FINANCIAL ANALYSIS OF PEPSI AND COCA COLA COMPANIES

Financial analysis of Pepsi and Coca Cola companies from 2007-2009

Financial analysis of Pepsi and Coca Cola companies from 2007-2009

Similarites between pepsi and coca cola

The product offerings of both companies are so similar, that if one were to remove the brand names from their respective products, an individual would not be able to distinguish one from the other. The companies not only compete in soft drinks, but also have branched out to other beverages including coffee, juice drinks and even water. If Pepsi were to offer a new product it wouldn't be surprising to see Coca-Cola follow suit. (Jacobson, 2005, 65-78)

PepsiCo launched "Pepsi Challenge" in 1974 in Dallas, Texas. The campaign led to eroding of Coca-Cola's market share, and making PepsiCo the dominant beverage company in food store sales. The campaign changed the dynamics of the nation of competition the soft drinks industry. For the first time, Coca-Cola acknowledged a competitor, and offered rebates, retail price cuts, and questioned the validity of PepsiCo's assertions.

The decline in market share led Coca-Cola to change Coke's taste. This led to an outcry among consumers, forcing the company to reintroduce its flagship. In retrospect, the nationwide campaign had both a positive and negative effect on Pepsi. The challenge led Pepsi to garner a market share of 20.4% in 1980 compared to 17% in 1970. Coca-Cola on the other hand lost market share, from 28.4% in 1970 to 25.3% in 1980. The reintroduction of original Coca-Cola led to increased popularity of the soft-drink, and eventually caused Pepsi to lose its market share to 17.3% in 1990s.

Explanation

Economical environment

Pepsi economy

PepsiCo Inc (PEP.N) has not seen a slowing economy or tighter consumer spending hurt sales of its snacks and soft drinks, its chief financial officer said on Thursday. "If you take a look at our fourth quarter, I think what you see is volume growth that's very consistent with where we've been for the year as a whole," said Chief Financial Officer Richard Goodman in an interview with Reuters. He noted, for example, that the Frito Lay unit posted 3 percent volume growth for the fourth quarter and the full year. (Jacobson, 2005, 65-78)

"At least in the fourth quarter, we didn't see any material change from where we had been before," Goodman said. When asked about the slowing of cold drinks sold at convenience stores and gas stations pointed out by Pepsi Bottling Group Inc PBG.N last month, Goodman said it affects the company, but not in a big way. "Clearly from a concentrate standpoint that did affect us, but for the quarter as a whole, that wasn't as big a thing," Goodman said, noting that big vendors such as Wal-Mart Stores Inc (WMT.N) and Costco Wholesale Corp (COST.O) are not included in that measurement. (Jacobson, 2005, 65-78) As of last month PepsiCo owned about 40 percent of Pepsi Bottling, its largest bottler. It also sells drink concentrate to the bottler, which bottles and distributes the finished ...