Cola war revival

The decades-old cola war that has seen Coca-Cola Co. and PepsiCo Inc. square off in supermarket aisles, restaurants and corner stores around the world saw a historic twist last week. Diet Coke overtook Pepsi as the second-most widely sold carbonated soft drink in the U.S. market, just behind regular Coke, according to industry figures. Diet Coke and Pepsi have each accounted for almost 10 per cent of U.S. sales (compared to 17 per cent for Coke), but in 2010 Pepsi-Cola sales slid back nearly five per cent, propelling Diet Coke up to the coveted second place, according to Beverage Digest, a trade publication.

The historic shift comes at a difficult time for the cola industry. In North America, sales of soda have been declining since the mid 2000s. Pepsi and Coca-Cola have long been retooling their arsenals, loading up on products that appeal to a health-conscious public like teas, energy drinks, and bottled water. Pepsi has invested heavily in Gatorade, while Coke owns numerous non-carbonated brands, including Vitaminwater and Minute Maid.

But neither side is giving up on cola just yet. Coke has been marketing heavily on television shows like American Idol and with commercials during the Super Bowl. And its efforts earned it an endorsement from long-time investor Warren Buffett, who told stockholders that dividends from the Atlanta-based company could “double within 10 years”—a rare prediction from the chairman of Berkshire Hathaway.

Pepsi, meanwhile, has been focusing on a hard-nosed marketing makeover of its cola brand. Last year, the company devoted the $20 million it usually spends for advertising on the Super Bowl to set up an online charitable initiative—a noble move, but one that analysts suggest didn’t help sell soda. This year, the brand that once counted Michael Jackson as a pitchman plans to spend 30 per cent more on television ads in the U.S., including $59 million to sponsor the television talent show The X Factor, reports the Wall Street Journal.

Coke may have won the latest battle, but the cola war is far from over.