Which Beverage do you Prefer, Pepsi or Coke?

Do You Know the Difference Between Coke and Pepsi?

Let the Cola Wars begin! Both of these companies have earned themselves immense amounts of brand loyalty over the years, and we're going to examine both Coke and Pepsi on a number of different criteria, before finally settling upon one empire to rule the kingdom of carbonated beverages! Welcome to WatchMojo, and in today's instalment of "Versus," we're going to be pitting two of the soft drink world's biggest rivals against each other once again for cola supremacy.

What to Know About Pepsi

Pepsi has always been the Apple to Coke's Microsoft, the Lyft to Coke's Uber. (Although that might not be fair. If Travis Kalanick had started Coca-Cola each can would cost five times as much in the summer and the company slogan would be "Coke: It would taste better if you smiled more.")

Still, there's no dispute that Pepsi was launched to directly compete with Coke.

Again, because people once got their soda and castor oil at the same place, Pepsi was invented by a pharmacist. Caleb Bradham created his product in New Bern, N.C., and labeled it, inventively, "Brad's Drink." Bradham later renamed the drink Pepsi Cola because he believed it helped with dyspepsia.

Then again, Pemberton naming his drink after its two main ingredients was hardly more inspired.

Pepsi's original formula used a variety of spices and flavors such as nutmeg, caramel, sugar and lemon oil to create what Bradham would later market as a "Delicious and Healthful" drink. In a moment foretelling the American marketplace to come, Pepsi was tangentially saved by Coke in the 1930s. After the Pepsi-Cola Company went bankrupt, it was bought by the Loft Candy Company, who brought Pepsi back to life because Coca-Cola wouldn't give them a discount on syrup.

Coke vs. Pepsi: Business Models

As a product, customers generally prefer Coke. The red can of cola is one of the most popular products in the world, in some places more common than clean water.

As a business, however, the market increasingly prefers Pepsi. It's not even close. At time of writing PepsiCo's stock sold for $117.09 against Coke's $49.83. The reason is diversity.

In recent years the American market in particular has trended away from sugary drinks like colas. Although both companies have long diversified into a wide range of other drink classes, such as juice, sports drinks and bottled water, many analysts particularly see the future in healthy drink classes. Pepsi is seen as having occupied that market more successfully than Coke with products like Lipton, Pure Leaf and its organic drinks.

More importantly, PepsiCo isn't just a beverage company.

Coca-Cola has made what's known as a "pure play" in drinks. The company has worked harder than Pepsi to establish a global brand, and has been far more successful in marketing its core product line (Coke itself).

On the other hand after its merger with Frito-Lay in the 1960s, Pepsi made a push into snack foods such as potato chips, oatmeal and (in more recent years) hummus. This is a market Coca-Cola hasn't entered at all.

This gives Pepsi two critical advantages over Coca-Cola. First, there's size. The snack food market is large and growing. In particular, it's growing much faster than carbonated drinks. As a result Pepsi has a much broader footprint than its rival, one which includes high-growth areas that Coca-Cola misses out on.

Second, Pepsi has what's known as "complementary" or "synergistic" business lines. Customers who buy snacks will often buy a complementary drink and vice-versa. In fact, frequently purchasing a drink or snack will inspire a consumer to buy the other even if they hadn't originally planned to. This allows Pepsi to convert many of its customers into double purchases with minimal overhead.

The upshot is that Pepsi's snack line has grown to a little less than half its total revenues, and its Return on Equity is more than 50% higher than Coca-Cola's.