German Unification Creates New Ground For Coke and Pepsi Battle
ATLANTA (AP) _ A flash point of the Cold War has become a focus of the cola wars.
Since the Berlin Wall opened last year, Coca-Cola and Pepsi-Cola have spent millions of dollars trying to establish a presence in what was formerly East Germany.
Pepsico Inc. representatives, with television cameras rolling, handed out cans of Pepsi when the wall was dismantled. And when East Germany allowed advertising on national TV for the first time this spring, a Coca-Cola Co. spot was among the first to air.
″The first unification of Germany was soft drink unification,″ said Emanuel Goldman, an industry analyst for PaineWebber Inc. in San Francisco.
The cola makers are concentrating now on building a distribution system and inching toward full-scale manufacturing in the region, which for nearly half a century was closed to most Western products.
The companies also are moving along with the type of aggressive public relations and advertising that have characterized soft drink competition elsewhere for decades.
Already, Coke says it is outselling its nearest competitor 10-to-1, a contention which Pepsi dismisses.
Atlanta-based Coke, which has a bottling operation running in what was East Berlin, says it has sold 7 million cases of Coca-Cola products since entering the former Communist country in February. Pepsi, a division of Purchase, N.Y.-based Pepsico, entered the new German market in January, but says it does not yet have reliable sales figures.
″Either side is guessing. It’s a little too early in the game,″ said Tod MacKenzie, a Pepsi-Cola spokesman. ″There’s no independent measurement (in the eastern sector) to represent what your share of the market is.
″We can say we shipped so much, but that’s not a measure of consumer take ... just how much we sent out the door.″
The soft drink makers say they’re expecting great things in the newly united Germany. That assessment is shared by analyst Goldman.
″It’s good for both companies,″ Goldman said, adding that Coke begins with a head start because of the commanding presence it had in West Germany and most of Europe.
″We think East Germany ... will reach the consumption levels of West Germany in the next few years.″ Ralph Cooper, president of Coke’s European Community Group, said in a recent interview. ″We think that’s a very achievable target.″
″Nearly 70 percent of the people have tried Coca-Cola in the first months,″ said Cooper, whose division accounts for about one-quarter of Coke’s international sales.
According to Coke, East German soft drink consumption in 1989 was 315 eight-ounce servings per person, compared with 334 in West Germany. West German consumption of Coke products was 167 eight-ounce servings per person in 1989, and company officials estimate that East German per capita Coke consumption is now about 30.
In the United States - the world leader in soft drink consumption - the per capita rate for Coca-Cola products was 283. Coke is the No. 1 soft drink company in the United States, with about 41 percent of the domestic market, though most of the company’s recent growth has come overseas.
Pepsi’s per capita figures were unavailable.
Goldman said it is easier for Coke to get established in the new market because it literally can move its West German operations next door. Pepsi has a much smaller operation there, about one-fifth the size of Coke’s, he said.
″For Pepsi, it’s good,″ he said. ″For Coke, it’s spectacular. They know how to sell it there. They know the whole market there.″
Pepsi, however, says its strong presence for nearly 20 years in such Eastern bloc nations as the Soviet Union, Poland, Yugoslavia and Czechloslovakia gives it an advantage.
″Pepsi’s historical leadership position throughout the Eastern bloc has provided significant leverage to power us into the East German market as well,″ said MacKenzie.
Pepsi’s initial activity in eastern Germany has involved building a distribution system across the key southern commercial belt, which includes Leipzig and Dresden. Manufacturing is still down the road for Pepsi, MacKenzie said.
Coke has concentrated its efforts on distribution, but it also is creating an infrastructure for manufacturing, bottling and sales, Cooper said.
″We want to be a part of everyday life there,″ he said.
Cooper said the company tapped into its West German operation for help on the other side of the border once the wall opened.
Coke has plastered cities with advertising posters and has sponsored a number of local events. Pepsi put up a 40-foot permanent billboard on a major thoroughfare in East Berlin and advertises on public transportation.
″It’s amazing how quickly a consumer open goods market has taken over there,″ MacKenzie said.
MacKenzie said Pepsi also has tried to respond to the Germans’ heightened environmental awareness by offering its products in recyclable plastic bottles.