Cola Wars

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Q3. What are one or two key challenges that Coke and Pepsi will face in the coming years?

Answer: Though Coca-Cola and Pepsi have been ferocious competitors for more than a century, but it is this very competition that has made both the companies stay on their feet and deliver their best. Both have to face the challenges that a carbonated soft drinks manufacturer faces in different geographies and economies. Two major challenges that loom over the carbonated soft drinks industry in the future are as follows:

- Healthier Substitutes: As the consumer becomes more inclined towards adopting a healthier lifestyle, the inclination to buy a carbonated soft drink goes down. To motivate, a lot of researches, findings, studies, etc. have deemed the carbonated soft drinks unhealthy due to the high sugar levels and chemicals used. The consumer is moving towards healthier and fresher drinks such as green tea, infused water, fresh fruit shakes and juices. All these options, which are natural in nature and contain healthy mixes of vitamins, minerals and no artificial sweeteners, are a big threat to the carbonated soft drinks in the future. Carbonated drinks being the core competency of these two companies, the shift in trend caused them to start other lines such as lipton, Tropicana, etc causing changes in operations, distributions, marketing strategies etc.

- Growth and Expansion: Though a lot of countries have a lot of potential for growth, a lot of countries have mature markets. So in order to grow and expand, concentrating on growing markets is important and to cater to the growing markets, both the companies need to set up plants at more locations. These days it has become difficult to acquire land to set up plants and it will keep getting so. A lot of environmental concerns about setting up plants make it difficult to have manufacturing units at strategic locations. For example, Coca-cola is setting up a plant in Sri Lanka to cater to the demand of India; this increases the costs a lot for the company. Such issues will only increase in manifolds with time making it difficult for both the companies to grow as desired.