Coca-Cola and Pepsi Have Been at War for More Than 80 Years. What's Changed, and What Hasn't? | Big Companies' Ad Wars

New spokespeople are on the shelf, and new problems have come with them. What happens now to the two companies' sugar-water business?

"I can't think of anyone better suited to promoting Cherry Coke than Buffett."

On the eve of April Fools' Day, Coca-Cola China announced something that sounded like a joke and wasn't one: it would print a cartoon portrait of Warren Buffett on the packaging of its new Cherry Coke. This was a real marketing plan. Coca-Cola chairman Muhtar Kent had gone to Buffett himself four or five months earlier to arrange it.

Coca-Cola's largest shareholder, now 86, loves Cherry Coke and is the most famous fan the drink has anywhere. "A quarter of me is Coca-Cola," he once said.

The cans with Buffett's face will appear for a limited time on Cherry Coke sold in China. The flavor dates to 1985 and only went on sale in China on March 10.

It may also be the strangest endorsement in Coca-Cola's history. Coca-Cola almost never leans on celebrities in its ads, let alone prints a face that big on a can. That is the sort of thing Pepsi does.

Pepsi has always been far keener on celebrity spokespeople than Coca-Cola. The early ones were Leslie Cheung, Andy Lau, Aaron Kwok, Faye Wong and Sammi Cheng; the later ones Jay Chou, Jolin Tsai, Nicholas Tse and F4. That leaves out the soccer players led by David Beckham, and a run of 1990s Western pop royalty: Michael Jackson, Madonna, Britney Spears.

On April 4, Pepsi released an ad starring its newest spokesperson, the model Kendall Jenner. Born in 1995 and already carrying 77.8 million Instagram followers, the fourth daughter of the Kardashian-Jenner family became the second model to appear in a Pepsi ad since Cindy Crawford in 1992.

The Sugar-Water Companies Are Nervous

Buffett keeps saying that Coca-Cola has a "moat" no competitor can cross. But he is now defending the drink at shareholder meetings and handing over his own face as well, and that help hints at something: the rival the cola companies face today may not be a company like Pepsi at all, but consumers whose tastes are turning under the health trend.

Coca-Cola's 2016 results showed revenue down 5.49% from a year earlier, the fourth straight year of decline. James Quincey, about to take over as CEO, had said: "Coke will always be the soul of the company... but this company needs more than just the core brand."

Coca-Cola is not the only nervous one. Carbonated soft drink sales in the United States have fallen for 13 years running, and Pepsi's numbers look no better. The carbonated drinks market, which spent the past century growing on the back of the beverage giants' fight, is now shrinking.

"We never used to think about what healthy eating was, because we figured whatever we ate was healthy."

That line comes from an interviewee in the 2009 documentary Food, Inc. Almost overnight, eating habits turned around. People wanted to know what sat behind the ingredients list, and what all those complicated chemical names did to the body. The panic over obesity — and over the fear of it — reached into nearly every corner of city life.

Food, Inc. caused a stir precisely because it exposed what lay behind America's food processing industry. Between 1998 and 2009, the number of times The New York Times used the word "obese" tripled. "Diabetes" first appeared in 1970 and now turns up ten times as often. "Obesity epidemic" first appeared in the Times in 2002 and has never stopped since.

Carbonated drinks took the blame first. In the plot of an American courtroom show like Boston Legal, a cola company president could perfectly well argue that a consumer's self-control is the thing that decides health — the cola just sits on the shelf, and nobody is holding a gun to your head to make you buy it and drink it. But the lab videos that circulate on YouTube tell you how frightening this drink is: line up a few bottles on a table, swap the sugar inside each one for the same weight of white sugar, and the pile in front of the cola is beyond compare. The videos exist to remind you what you have been doing to yourself.

That shift in how consumers think has shaken the ground the cola companies stand on, Pepsi and Coca-Cola alike. People have come to hate sugar, and swapping in aspartame or stevia does nothing to calm them, because sweetness itself has become the threat.

Buffett's appearance is Coca-Cola asking to be trusted — not only with an old man's body, but with the persuasive force of his money. Kendall Jenner's appearance can only be about cool. In that sense she does the same work as Cindy Crawford, the last supermodel to take the job. In the 1990s, supermodels stepped off the runway for the first time and became idols for everyone.

For the first time in their history, the two cola companies stand in front of the same task: beating back what the health trend is doing to sales. And all the while, the open fight between them goes on.

You Think They're Mortal Enemies? No — They Built the Carbonated Drinks Market Together

Coca-Cola and Pepsi built today's global carbonated drinks market, 200 billion liters of it, almost by themselves.

Coca-Cola was invented on May 8, 1886, by the pharmacist John Pemberton in Atlanta, and its rise has always been bound up with war. Soon after Pearl Harbor, four Coca-Cola cold-drink dispensers turned up in Hawaii, and Robert Woodruff announced that wherever the army, navy or air force was stationed, every serviceman should be able to drink Coca-Cola.

Pepsi was born in the 1890s and went bankrupt twice. Its rise in the 1930s was a direct challenge to Coca-Cola. By the time Pepsi appeared, Coca-Cola was already selling a million gallons a year; whichever way you looked at Pepsi, it was a knockoff.

Coca-Cola was aiming at the mass market. But the Depression left plenty of room to cut prices. Pepsi took the opening with "same price, twice the drink," a half-price-per-case strategy that pulled away a piece of the market. Charles Guth, chairman of the Loft candy chain, became the key figure in Pepsi's push. Loft was a Coca-Cola distributor.

Guth's basic view was that without a self of its own, Pepsi would never succeed. Coca-Cola was simply too strong, and if you needed to state a position clearly, what states it more clearly than twice the product at the same price?

The fight between the two companies started there. The real turn came after the Second World War, as the baby boomers came of age and became the main force in American consumer spending. Alfred Steele, who was then running Pepsi, sensed that whoever won the young would win, because they "consumed soft drinks far out of proportion to their share of the population." Everything you see today in Pepsi's endless pursuit of cool comes from that.

Everyone assumes a fight this open must mean one company gains what the other loses. Study the two companies' accounts even briefly and you find it is not a zero-sum game.

The logic is simple. Every product extension exists mainly to win more space on the shelf. However well a product sells, a supermarket manager will only ever put one product in one spot. Add new products in more flavors and more colors, and each of them claims a spot of its own. The more often a shopper sees the brand, the likelier they are to buy it.

Coca-Cola and Pepsi raised their volume by fighting through ads, and raised their presence by inventing products. Either way, what grew was the carbonated drinks market as a whole. Without their joint effort, fizzy drinks would probably never have become fixtures on the dinner table and in the living room, never mind carrying all the comfort and attachment people now invest in them.

"Both sides have to be winners. You have to bring fun to this market. The more fun we provide, the more people buy our products, whatever they are. The trick is, it has to be fun. If this war ever looked like one company was in real trouble, out of luck and past saving, the mood of the game would darken at once..."

That is how the Harvard Business School professor Richard Tedlow summed up the contest between Pepsi and Coca-Cola in his well-known book Retail Marketing (《零售营销》). Tedlow later ran Apple University, the institution Steve Jobs set up himself, where he explains famous battles and episodes from business history to Apple executives in the hope that they will draw something from them for running the company.

More Than 80 Years of Ad War Between the Two Cola Companies. What Were the Details?

The fight between Pepsi and Coca-Cola never sank into slinging mud at each other. The fun Tedlow is talking about lies in the details and the strategy.

From the 1960s on, Pepsi gradually dropped its old approach of appealing to everyone, young or old, man or woman, and went after the young instead. Look at the slogans:

• 1961: This is Pepsi, and it belongs to young hearts.
• 1963: Rise up — you belong to the Pepsi generation.
• 1964: Come alive, you're the Pepsi generation.
• 1975: The Pepsi Challenge — let your taste decide.
• 1998: The choice of a new generation. Ask for more.

Whoever shouted those lines had to be the person the young thought was coolest. That is why Pepsi went after Michael Jackson, signing the King of Pop for the sky-high sum of $5 million and breaking the record for a celebrity endorsement fee.

The deal was signed in November 1983, about a year after MJ's sixth studio album, Thriller, came out. "Coca-Cola offered a deal worth $1 million, but the Jackson family turned it down and went over to Pepsi," Jay Coleman, the family's agent, later said. Roger Enrico, then Pepsi's CEO, had been scouring the field for someone to front the brand's newest campaign, "New Generation."

"The goal was to make Pepsi look young and Coca-Cola look old, and MJ was in fact the choice of the new generation."

Well before MJ, plenty of Black musicians had appeared in Pepsi's ads, and their music stood for a new wave. Timothy Taylor, who wrote The Sounds of Capitalism, put it this way: "Many of those musicians were African American, and when Pepsi began using Black musicians in the late 1960s, they were very glad to sign, because for a Black musician it meant the mainstream had finally accepted them."

In the Chinese market of the late 1990s, Pepsi's spokespeople amounted to a roll call of the biggest names in pop. That is the direct reason why, in market tests today, plenty of consumers born in the 1980s still think blue Pepsi is cooler than Coca-Cola.

The rebrand was brilliant and it showed everywhere. Pepsi dropped the word "Cola" from its logo, kept only "Pepsi," and redrew the type to look sharper and livelier.

Coca-Cola, meanwhile, was expanding around the world at speed. Its 1927 slogan, "Coca-Cola everywhere," gave away the global ambition. 1927 was also the year Coca-Cola entered China, setting up a bottling plant in Shanghai.

By 1942, Pepsi had grown into competition Coca-Cola could no longer ignore, and Coca-Cola changed its slogan to "The only thing like Coca-Cola is Coca-Cola itself." Only Coca-Cola is Coca-Cola.

The war between the two escalated so far that the phrase "Cola War" came to stand for a particular kind of blood feud. In 1985, to compete with Pepsi, Coca-Cola launched a reformulated product called New Coke, an episode that became the marketing nightmare of the company's history. Roberto Goizueta, then president, said afterward that it had taught him that "the Coca-Cola trademark is not owned by the Coca-Cola Company but by the consumer."

Next to Pepsi, Coca-Cola's advertising has always been much more traditional, fixed on family and childhood, often playing the nostalgia card. Coca-Cola was again a sponsor of the 2016 Olympics, and the ad it ran in China, This Moment Is Gold, featured Sun Yang, Zhu Ting, Zhang Peimeng and the volleyball coach Lang Ping.

At the 2015 NASCAR races, Coca-Cola ran its classic 1979 ad "Mean Joe Greene" again, the story of the football player Joe Greene and a small boy. Coca-Cola often brings back old ads like this one to pull at feelings. It also sponsors NASCAR, the NBA, the PGA Tour, the Olympics and the World Cup, among other big sporting events, and counts spokespeople like LeBron James.

In 2016, the polar bears came back to Coca-Cola's Christmas ads. For many Americans, those white bears are a childhood memory of Christmas.

Last year Coca-Cola dropped "Open Happiness," the slogan it had used for seven years, and switched to "Taste the Feeling," hoping to put the focus back on the drink after so many years of talking about being happy. That was also an answer to the sales decline that had run since 2013.

Along with the new slogan came the One Brand plan, which gathered several of the company's drinks — Diet Coke, Coke Zero and others — under a single brand. At the same time Coca-Cola has been hunting for new categories to make up for weak carbonated sales, investing in high-tech milk and functional drinks.

In this round of marketing under the new slogan, the people on screen are still ordinary Americans of every skin color. But compared with the past, celebrities are now a standard tool in Coca-Cola's ads. One spot, set during a chance meeting in an elevator, tells an ambiguous story between a big star and a hotel bellhop; in the version made for China, the male lead was swapped for Lu Han.

As a rule, the faces in Coca-Cola's ads come in only a couple of kinds: cuddly polar bears, the Santa Claus everybody knows, and athletes. Musicians rarely show up. That rule has been broken in the past few years, and the biggest example is Taylor Swift, the face of Diet Coke since 2013. Facing young people who are now unusually wary of sugar, Coca-Cola has begun to understand that it needs a famous face as well as its red and its smile.

The only trouble may be that hiring a spokesperson is no longer as simple as shooting one cool poster for a cola company. Chasing eyeballs and headlines, the newest Pepsi ad with Kendall Jenner, released on April 4, touched a sensitive social issue, and a single day later the backlash forced it off the air. That was the part nobody saw coming.

Andrew Eborn and Richard J. Hillgrove VI, columnists for the marketing site The Drum, wrote this: “Pepsi's marketing department may be scratching its heads trying to work out why it went viral on Twitter for all the wrong reasons. The answer is simple. Pepsi, you're not the real thing.”

Andrew and Richard were playing on Coca-Cola's 1969 slogan, "It's the Real Thing." The Apollo program had just put men on the moon, the wildest dream of the twentieth century had come true, and Coca-Cola borrowed the mood of celebration for a line that was extremely simple and extremely solid, telling everyone that dreams do come true and Coca-Cola was celebrating with them.

Even today, the line still works for mocking a rival's mistake.

But all of this is talk. Coca-Cola is not what it was; it has become the well-mannered old man clapping along at the Super Bowl, while Pepsi chases the trend and still hopes to grab a look. Neither can pretend the health wave isn't there, and neither can declare war on it. Each can only find the path that suits it.

The war that never ends will go on. As long as the sugar-water business exists, Richard Tedlow's words still fit these two giants: "Everyone's interest lies in keeping the public curious. 'Okay, that's what Pepsi is doing today — now can you imagine what Coca-Cola will do tomorrow?'"

Cover image: Pixabay