The fizzy drink of choice at PepsiCo on Dec. 12 was more likely to have been champagne than cola. By the end of trading on Wall Street that day, the company's market capitalization reached US$98.4 billion -- and the market valued rival Coca-Cola at US$97.9 billion. For the first time in the history of the two companies, PepsiCo was valued more highly than its old arch enemy.
It was chiefly a symbolic shift, but what a symbol -- and one that has persisted over ensuing days. The "real thing" is suddenly second best.
The tussle for supremacy between Coca-Cola and PepsiCo is one of the great rivalries in business. The two firms remain the No. 1 case study for marketing students on how to create a brand mythos around something as humble as brown carbonated water laced with caffeine and vegetable extracts.
PHOTO: AFP
They have more recently become case studies for another reason: PepsiCo for its ability to spot consumer trends and adapt its business to a changing climate; Coca-Cola for failing to do the same, perhaps numbed into complacency by its long history as the No. 1 best-selling drink in the world.
In early 2000, Coca-Cola's market capitalization was about US$128 billion, almost three times that of PepsiCo, which was valued at US$44 billion.
Fizzy drinks sales at both firms are flat in developed markets.
The crucial factor in the differing fortunes of the two has been PepsiCo's diversification away from sugary carbonated drinks and the early realization that consumers were worrying more and more about obesity and health.
In 1998 the company acquired the fruit juice business Tropicana. Three years later it won an auction for Quaker Oats, paying US$14 billion and adding the energy drink Gatorade to its portfolio.
Coca-Cola pulled out of the bidding after its independent directors -- including the billionaire investor Warren Buffett -- expressed concerns about the lofty price. That proved to be a poor decision.
Today, PepsiCo has about 81 percent of the fast-growing sports drink market in the US. It has the No. 1 fruit juice brand in Tropicana and the leading bottled water brand in the US, Aquafina.
In the most recent quarter, sales of PepsiCo's non-carbonated drinks grew by 24 percent.
PepsiCo generates about 23 percent of its worldwide profits from the near stagnant carbonated-drinks sector, while Coca-Cola relies on its fizzy drinks for 85 percent of profits.
PepsiCo owns snack foods including Walkers Crisps and Doritos and its diverse range of products, analysts have said, is helping it to gain better leverage with supermarket chains.
Coca-Cola is playing catch-up. In June, it launched its Minute Maid pure juice range in the UK. It has also introduced the Dasani bottled water brand and the Powerade energy drink. Powerade is about one-fifth as big as Gatorade in the US.
When Coca-Cola did eventually launch its bottled water brand in the UK, it met first with derision when the press realized it was distilled tap water and then horror as it was pulled from shelves in a health scare.
PepsiCo shares have risen 14 percent last year while Coca-Cola's fell 1.2 percent.
BUSINESS UPDATE: The iPhone assembler said operations outlook is expected to show quarter-on-quarter and year-on-year growth for the second quarter Hon Hai Precision Industry Co (鴻海精密) yesterday reported strong growth in sales last month, potentially raising expectations for iPhone sales while artificial intelligence (AI)-related business booms. The company, which assembles the majority of Apple Inc’s smartphones, reported a 19.03 percent rise in monthly sales to NT$510.9 billion (US$15.78 billion), from NT$429.22 billion in the same period last year. On a monthly basis, sales rose 14.16 percent, it said. The company in a statement said that last month’s revenue was a record-breaking April performance. Hon Hai, known also as Foxconn Technology Group (富士康科技集團), assembles most iPhones, but the company is diversifying its business to
Apple Inc has been developing a homegrown chip to run artificial intelligence (AI) tools in data centers, although it is unclear if the semiconductor would ever be deployed, the Wall Street Journal reported on Monday. The effort would build on Apple’s previous efforts to make in-house chips, which run in its iPhones, Macs and other devices, according to the Journal, which cited unidentified people familiar with the matter. The server project is code-named ACDC (Apple Chips in Data Center) within the company, aiming to utilize Apple’s expertise in chip design for the company’s server infrastructure, the newspaper said. While this initiative has been
GlobalWafers Co (環球晶圓), the world’s No. 3 silicon wafer supplier, yesterday said that revenue would rise moderately in the second half of this year, driven primarily by robust demand for advanced wafers used in high-bandwidth memory (HBM) chips, a key component of artificial intelligence (AI) technology. “The first quarter is the lowest point of this cycle. The second half will be better than the first for the whole semiconductor industry and for GlobalWafers,” chairwoman Doris Hsu (徐秀蘭) said during an online investors’ conference. “HBM would definitely be the key growth driver in the second half,” Hsu said. “That is our big hope
The consumer price index (CPI) last month eased to 1.95 percent, below the central bank’s 2 percent target, as food and entertainment cost increases decelerated, helped by stable egg prices, the Directorate-General of Budget, Accounting and Statistics (DGBAS) said yesterday. The slowdown bucked predictions by policymakers and academics that inflationary pressures would build up following double-digit electricity rate hikes on April 1. “The latest CPI data came after the cost of eating out and rent grew moderately amid mixed international raw material prices,” DGBAS official Tsao Chih-hung (曹志弘) told a news conference in Taipei. The central bank in March raised interest rates by