London, 24 August 1998 (RFE/RL) -- Coca-Cola has stolen an advantage on its arch rival, Pepsi, by winning the largest share of sales in the Central Asian and Caucasus countries, regarded as one of the fastest growing soft drink markets in the world.
Far more people are drinking Coke than Pepsi in three countries of the region, Azerbaijan, Kazakhstan and Kyrgyzstan, as well as in southern Russia, following a drive by a Turkish-owned beverage group to set up a big Coke production and distribution network.
A report by a Japanese research company, Daiwa Europe, notes that producers and distributors of two of the world's most popular soft drinks are showing intense interest in the new markets of the former Soviet Union and Eastern and Central Europe.
This is because they are forecast to experience a period of "super growth" as consumers abandon local beverages and take advantage of rising real incomes to buy internationally known branded drinks.
Already, the increase in consumer demand for soft drinks has outstripped growth experienced by most other sectors, and the size of the soft drink market has risen dramatically across the region.
In Bulgaria, soft drink consumption per capita has risen five-fold from 10 to 55 liters over a five year period. In Romania, per capita consumption has risen from 10 liters in 1991 to 25 liters in 1995.
Internationally branded goods start at a disadvantage as they are usually more expensive than local products and consumers are highly price-sensitive. But this applies less to low cost products such as soft drinks. In Bulgaria, Hungary and Uzbekistan, the combined market share of Coca-Cola and Pepsi exceeded 90 percent of the soft drink market shortly after they appeared on the scene.
The new eastern markets are attractive to Coca-Cola and Pepsi because their potential is enormous. One of the big potential growth areas is in branded sparkling water which is in much in demand in a region with insufficient or poor quality drinking water.
The global soft drink market reached 30,000 million cases in 1996, of which 60 percent of sales was generated in north America, western Europe and Japan. Consumers in these regions drink 150 liters per capita -- meaning that room for further expansion is limited. In the rest of the world the figure is only 30 liters per capita, presenting soft drink multinationals with a major sales opportunity.
Pepsi targeted east European markets after the 1989 fall of the Berlin Wall, and expanded vigorously into the region. But Coca-Cola only later expanded into the CIS region with an investment plan of $1.5 billion for 1990-1995. Initially, it expanded after reaching franchising deals with Ukrainian, Russian and Armenian concerns.
Coca-Cola then decided to enter the markets of the Central Asian republics via a Turkish company, a decision dictated by common language ties, religion and culture of Turkic and Turkish people. It chose as a partner the Anadalou Group, a major industrial concern, whose division, the Efes Beverage Group, already had an efficient distribution network in Turkey's brewing and soft drink market.
Efes Invest now holds majority stakes in four Coca-Cola bottling plants in Kazakhstan, Kyrgyzstan, southern Russia, and Azerbaijan, for the production, bottling and distribution of carbonated beverages under the Coca-Cola trademarks. It is to open another subsidiary in Turkmenistan. (All these companies are owned jointly by Efes Invest, Coca-Cola and a local partner). The Daiwa report says Coca-Cola last year had a 29 percent share of Kazakhstan's soft drinks market (Pepsi 10 percent), 36 percent of Kyrgyzstan's (Pepsi 5 percent), and 45 percent of Azerbaijan's (Pepsi 5 percent).
But the Daiwa report also said that Pepsi is likely to expand its activities in the region, marking another stage in the fierce rivalry between makers of two of the world's best-known soft drinks.