There are few rivalries in business as fierce and long-lasting as that between Coca-Cola and Pepsi. For more than a century the pair have battled for dominance over the fizzy-drink business, using witty adverts, bold publicity stunts and new – sometimes disastrous – takes on their classic cola as weapons in the battle against each other.
There are few rivalries in business as fierce and long-lasting as that between Coca-Cola and Pepsi.
However, over time, the two have evolved into very different companies. According to Beverage Digest, a research firm, Coca-Cola’s various brands account for 17% of the U.S. soft-drink market, while Pepsi has 11%. But Pepsi now makes more than half its revenue from packaged foods, including brands like Lay’s and Quaker Oats. And unlike Coca-Cola, which moved its US bottling operations to franchising nearly a decade ago, Pepsi has continued to make its own drinks in its home market. However, all this may soon change, as the underdog embarks on an effort to make a difference, which depends in part on becoming more like his long-term rival.
The past few years have been much more bullish for Coca-Cola, whose market value has increased 23% since the start of 2023, compared to Pepsi, which has declined 15% (see chart). Pepsi’s troubles stem partly from the huge price hikes it implemented on its food and beverages amid a surge in inflation following the pandemic, which are higher than those of its competitors. This strategy has failed recently as cost-conscious shoppers have fled to new brands and retailers’ in-house options.
Pepsi is also suffering from the increasing health-consciousness of consumers. Disquiet over ultra-processed foods has been bad for the snack business, as has the rise in weight-loss drugs. Slimming drugs could also pose a problem for soda sales; According to consultancy AlixPartners, Americans who take them have reduced their purchases of soft drinks by about 7%. This puts Pepsi at a disadvantage compared to Coca-Cola, which has a wide lead in the sugar-free cola market: Americans consume about 2.5 times more Diet Coke than Pepsi. In the case of protein shakes, Coca-Cola also came into the market very early.
Pepsi received a blow in September in the form of a letter from activist investor Elliott Management, which had taken a $4 billion stake in the business. It demanded that Pepsi cut costs, trim its product line, focus on marketing its core soda line-up, and outsource bottling in the US, among other things. Although Pepsi thwarted the hedge fund’s attempts to gain a board seat, it agreed to various measures to appease Elliott, including lowering prices, discontinuing one-fifth of its snack brands, and closing some factories. Even underperforming labels, like Quaker Oats, may soon be sold. And although the company still seems lukewarm about stopping bottling, it is considering experimenting with doing so in some US states.
There are early indications that the change in strategy is paying off. On April 16, Pepsi reported that operating profit for the first quarter of 2026 rose 24% year over year, outpacing the 19% increase reported by Coca-Cola on April 28. There are fears that Pepsi may even be displaced by Dr Pepper as America’s second-largest fizzy-drink seller now shrinks. The $2 billion acquisition of Poppy, a popular prebiotic-soda brand, in May last year is also helping boost beverage sales. The battle between the two soft drink giants is not over yet.
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