Coke and Pepsi square off in 'diet-cola wars'
The nation's two largest soft-drink manufacturers, Coca-Cola Company and PepsiCo, have begun another round of ''cola wars.''
This week, PepsiCo, the No. 2 soft-drink producer, has introduced a 99 percent caffeine-free version of its cola. And Coca-Cola, at a news conference in New York, has introduced ''diet Coke.'' Since both companies expend considerable time and money to market their products, analysts expect this round of the cola wars to be waged extensively in the national media.
Coke and Pepsi, which account for well over 50 percent of all soft drinks sold, have been almost continuously battling for the competitive edge. Pepsi has steadily been gaining ground on Coke, and Pepsi's advertising campaign promoting its ''taste test'' has made some dents in Coke sales.
With the introduction of a nearly caffeine-free cola, Pepsi will now go head to head with Seven-Up, a division of Philip Morris, which recently has been promoting the absence of caffeine in its soda. This promotion has benefited Seven-Up, comments Arthur Kirsch, an analyst with Drexel Burnham Lambert Inc., a brokerage house. Seven-Up increased its unit sales by 5 to 6 percent since its advertising campaign began, Mr. Kirsch notes, adding that in the past, Seven-Up hasn't shared the growth of the soft-drink market. In fact, Seven-Up advertising prompted Pepsi to complain that Seven-Up was misleading consumers about the effects of caffeine.
However, at the introduction of its new product, called Pepsi Free, Pepsi's president and chief executive officer, John Sculley, said, ''Research indicates that consumers are very interested in a caffeine-free cola, however, they are not willing to trade off taste for the caffeine-free benefit.''
Coke, for its part, has decided to introduce a diet soda that will compete with Tab, its own sugar-free soft drink, and with Royal Crown's RC 100, which now accounts for some 25 percent of the bottler's sales.
At its press conference in New York, Brian G. Dyson, Coca-Cola USA president, said Coke had decided to enter the diet market because it is the fastest-growing segment of the soft-drink market. Diet sodas, he said, are growing at three times the rate of the rest of the industry, and now constitute 18 percent of total soft-drink sales. Coke's market analysis indicated that diet soda's share of the market could double by the 1990s. Mr. Dyson also said Coke would begin its own version of a caffeine-free cola ''when we determine the time is right.''