Coca-ColaWhat could be more American than the Cola Wars? Played out in ads and price-chopping contests, Coca-Cola (KO) and PepsiCo (PEP) have been at it for decades. Pepsi's latest offensive: The brand declared summertime as "Pepsi time" with ads released at the end of June showing Santa and Mrs. Claus, the Coca-Cola icons, boogying down at a tropical locale and drinking...what else? Pepsi, because they are "on vacation."

Even as the two brands fight to differentiate themselves by taste, demographic and even season, at least one thing remains pretty much the same between the two: price.

The exact cost of soda varies widely from store to store, and depends greatly on packaging, location and promotions. Take a 12-pack of 12-ounce cans for Coke (144 ounces), which sells for $8.00 on Amazon.com. A similar package of Pepsi is priced at $8.25. Yet a 2-liter bottle of Coke costs $1.79 on online grocer FreshDirect.com, while Pepsi comes 10 cents cheaper at $1.69. For Coke Zero drinkers in the heart of Manhattan, a two-liter bottle at a local grocer costs $2.89.

Prices Edge Up as Ingredient Costs Grow

Both brands enacted modest price increases around the same time last month, and will likely keep their prices relatively similar for the foreseeable future. Both brands cited the rising costs of the commodities used to produce their beverage portfolios, including sugar, corn, oil and aluminum.

"We achieved 1% to 2% positive retail pricing in the [second] quarter and remain committed to achieving 3% to 4% retail pricing in the second half of the year to help offset higher commodity costs," Coca-Cola said in its earnings press release in mid-July.

PepsiCo also raised prices in July after having announced the coming hikes back in April.

How will those price bumps get passed on to consumers? It is too early to tell, says John Sicher, publisher of Beverage Digest. Price markups could show up in a number of ways and it's hard to decipher where it's happening, he says. It could manifest in a few pennies for special packaging or various other promotional tools and distribution channels.

"The price increases get implemented in careful and complicated ways," Sicher says.

Should Coke Raise Its Prices Even Further?
If Coca-Cola cost 20% more than Pepsi, would you switch brands?
Yes1176 (39.7%)
No1293 (43.7%)
I already drink Pepsi.491 (16.6%)


One pricing strategist argues that Coke, as the market brand leader in North America, should actually move its prices even further north and price itself much higher than Pepsi, which has experienced declining demand. Rafi Mohammed, author of The 1% Windfall and The Art of Pricing, says Coke's brand strength -- along with its success in expanding into products such as Coke Zero, released in 2005 -- is an undertapped opportunity for investors.

In 2010, the Coke brand ranked No. 1 in market share (17%), followed by Diet Coke (9.9%), Pepsi-Cola (9.5%), Mountain Dew (6.8%) and Dr. Pepper (6.3%), according to Beverage Digest.

"There is room to premium price it over Pepsi," Mohammed says. A stronger pricing strategy for the 125-year-old brand would take better advantage of its market position, he says. A premium price may not be appropriate for Coke Classic, he says, but could work for Coke Zero. "It's about capturing the value of a product relative to the customer's next best offer," he says.

Coca-Cola historian Mark Pendergrast disagrees. He is the author of For God, Country & Coca-Cola. The price battle between the two soda titans stretches back to 1950s, when Pepsi -- until then considered something of the underdog beverage -- became a real value challenger for Coke, selling more volume for the same price.

"For many years [Coke] had resisted matching prices," Pendergrast says, "but as the market grew and challenged Coke, [Coca-Cola] realized that they were in real battles."

Since that time the prices have moved in tandem. "Coke is still number one in U.S.," he says. "They need one another and they do move in tandem and it would surprise me if one went out of line. It used to be that people were totally devoted to one, but now [consumers are] not so brand devoted."

Risk of Soda Sticker Shock

The fear is, of course, that soda drinkers would switch allegiances or just stop buying as much of the carbonated stuff. Prices for soft drinks are very sensitive, so any price bump could have a dampening effect on volume, Sicher says. When the two cola makers raised their retail prices in 1999, consumers responded by buying less.

This year, the CEOs of both companies have voiced the need for caution when it comes to pricing. "In the case of beverages, we have to be a lot more careful," Pepsi Chief Executive Indra Nooyi told The Wall Street Journal. "There are alternatives where you can start trading down. You can go from packed beverages to, first, bottle water, then to tap water."

Coca-Cola CEO Muhtar Kent defended its pricing strategy at an investor conference in June: "We are selling moments of pleasure at a sensitive time."

Catherine New is a staff writer for DailyFinance. You can reach her at catherine.new@huffingtonpost.com.


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104 Comments

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Ron

I stopped drinking soft drinks and any caffine 4 months ago. lost a large tummy in the process, and feel bettter than in years. Everything is much clearer. now let me make one thing clear to you. drinking caffine free sodas will not make any difference for several reasons. 1 they are about as caffine free as i am a goat . i went to so called caffine free drinks for 3 months. experiemced no withdrawals. i quit caffine free and had the worse headache in years for 2 days.carbonated water damages yuor bones at any age but is clearly harmful on babies and minors to the extent they cannot recover fully after a few year sof use. the medical industry(doctors,druggist, researchers, hospitals), businesses like holdsalers, retailers like walmarts ar equiet on the subject of the dangers of soft drinks,and snacks with caffine ,corn syrup, and carbonated water due to the huge profit they all realize

August 21 2011 at 10:02 PM Report abuse rate up rate down Reply
Ron

Here u see coke and pesi taking turns at walmarts, and other stores selling 24 12oz cans for $5.98 to $6.98. the average price is about $.60/.$75 in convient stores. 12 packs pf 12 oz cans can be brought for $4.80 abnout anywhere.
But the big story is how long is america and the world going to allow the world's two biggest drug dealers to florish.caffine, and corn syrup is distroying health and endangering people to the poing of death somewhere every day.caffine in the form put into drinks/snacks is very habit forming and and leads to futher addiction to other drugs down the road. the corn syrup is responsible for most obesity, and nearly every form of bad health . Children and adults are getting so addicted to the drinks that many are downing 10/15 aday. i see people at work gusslin down 2 to 5 pesi a day at lunch and break t ogeather. Some of them have quit but ended up ging bakc tio the cyrupy crap after i sip and getting even more hooked. caffine is taseless, oderless, and has no use other than to addict yuo to it. It's the worse over the counter drugs uin history and should not be allowed to be sold to minors. eventually the american people will tell the doctors, druggist, and cola companies ot go to hell and rid it from their children.

August 21 2011 at 9:55 PM Report abuse rate up rate down Reply
Travis Zepp

who are the wackjobs paying $8 for a 12pk of Coke? It goes on sale every few weeks for $2.50/12pk

August 20 2011 at 5:02 PM Report abuse rate up rate down Reply
1 reply to Travis Zepp's comment
hgeorgech

exactly! probably the same morons who pay $1.50/bottle for filtered tap water!

August 21 2011 at 11:10 AM Report abuse rate up rate down Reply
TheTotal Creation

Stop drinking High Fructose Corn Syrup people. It's horrible on your body and you will get diabetes from it if you drink enough of it on a daily basis. I was borderline diabetic until I got off this crap. I shed pounds like nobodies business too.

And if you switch to juice a lot of it can be deceiving. Look at the ingredients list, if you see high fructose corn syrup put it back on the shelf. Dole makes some great juices that are sweet without that horrible horrible ingredient.

August 20 2011 at 3:10 PM Report abuse rate up rate down Reply
hello

Coke and pepsi may raise their prices but it will just end up losing because more and more people are forgoing a drink of soda for more healthy options....... even making their own juices by juicing veggies and fruits. Its cheaper and taste better and is better for you! I for one stopped drinking soda pop now going on 5 years, because it just made me sick... it smelled like paint after drinking fresh fruit juices that I made myself. And I am healthier for it. I challenge anyone whose a diabetic to get off the soda pop and junk and you will be able to drink real fruit juices! I do. And I am no longer a diabetic. I am now able to eat fruit and juices with no increase in my sugar! and my weight is stabilized! Getting rid of the soda pop is what started me on the road to getting healthy! Go ahead Pepsi and coke raise your prices, see if I care! WONT!

August 19 2011 at 8:11 AM Report abuse rate up rate down Reply
hello

Nows the ebst time to buy any appliance, house, car etc, so why are people holding onto their money? If they do it wont be worth much in the long run! I am spending mine now!

August 19 2011 at 8:05 AM Report abuse rate up rate down Reply
hgeorgech

Coca Cola .. or any other company .. is fully within their right to raise, lower or keep their prices where they are. What is so unique about Coke (KO)??

Hasn't anyone noticed the incredible "shrinking container" sizes of tuna, ice cream, coffee, crackers, snacks, etc., etc over the past months/years? Is that OK .. or even much worse? How about the $3.60 - $3.90 loaves of bread? Is that OK?

Consumers have the choice: either buy the product, select a (lower priced) competitor's product .. or walk down the isle and avoid the item - period!

August 19 2011 at 7:43 AM Report abuse +1 rate up rate down Reply
jazzyg410

Personally I couldn't care less if they raised their prices.Neither one is getting my monies when it comes to sodas.I personally don't drink them. Besides there's nothing like a good old cold glass of iced H2O.

August 18 2011 at 5:44 PM Report abuse +2 rate up rate down Reply
Robert Catroneo Jr.

Coke has to learn how to purchase better. We have been trying to sell them a new Lubricant that will save them millions per year. Their purchasing people refuse to look at it because we are not a large multinational supplier. They are purchasing over priced old technology and will not even look at new technology. Imagine how much monies they are wasting by staying closed minded to new technologies. Millions a year in lube a year. These people should look at what they are wating instead of constantly increasing prices.

August 18 2011 at 4:35 PM Report abuse rate up rate down Reply
Gumby

You dont need to raise prices of coca cola but you need to raise aluminium prices which is too low as ocmpared to copper and gold! aluminijm prices is lagging behind way back !

August 18 2011 at 1:21 PM Report abuse -2 rate up rate down Reply