What do these two characters have in common?
by Harry Evans at 7IM
The answer is that both work for Pepsi*.
Which might be a bit surprising, because we most often think of Pepsi as a worse/better alternative to Coca-Cola (delete as appropriate, we don’t take sides).
Both Coca-Cola and Pepsi have similar origin stories as drinks created by drugstore owners in late-1800’s America, which spread across the country and the world, competing all the way.
Now, when it comes to the cola wars, Coca-Cola has basically won. It’s the most popular soft drink on earth, and as we mentioned a year or so ago, Coca-Cola is the second-most understood word in the world, after “OK”.
As of 2024, Americans even drink more Dr. Pepper (also created in a US drug store at the turn of the century!) than they do Pepsi. Brutal.
But! That’s where it gets interesting (in investment terms).
Where Coca-Cola is all about drinks, PepsiCo isn’t just in the fizzy drink business.
It owns Walkers (hence Gary), and Quaker Oats, as well as Doritos, Tropicana and the Starbucks cold coffees. There are also dozens of other brands which would be instantly recognisable if you live in Mexico, or South Africa, or Indonesia.
In the last twelve months, Coca-Cola made sales of about $45 billion. PepsiCo doubled that.
Coca-Cola does one thing better than anyone else. PepsiCo does lots of things better than most.
The result?
If you stuck $100 into both companies 30 years ago, your Coca-Cola shares would be worth just over $1000, while your PepsiCo shares would be over $1800.
The beauty of PepsiCo’s business strategy is that it can deal with different states of the world.
While Coca-Cola was struggling with the tech bubble bursting (and the fall in US consumption), Pepsi was benefitting from the boom in Emerging Markets – particularly the rise of supermarkets stocking crisps, rice and porridge.
Coca-Cola focussed on winning the cola wars. PepsiCo built a diversified business. Whose shareholders are happier?
*An even better answer (although more difficult to put a financial spin on) is that both Gary Lineker and George Fox – founder of the Quakers – were born in Leicester!