The world knows well about the Cola wars between the two giants of the global beverage industry, the Coca-Cola Company, and Pepsico. Despite the never-ending business rivalry to dominate the global market the business models of these companies are pretty similar. The similarities are not only in terms of the industry but also in flagship products and ideal consumers. Perhaps commonalities fuel the Coca-Cola Company Vs Pepsico battle. Both companies are leaders in the global beverage industry and offer hundreds of beverage brands to consumers. Another similarity that these companies share is the offering of consumer packaged goods as ancillary products. However, the similarity of the business models is quite superficial. The worldwide consumers have a strong opinion in backing one of these brands, of which they are die-hard fans.
Looking deeper into coca-cola company vs PepsiCo business models
Beyond the apparent similarities of the business models, investors who dig deeper can identify the differentiators too. Both companies are fierce competitors, and their business models are unique.
About Coca-Cola Company – Coca-Cola focuses mainly on beverages. The company aims to dominate the global beverage industry, which it does quite successfully. When talking about Cola, the name Coca-Cola flashes in mind first because it gave the world the first taste of Cola. Moreover, the company pays undivided attention to beverages only and keeps adding new products to the range but never dabbles in multiple products. Coca-Cola never deviated from the original business model based on the original syrup discovered in 1886. It will not be wrong to say that the Coca-Cola Company is exclusively a beverage company that continues adding new products without stepping out of the industry.
About Pepsico – The business model of Pepsico is entirely different in terms of the focus because the company, unlike its rival, looks beyond the beverage industry. If Coco-Cola is known for its single-minded attention to beverages, PepsiCo’s focus goes beyond beverages and includes a highly diversified product portfolio that brings within its ambit products belonging to the consumer packaged goods industry. Almost half of PepsiCo’s business revenue comes from products in snack food, whereas the revenue earning of Coca-Cola is exclusively from its diversified range of beverages. The company has a presence in the food industry, too, which is a unique identity compared to its rival.
Cola being the common factor for both companies gives an apparent impression about the companies adopting similar business models.
What does the stock price say?
Income margin– The stock prices of the companies should help to gather further insights about what is going on behind the scenes in the coca-cola vs PepsiCo battle. At the end of 2016, the coca-cola company’s share price was $37, and in three years, as of 15th June 2020, the share price touched $ 47 that translates into an increase of 24%, which is a tremendous positive for the company. However, during the same period, PepsiCo’s share price grew by an astounding 37%. Whereas PepsiCo’s margins have seen a lot of volatility between 2017 and 2019, Coca-Cola’s net income margins have grown consistently during the same period.
Revenue – Although the income margin is essential for all companies, revenue matters more because it is one of the key elements determining performance. PepsiCo’s revenue base is more than twice that of Coca-Cola. Interestingly, PepsiCo’s margin has consistently gone up for 2016-19 abut that of Coca Cola Company saw a steady decline.
Impact of product offerings on the business prospects
On looking at the revenue mix of the two companies, you will see that Coca-Cola’s revenue comes from beverages like carbonated soft drinks, juices, coffee, etc., only while PepsiCo’s revenue mix comprises beverages, snacks, and food products. Almost half of PepsiCo’s revenue is from food and snacks, with beverages making up for the rest. As consumer trends are changing fast and people are moving away from carbonated drinks in pursuit of health and fitness Coca Cola’s sole reliance on beverages may dent its revenue further.
As the Coca-Cola Company Vs Pepsico continues, it will be interesting to see whether any of these companies emerge as a clear winner in days to come.
