Competition makes the world go round. When companies compete for consumers, we all win. Pepsi and Coca-Cola have been fighting the “Cola Wars” since the late 1800s and the story behind this epic brand war is fascinating!
Here’s a transcript of our conversation:
Brittany: Hi, Emma.
Emma Phillips: Hey, Brittany.
Brittany: So just for our viewers out there, we have Emma Phillips, who’s gonna be filling in sometimes as a co-host with us today. So very excited to have her. And we’re gonna talk about one of my favorite historical brand wars, as it’s called. And I know Connor, I had talked about this, but we’re all pretty anti-war. I assume you’re probably pretty anti-war, too, Emma, right?
Emma Phillips: Yes. that’s true.
Brittany: Well, There, is one kind of war I actually love. Really? Yes. So that’s what I wanna talk about today. And normally I’d say maybe war is the wrong term, but they actually do call them brand wars. But what I really mean here is market competition. And we’ve talked about that a lot. And what I really love about this is when you have two or more similar products or you know, companies competing for the market, the consumers win, right? Because we get all these different choices and they’re all fighting for our business. And there are a ton of examples of this. In fact, there is a podcast called Business Wars, and I’m sure I’ll talk about it again, where they kind of highlight all these different companies. But I wanna talk about my most favorite, which was called the Cola Wars.
Emma Phillips: Hmm. The Pepsi and Coke War. I know this one.
Brittany: Yes. So I wanna start by saying I am a Pepsi girl. I love Mountain Dew, and that’s who makes Mountain Dew. So like, I am a very, very big Pepsi enthusiast. What about you, Emma?
Emma Phillips: I do also love Mountain Dew, but when it comes to the cola, I’ve definitely preferred Coca-Cola, so.
Brittany: Okay. It’s fair. Like,
Emma Phillips: Well, we’ve got our difference.
Brittany: Yes. So we’ll just dive right into this. Now, at the time, I believe it was 1892 when Coca-Cola was born, and that was born in Atlanta, Georgia. When I lived there, briefly, everything is Coca-Cola. You, they have a museum, they’ve got everything. But there were other sodas at the time. In fact, root beer, which is my favorite soda that was already around. But Coca-Cola for a while was the only cola in the game. And soda shops back then were huge. And they were usually in like a pharmacy. So you’d go and you’d get what, you know, whatever it was, at a pharmacy, and you’d sit at almost like a bar and you’d sip your soda. And that was like the thing back then. and that’s how Coke became known. But then like in the other successful product, you know, competitors came on the market. And so in 1899, Coke did something revolutionary and they started bottling their sodas. And no one had ever done that before.
Emma Phillips: Wow. That’s interesting. Because you think about going to the store and seeing soda on the shelves, it’s you can’t picture going to the store and not seeing that. It’s like we take these things for granted that, you know, they’ve made a world of difference, changed our experience as consumers, but they had to be in innovation at one point.
Brittany: Exactly. And, you know, in bottle form now it’s everywhere. Because before they, you know, people had to ship in, what it was was syrup. It wasn’t the actual soda. Right. So now they’re in bottles and they’re everywhere and, they had the logos and you know, Coca-Cola became a brand name. Well, when I say, you know, Coca-Cola, Emma, like what comes to your mind when you close your eyes? And I just say that like what vision, what image comes in your mind?
Emma Phillips: I just picture that, that red and white logo, the Coca-Cola cursive logo.
Brittany: Exactly like that is Coke. Right? And they were so smart that they actually etched the logo in their bottles. And I believe they still do it. I don’t buy a lot of the glass bottles anymore because I don’t have to they’re in plastic. But as one historian described in this documentary, and I’ll link to that in the show notes, is that they actually etched it in the bottle. So even if you were blind, you knew when you were buying real Coke because all these new competitors came on the market and they’d call themselves like something so similar like Coca-Cola with K’s or, you know, just something, just different enough. But people were being tricked. Now, one thing, and we haven’t talked, you and I have not talked about this, but I’m pretty sure I know where you stand on this. Connor and I have talked about intellectual property a lot and how we’re not. Huge fans, But one thing Coca-Cola was pretty bad at was Trade secret which is a kind of, intellectual property. And they were so protective over their ingredients. They kept the, on one piece of paper behind like a bank vault, like one of those big bank vaults, you see, like with the spinning thing. Like that’s how protective they were about it. Yeah. It was pretty crazy. So while all this is happening, Coke is, you know, doing great. They’re controlling the market. All of a sudden, 19 or 1898 rolls around New Bern North Carolina. This guy named Kayla Brannan invents another cola called Brad’s Drink. And the town loved it.
Emma Phillips: That Brad.
Brittany: His name was even Brad, always so
Emma Phillips: Funny. Always, making his knockoff Colas. That’s interesting. Well, because of the caffeine in both drinks, Coke was marketed as a revolutionary medicine and there were ad campaigns telling people it was good for them to drink. And Caleb, who was a druggist or a pharmacy soda store marketed his drink as a treat and more of an indulgence, so a refreshing drink that may have health benefits. And in 1902 it became Pepsi-Cola. And then by 1907, Pepsi had sold a hundred thousand gallons of syrup with 300 bottling plants in 24 states opening in just a few years. So soda flavors, you talked about this earlier, Brittany, are just syrup added to soda water. Yep. So at first, they were just shipping the syrup, and that’s why the bottles were such a revolutionary innovation.
Brittany: Exactly. But one thing, so syrup is made out of pure sugar. So then World War I happens, and sugar, the price of sugar just went skyrocketing. And one thing led to another, and Pepsi-Cola actually had to shut down. But here’s where the fun part comes around because here’s where the battle begins. So prohibition, that’s when the government banned alcohol. I think Connor and I have talked about that in previous episodes. So that led to a rise in Coca-Cola sales because people wanted something to drink and they couldn’t get alcohol. And so, Coca-Cola was filling that void. And so Coke, I think was, had 23 million dollars in 1923. So today that would be 354 million that they were making a year. And I mean, that’s not a bad chunk of change.
Emma Phillips: No kidding. Yeah. And this soda shop owner comes along demanding that Coke gives him a discount because of how much he was selling. And Coke said no. And he was so mad he went and bought Pepsi while it was struggling, and it didn’t turn out so well because Pepsi was on the brink of bankruptcy again. So the owner goes back to Coke and says, Hey, my bad, this was a terrible plan. We wanna buy Pepsi and Coke said no. And they thought that Pepsi was a worthless product, and that would’ve ended up being a huge mistake.
Brittany: What’s funny is this also ended up happening with Blockbuster and Netflix. And I know our audience, a lot of them don’t know what Blockbuster is, cuz they don’t have rental stores anymore. I think Connor and I have talked about it, but, Blockbuster had the opportunity to buy Netflix and said, no. And that’s what happened here, where Coke actually had the opportunity to buy up their competition and then we wouldn’t have had any of this, but they said no. so it’s just so funny to me, but one thing that I love about competition is when someone ever like doubts me or tells me what I can or can’t do, I end up trying harder. Right? Because you kind of wanna prove like, no, I can do this. And that is exactly what happened with Pepsi. So he was so angry. The guy was so angry, and I can’t remember his name, I’ll put it in the show notes at Coke that he’s like, no, like, we’re gonna, get through this. So here in America, we’re in the middle of the Great Depression. Everyone is struggling. I think it was a nickel for a six, an ounce bottle of Coke, which was pretty expensive back then. so Pepsi starts recycling old 12-ounce beer bottles and putting its own cola in them. So they were recycling essentially but they start selling theirs for a nickel. So you’re getting double what you were getting. So then Pepsi starts, you know, their stock starts storing and soaring and people start buying more of them. So they went from being in the brink of bankruptcy to then making a hundred thousand dollars in profit. Now, still, nowheres biggest as Coca-Cola was, but they were like nipping at their heels, right? So Coke is finally starting to get nervous and starting to take Pepsi seriously.
Emma Phillips: Yep. And then World War II comes along and the government imposed sugar rationing, which meant that people could only use so much sugar because there was a limited supply of it. So Coke’s sales were now cut in half. And to get around this Coke, of course, goes to the government. And it argued that this was a wartime necessity. People needed their Coke, and somehow the government agreed to this. And now silly, the Coke was I, yeah, very silly. The coke was exempt from rationing and supplying the soldiers with coke. And it became a symbol of patriotism and boosting morale to the soldiers. Pepsi was not so lucky. this is a great case of the government picking winners and losers. but Pepsi was a scrappy fighter since the guy owned a candy store, and he decided to start melting down his own candy to provide sugar for the syrup. And I really like the innovation in that. So now we’re in the fifties, Coke is the leader, but Pepsi is still around and Coke hates Pepsi calls it the imitator and P cola.
Brittany: Which I guess is an insult, like.
Emma Phillips: Yeah. I don’t know really what that’s supposed to be. Maybe insults were different in the fifties, but the problems for Coke came because they refused to change and innovate, and Pepsi had to stay alive and Coke didn’t. And eventually, it had to. So it invented Sprite and other flavors of stuff like Mountain Dew.
Brittany: Yeah. And so, then TV comes around, and this is huge, right? Because this is where we’re advertising starts to play a big role in everything. And, so Pepsi had become this nostalgic thing for World War II vets, right? Because they remembered that was the one thing they had connecting them to home. While they were overseas. They had this Coca-Cola, so Pepsi, so they’re not really relying on advertisements. So Pepsi ignored that market and they went after the youth. And this is one of, you know, the biggest tricks in the book. So Pepsi became about being young and hip. So now the young and hip kids, they were the ones who were unconventional. They were the ones that wanted to drink Pepsi. So Coke strikes back, and this is actually one of my favorite parts of the story. So they make what is now known as one of the most iconic television ads in marketing history. And I’ll link to it in the show notes, but it was a commercial called I’d like to Buy the World of Coke. And this is like the hippie era. So this is where you have, so it was all these like hippie kids of different nationalities from different countries and they’re all like holding hands and singing about how Coke is like bringing them together. And even though it was really genius at the time, Pepsi was still catching up.
Emma Phillips: They were, now it’s the late seventies and Pepsi launches the Pepsi challenge, which now sounds like something you could see on TikTok or something. But this was back in the seventies, this was long before that was a thing. And people did blind taste tests with Coke and Pepsi throughout the challenge. And people were asked to choose between the two. And it was a blind test, so they couldn’t see what they were drinking. And they almost always chose Pepsi. Now Pepsi is less than three percentage points away from Coke’s market share, which is how much of you know the market of cola drinkers Coke is selling to. So Coke goes from being hesitant towards any innovation to being so scared of Pepsi, it decides to change its entire formula to make it taste more like Pepsi. So Pepsi had coke pretty scared. But here’s the thing. With any product, you’ve gotta figure out what works and stick with it and what doesn’t work and innovate. Coke learned this lesson the hard way in the eighties.
Brittany: Yes. And this is hilarious to me. So people hated new Coke so badly. Like there was like civil unrest, people were flooding, phone lines calling, there were protests, like, in front of buildings and it was crazy. So people were furious about this. They hated new Coke so much that this was like the main news story for months that people were just like, what are we gonna do? We hate new. And of course, Pepsi’s benefiting in the meantime. But here’s where I actually think, even though I’m a Pepsi girl, here’s where I think Coca-Cola was pretty genius. So realizing they had messed up, they quickly rebrand. And so what they did is they went back to the original formula and they called it Coca-Cola Classic. Now if you go buy one of the red ones, not like Diet Coke, you’ll see it says Coca-Cola Classic. So they kept that branding. And Connor, and I’ve talked about nostalgia and how people love nostalgia on a previous episode, and that’s kind of what it did. And people were just so glad to be rid of the old flavor. So sales so sort again. And some people actually think that the whole formula change was like done on purpose. Like it was like some, some, you know, insider thing to boost conspiracy sales, but they, yeah, conspiracy Koch denies that. But what I think at the bigger lesson here is they failed and they learned from their faults. And, what’s crazy about this is a war that’s been going on for a hundred years. It’s still kind of going on, but I love it because consumers have just been along for the ride and we’ve just kind of been benefiting from all the different things. But I don’t know. Emma, do you have any closing thoughts?
Emma Phillips: Yeah, I mean, I think when there are different brands competing for our business, competing for our attention, even when you look at entertainment and different products that are on the market beyond just stuff you can drink, it’s good for consumers. It means things are cheaper, they’re better. When companies are competing with each other, the consumers are the ones that really win. So it’s exciting to see an example of this and now I know why my dad is so obsessed with Coca-Cola classic. He always calls it Coca Classics and when he orders it. So now I know. Thank you for, talking through that with us, Brittany. And of course, you guys can find the show notes at our website, Tuttltewins.com/podcast. You can check out some of the stuff that we referenced here. And until next time, we will talk to you guys later.