Research on Cunsumers' Preferences for Coca Cola and Pepsi

Essay by franklin atadjaUniversity, Bachelor'sB+, October 2007

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Recommendation provided by Yayra Consulting firm for the Coca Cola Corporation and Pepsi Corporation is as follows:Based on the survey I found that a majority preferred Coca Cola over Pepsi. The consumers that preferred Coca Cola were influenced by the products taste. Both Coca Cola consumers as well as Pepsi consumers were loyal to their product of preference. In both cases I found consumers who have consumed Coca Cola and Pepsi for over 20 years. I recommend that Coca Cola continue to invest in advertisements due to the fact that from those who preferred Coca Cola were influenced by their advertisements and their use of celebrities. Consumers did say that if they did not have a choice and Pepsi was their only choice they would sometimes drink Pepsi. This leads me to recommend Coca Cola to increase their presence in areas where they currently are not. This will give the consumer an option and loyal consumers will stay with their preference.

I would recommend that Coca Cola ensures that their product is available at the convenience of their consumers.

My recommendation for Pepsi would be to target the younger community by incorporating cartoon characters on their products. This recommendation is due to the fact that from those surveyed I found that the younger generation liked the Pepsi sweeter taste more than what those surveyed described as crisp flavor for Coca Cola.

APPENDIX AMarket Research Survey to determine customer value and satisfaction between:Coca Cola vs PepsiActual participants: 5 males/females between ages of 12-55COCA COLAOf the five people surveyed the following preferred Coca Cola:How many people preferred Coca Cola?IIINumber of consumers who prefer Coca Cola's taste?IIIHow many cups of Coca Cola do you drink per day?3 TO 4 CUPS OF COKENo. of consumers who prefer price?0Would you drink Pepsi if that were your only choice? (sometimes, often, never)III = SOMETIMESHow long have you been drinking Coca Cola? 20+ YEARSDoes everyone in your family drink Coca Cola?1 YES and 2 NOAside from taste and preference what else do you like about the product? (packaging, advertising, celebrities)2 advertising, 1 celebritiesAPPENDIX A (Continued)PEPSIOf the five people surveyed the following preferred Pepsi:How many people preferred Pepsi?IINo. of consumers who prefer Pepsi's taste?IINo. of consumers who prefer price?0How many cups consumed per day?The least was < 1The most was 2 - 4Would you drink Coca Cola, if that were your only choice? (sometimes/ always/ never)II SOMETIMESHow long have you been drinking Pepsi?9-20 + yearsDoes everyone in your family drink Pepsi?1 yes, 1 noAside from taste and preference what else do you like about the product? (packaging, advertising, celebrities)II advertisingResearch findings:Coca Cola:Out of 5 people surveyed 3 out of 5 preferred Coca Cola over Pepsi. 3 out of 5 preferred Coca Cola taste over Pepsi. Coca Cola consumers surveyed revealed they drank 3-4 cups per day. Coca Cola consumers surveyed stated they would sometimes choose Pepsi if they did not have a choice. Coca Cola consumers surveyed also revealed that they have consumed the product for over 20+ years. Of the 3 Coca Cola consumers surveyed one stated that their family exclusively consumed Coca Cola in their family. Two of the three Coca Cola consumers surveyed were attracted by Coca Cola's advertisements and one was attracted by Coca Cola use of celebrities.

Pepsi:Two out of the 5 people surveyed preferred Pepsi over Coca Cola. Out of the two surveyed for Pepsi both preferred Pepsi's taste. Price did not influence choice. Out of the two Pepsi preferred consumers stated that they drank < 1 cup - 4 cups per day. Of the two surveyed both stated that they would sometimes chose Coca Cola if they had no other choice. Of the two surveyed the years consuming the product ranged from 9 - 20 + years. Only one of the two surveyed exclusively consumed Pepsi in their family. Both Pepsi consumers surveyed were attracted to Pepsi's advertisements.

APPENDIX BProduct Profitability analysis between Coca Cola and Pepsi:The product I have chosen is Coca Cola versus Pepsi for analysis. From research I found that Coca Cola net sales/revenues were $24,088,000. Cost of goods sold were $8,154,000 the difference between both sales/revenues and cost of goods sold resulted in a gross profit of $15,924,000 in 2006. The net income in 2006 was $5,080,000.

For Pepsi I found that net revenue for 2006 were $35,137,000. Cost of goods sold was $15,762,000. The difference between the revenue and cost of goods sold in 2006 for Pepsi showed a net profit of $6,439,000. The net income in 2006 was $6,439,000.

The importance of the financial data is to show areas in which the corporation is excelling and may want to continue to invest in. The financial data analysis in detail also reveals areas in which the corporation is losing money and from the findings the corporation can decide to change its approach in the particular area in order to prevent further financial losses. Also, the data helps management to identify these areas where there is loss and take action that leads to increased profits.

Based on the net income of 2006 for Pepsi I would say one of the factors that contribute to the edge they have over Coca Cola is that Pepsi is more diversified in the products that they produce. Pepsi not only distributes the nonalcoholic beverages they also distribute a variety of sweet and salty snack products.

APPENDIX CSWOT ANALYSIS - Strengths, Weaknesses, Opportunities and Threats:Strengths:Coca Cola:Coca Cola is a well established international nonalcoholic beverage corporation. They are well established in the market and are one of the largest nonalcoholic beverage companies in the world. Coca cola has over 400 brands from water to sports drinks. Coca Cola continues to invest in advertisements for their products, which contributes to their strong presence in the beverage market. They are addressing innovative ways to provide healthy drinks for consumers.

Pepsi:Pepsi is also a well established international nonalcoholic beverage corporation. In addition to beverages Pepsi sells snacks such as the Frito Lay chips. They operate globally and have penetrated the market through advertisements, which influences increased sales. Pepsi using a distribution network to sell their products. They sell to distributors based on customer needs. Their established presence in the market contributes to their continued success and sets the stage for new successes with new products distributed by Pepsi.

Weaknesses:Coca Cola:Coca Cola in 2006 some external factors caused a reduction in income due to foreign exchange negatively impacted operation income in a decrease of 1% in European Union, Bottling investments, Brazil, and Latin America. Higher interest rates also affected Coca Colas profits. In 2006 they had a decrease of $42M compared to the prior year. Their main competitor which is Pepsi has a strong presence in not only the nonalcoholic beverages but also in salty snacks such as the Frito Lay chips corporation. Coca Cola products are strictly beverage drinks and I believe that this is a weakness for them.

Pepsi:Similar to Coca Cola Pepsi operates on customer demand. If they were to market a new product that consumers don't like Pepsi is at risk of losing sales and revenue. Other factors that can have a negative impact to Pepsi's continued success are external factors like inflation, interest rates, and political issues. This corporation is heavily dependant on technology to run the day-to-day business. If anything were to go wrong with the technology they can be negatively impacted. Another issue that is of concern to the Pepsi organization is the fact that in recent years consumers have become more aware of health concerns. People are beginning to hold those responsible for distributing foods that are disease causing such as illnesses associated with obesity. To continue on the topic of health, Pepsi continues to distribute diet drinks containing aspartame which has been linked to cancer.

APPENDIX C (Continued)Opportunities:Coca Cola:Coca Cola continues to invest on innovative products. This leads to having the ability to stay ahead of their competitors such as Pepsi. With Coca Cola being an international business the ability to be innovative provides further success in an ever changing world. In regards to being innovative, through innovation Coca Cola has the opportunity to put out healthy products into the market and address how their product affects the health of their consumers. Coca Cola to date has increased their diet products by through their partnership with Splenda, a diet substitute, by providing a variety of diet Coca Cola drinks. I also believe that Coca Cola should branch out like Pepsi into the snack industry. By doing so,they can have more of a competitive edge over Pepsi by providing snacks that are healthy in combination with innovative health drinks.

Pepsi:Pepsi already participates in the distribution of snacks as well as their Pepsi drinks however, the snacks distributed are considered to be unhealthy. They should put more focus on providing healthier products for the consumer. This would provide more profitable opportunities for Pepsi. They would be reaching consumers who in today's changing world are more health conscience than ever before.

APPENDIX C (Continued)Threats:Coca Cola:The threats for Coca Cola are the constant increase new competitors entering the market. They have to constantly be aware of who their competitors are and what they are offering the market so that they can stay ahead of their competitors. Coca Cola dependence on technology is also a threat because in today's advanced technological world there is always some kind of external threat including hackers, viruses that can corrupt critical financial information as well as product information. Another factor that can be a threat to Coca Cola is the interest rates increase. This can directly affect Coca Cola's profits which can result in a loss.

Pepsi:The threats for Pepsi are their contribution to the unhealthy snacks that they distribute to the consumer. I think that corporations have a social responsibility to provide healthy food products and not products that can cause ill health. Pepsi not only distributes nonalcoholic beverages but it also distributes snacks such as Lays chips, Doritos, Fritos to name a few. These snacks are considered unhealthy and I think that they should invest in innovative ways to come up with healthy snacks to the health conscience consumer. In recent years consumers have sued corporations for distributing food products that have lead to poor health. Therefore, with the threat of potential lawsuits Pepsi needs to address this issue and provide a product that consumers would consider to be healthy.

CONCLUSIONThe fact remains that Coca Cola and Pepsi are each others main competitors. My recommendations for Coca Cola to invest in increasing their presence where they currently are not and continued investments in advertisements I believe will put them ahead of Pepsi. Also, Coca Cola should branch out into distributing snacks but not just any snack but a healthy alternative snack for the increased awareness consumers have in today's market. Pepsi consumers favored their sweet taste that was especially appealing to young consumers. My recommendation that they advertise with cartoon characters by targeting the youth I believe would lead to increased sales and increased profits for Pepsi. I also believe that Pepsi should invest in providing healthier drinks and snacks for their consumers. They already are in the market for the snacks if they began selling healthy versions of the existing snacks I believe that would also give them an edge over Coca Cola being that Coca Cola has yet to invest in the distribution of snacks.

In conclusion, Coca Cola and Pepsi are successful companies that are well established in the market. This gives them an edge in the market that new competitors joining the market don't have. That being said they still face the constant threat of new competitors and existing ones and must continue to invest in innovative ways that will keep them ahead of the competition. Also, companies have a social responsibility to provide healthy products for consumers especially in today's world with consumers being more health conscience and demanding quality products from the food industry.

CitationNew York Stock Exchange:PEPSI