms have sponsored musical events and talent shows in recent years. They have also devoted some of their marketing campaigns to soccer, which is popular as well among youth. The companies also engaged in price wars and dueling promotions and have been supporting community activities: Coke has been sponsoring the planting of cedar trees in Lebanon, and Pepsi is sponsoring educational programs in Egypt.
Recently, Pepsi, which still dominates the region's soft-drink market, came up with a daring marketing project: producing a full-length musical movie for the Arab world.
The film, "The Sea of Stars," was shot last year in a quaint village in northern Lebanon and features five Arab pop stars, including the Lebanese Wehbe, who landed in the top 50 of People magazine's 2006 most-beautiful-people list. The movie is scheduled to hit screens across the region in May.
"We are market leaders in the region and we wanted to offer our consumers fun and hip new ways to communicate with their brand," said Moussa Mustafa, the Dubai-based regional marketing director for Pepsi Middle East.
The film, which has cost Pepsi $5 million so far, according to Mustafa, tells the story of a teenage boy who goes out of his way to revive his small town. With the help of a group of stars, he manages to bring hope to his village by organizing a music festival -- sponsored by Pepsi, of course.
"Pepsi is all about teens," said Mustafa, who said that the company's market share in Saudi Arabia and the Persian Gulf exceeded 80%. "With a growing young population in the Middle East, we see a big potential for us here."
Still, many Arabs regard Pepsi and Coke as symbols of U.S. cultural and economic hegemony. They remain vulnerable to occasional boycott campaigns in the Middle East. But local soft-drink companies, like Iran's Zam Zam and Dubai-based Mecca Cola, pose little threat to their global counterparts. They may, however, push Coca-Cola and Pepsi to adopt more local branding strategies.
In late 2004, Coca-Cola made a breakthrough advertisement featuring Ajram, then a budding young singer. According to Coke's regional manager, Rady, the promotional clip, which was the most expensive advertisement in Egypt that year, had an "immediate impact across the Arab region."
The spot centered on a group of teenagers who create a rollicking party atmosphere in a posh cafe by making music with their Coke bottles, which inspires Ajram to sing and dance.
Pepsi, meanwhile, has opted for ad campaigns mixing local and global celebrities. It cast French soccer star Thierry Henry with Wehbe and Christina Aguilera with another Lebanese singer, Elissa.
Coke has plunged wholeheartedly into its partnership with Ajram, emblazoning her face on cans sold even in the most remote Egyptian villages and displaying huge billboards of the star holding Coke bottles and looking coyly onto traffic along Lebanon's main coastal highway.
Its ads in the Middle East feature songs from Ajram's albums. "Nancy and Coca-Cola grew together here," Rady said. "Today, we have an excellent relationship, and it's here to stay."
Times staff writer Borzou Daragahi contributed to this report.