The cola wars between Coca-Cola and Pepsi have long defined the global soft drinks industry. The two market leaders have continuously reshaped the carbonated drinks business through product innovation and marketing, leading to intense competition and unusually high levels of brand loyalty.
However, digitisation and changing consumer preferences are leading to structural shifts in cola carbonates, setting up a new showdown between the market leaders as they need to rethink where and how to play.
E-commerce gains strategic importance amid shifts in traditional cola consumption
Improving health consciousness and price inflation are impacting traditional cola consumption. Global off-trade value sales of cola carbonates are expected to grow by 4% during 2024, following 10% growth in 2023. Volume sales decline in several mature markets is a key factor contributing to this slowdown in value sales growth.
Capturing consumers’ attention and identifying the moment of purchase are becoming even more critical for cola brands to retain brand equity
Source: Euromonitor International
In light of this, the retail e-commerce channel is becoming more important. During 2023, global e-commerce penetration of carbonated drinks reached 5%, rising from 4% the previous year. Cola carbonates accounts for more than half of global carbonates sales. According to Euromonitor International’s E-commerce system, which tracks brand- and category-level data across 300 retailers in 15 leading e-commerce markets using advanced analytics, online sales of cola carbonates grew by an average of 28% during 2023 across the markets covered.
In addition to e-commerce’s growing importance as a purchase channel, its influence on online-to-offline sales conversion is increasing as more consumers use digital platforms to research food and beverage products.
New shopping behaviours lead to new cola distribution and sales strategies
As more consumers purchase beverages and other groceries online, Coca-Cola and Pepsi have both recognised that online purchasing habits translate into different consumer expectations. Consumers often prioritise convenience, opting for bulk purchases and subscription models that allow beverages to be delivered to their doorsteps regularly.
Traditionally, both Coca-Cola and Pepsi’s distribution networks utilise direct store delivery, partner warehouses and other third-party distributors, including wholesalers. However, due to the growing relevance of e-commerce, both players have enveloped a wider range of stakeholders.
This adaptation, though, is not straightforward.
Varying levels of digitisation and e-commerce infrastructure across countries necessitate adopting unique go-to-market e-commerce strategies and working with different business models to offer a unified brand experience
Source: Euromonitor International
For example, while grocery players account for the majority of cola carbonates e-commerce sales across the US and UK, third-party delivery players such as Instacart are stronger in the US.
Playing the long game through direct investment in digital platforms
Coca-Cola and Pepsi are developing exclusive partnerships and embracing digital transformation to stay ahead of the shifts, with both investing in on-demand delivery and direct-to-consumer (DTC) platforms. For example, Coca-Cola bought a stake in delivery platform Zomato and food delivery start-up Thrive in India during 2023. For its part, Pepsi invested USD175 million in Instacart, the US’s biggest third-party grocery delivery platform, in 2023.
E-commerce is emerging as the go-to channel for exclusive product launches
Powered by digital marketing, e-commerce has become a channel for exclusive product launches. Coca-Cola has actively used this strategy. In 2024, for example, the company launched Happy Tears Zero Sugar, exclusively sold via TikTok in the US and UK. Such digital-first approaches are leading cola brands to attract new audiences and maintain relevance, particularly among Gen Z consumers.
Apart from exclusivity, companies are prioritising launching products first on e-commerce. Carbonates saw the second highest number of new product launches online among all food and beverage categories in the US in both January 2023 and July 2024.
Brand loyalty is becoming more important, giving Coca-Cola a significant edge
Coca-Cola continues to maintain its dominance in the online cola wars. Not only does it continue to benefit from greater brand loyalty as consumer trust boosts online sales, but it has also developed stronger network relationships across markets. While Pepsi is also active in digital engagement, Coca-Cola has better harnessed digital share of shelf through an effective digital commerce strategy.
Digital-first strategies empower consumer-centricity
With e-commerce enabling brands to gather valuable consumer data, both Coca-Cola and Pepsi are personalising shopping experiences through targeted marketing and price promotions. For example, Coca-Cola has actively leveraged consumer data and artificial intelligence for product innovation.
Additionally, social media and user-generated content are redefining marketing strategies, with marketing budgets shifting to develop an early presence in virtual spaces and both companies venturing into Web 3.0 marketing. Following an NFT launch on Decentraland, Coca-Cola launched its Masterpiece digital art collection in 2023 on Coinbase. Likewise, Pepsi has embraced Web 3.0 marketing through its own metaverse space, the Pepsi-verse, and the Play Pepsi Concept Store on WeChat to drive community engagement.
As digitisation and emerging technologies take the cola wars into digital frontiers, cola brands must strive to win by capturing greater consumer loyalty and attention. Providing more dynamic experiences that go beyond selling physical products is inevitable.
Read our report, E-Commerce in Soft Drinks, for more analysis on the performance of soft drinks online, development in functional categories, and e-commerce-led disruption in the industry.
You can also read our report, Mastering E-Commerce: Leveraging Category Nuances to Unlock Growth, to understand these developments in the beauty and personal care, consumer health and food industries.