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. Last Updated: 07/27/2016

Coke Fires New Salvo in Cola Wars

American soft drink giant Coca-Cola announced Monday an additional $100 million in planned investment in Russia and said it had finally succeeded in wresting the lead in the Russian soft-drink market from archrival Pepsi Cola.


Company officials made the announcement at the official opening of their newest Russian production facility, a $33 million plant in the central Russian city of Oryol, saying Russia was the largest country in the world where Coca-Cola had not been the market leader.


"Our investment in Russia is paying off in a big way," chief executive officer Roberto Goizueta said in a statement, adding that the $600 million the company had now pledged to Russia in the past five years had helped it catch up faster than anticipated.


Coca-Cola's announcement comes several months after Pepsi announced a five-year, $550 million investment initiative, which appeared aimed at recapturing the momentum in the $1 billion a year Russian soft-drinks market from its American rival.


Despite Pepsi's 20-year head start -- it was the first foreign consumer-goods firm to set up in Russia, in 1974 -- Coke had narrowed Pepsi's lead from an estimated four-to-one to less than two-to-one by last year.


Coca-Cola, which also bottles Sprite and Fanta beverages, claimed that the "most recent independent market reports" had revealed that its products represent 18 percent of soft drink sales in Russia and 51 percent of all international brands sold in the country. It outsold its nearest competitor by a margin of 1.3 to 1, it said.


Pepsi representative David Crawley, however, said his company was not overly worried by Coke's success in Russia. "We are the best so it's nice to see the competition stepping up their efforts to try and top us," he said in an interview.


Keith Hughes, a Pepsi spokesman in New York quoted by The Associated Press, disputed Coke's numbers, saying: "Coca-Cola must have a funny way of looking at the market." Pepsi holds 58 percent of the cola market and has a 2-1 edge over its nearest rival, he said, but did not cite figures for the overall soft-drink market.


The two corporate giants are fighting a global battle for market share, involving billions in investments and staggering outlays for advertisements and promotions to win the hearts and minds and throats of emerging markets.


Coca-Cola said it has already invested half of its planned $600 million and that the rest would come by the end of 1997.


Spokesman Randy Donaldson said the amount would be invested not only in building new plants but also in upgrading and modernizing existing facilities and in additional infrastructure to streamline distribution.One major project will be the company's bottling plant in St. Petersburg, which less than a year after opening is set for a $10 million expansion that will triple its output in the face of unexpected market demand.


"Trying to keep up with the market is just extraordinary," said Gary Wilson, general manager of the St. Petersburg Coca-Cola Bottlers plant.


A new production line and a doubling of warehouse space, to be completed next February, will triple the plant's capacity from its current level of 19,200 bottles per hour. The company plans to hire an additional 110 employees, bringing its total St. Petersburg work force up to 460.


With sales booming, Donaldson said there would be no significant changes in the company's advertising strategy.


"Our strategy worldwide is similar and as it seems to work very well, we see no reason to change it," he said in a telephone interview from company headquarters in Atlanta, Georgia.


Donaldson would not give an estimate of what Coke's market share would be by the end of the year, citing the "unpredictability" of the Russian market.


Neville Isdell, head of Coca-Cola's greater European division, said in the company statement that cola sales had boomed by 50 percent in the past year and it was "only a matter of time" before it became the top-selling soft drink in Russia.





-- Rachel Katz in St. Petersburg contributed to this report.