In the latest round of the cola wars, governance, not fizz, is separating winners from also-rans. A decade and a half ago, both giants brought bottling operations closer to their headquarters. Then their paths diverged. Coke refranchised, pushing distribution back to independent partners and focusing on brands and demand creation in Atlanta. Pepsi maintained most beverage distribution in-house, layering a capital-intensive network onto a company already managing one of the world’s largest snack operations. The performance gap that followed is less a marketing story than an incentives story.
Why Trucks Beat Slogans
Distribution decides whether an ad becomes a cold can within arm’s reach. Independent bottlers live and die by throughput, service levels, and display compliance; they are paid to move product, not defend a corporate org chart. That alignment speeds resets, sharpens promotional execution, and frees the brand owner’s capital for innovation and media. Pepsi’s argument for integration, faster launches and tighter control, has merit, but control tied to a large asset base can blunt incentives and slow cycles. Meanwhile, Coke flipped the equation, letting partners obsess about wheels while headquarters obsesses about demand.
The Numbers Sharpen the Critique.
The margin and share deltas have become too visible to ignore. Coca-Cola’s North America operations run at materially higher operating margins than Pepsi’s beverage unit, according to the Wall Street Journal, reflecting the benefits of an asset-light model and steadier, visible marketing. The brand scoreboard also indicates that Dr Pepper has edged past Pepsi in U.S. soda sales, and Sprite is pressing harder on the blue can, signaling that cold placement and zero-sugar trials are compounding where capital and attention are most focused, according to the Wall Street Journal.
Activism Meets a Conglomerate Discount.
Investors have noticed the sprawl. Pepsi’s revenue is nearly twice Coke’s, yet its valuation multiple trails the classic conglomerate discount. According to the Wall Street Journal, Elliott Investment Management’s $4 billion stake is a wager that pruning can unlock its value, including refranchising more beverage distribution, streamlining slower-growth food assets, such as legacy pieces of Quaker, and redeploying dollars into working media, equipment placements, and innovation where share is won. The action case is the arithmetic of returns and the evidence on the shelf.
What a Credible Fix Looks Like
The cleanest path isn’t a dramatic breakup. It’s a staged refranchising program and a disciplined simplification of the food portfolio. Start by expanding the share of beverage distribution handled by independents in waves, prioritizing geographies where service KPIs lag and third-party partners can move the fastest. Tie contracts to outcomes, on-time delivery, display weeks, and cold availability, not just cases shipped. In parallel, make Pepsi Beverages North America “carve-out ready”: separate systems, standardized packaging, and bottler-friendly fountain terms, preserving the option to accelerate later without committing today.
Then move money from wheels to reach. Coke’s ad intensity has been consistently higher; Pepsi should close that gap and aim to spend at Pepsi Zero Sugar, food-pairing creative in QSR and convenience, and a renewed push on cold-drink equipment where Sprite and Dr Pepper have momentum. Finally, simplify the pantry. Trimming slower food assets reduces managerial noise and funds the media and equipment that shift beverage share.
The Pain, the Plan, the Payoff
It’s worth mentioning that refranchising can be messy cause the transition costs are deducted from earnings before benefits are shown. Thus, Labor and IT carve-outs require precision. And with snacks softening, management bandwidth is finite. However, the alternative is to maintain a distribution footprint that consumes capital while competitors outspend and out-execute on the shelf. Markets have already priced in skepticism. By that, a dated, measurable roadmap, milestones for refranchising, targets for ad-to-sales, and hard KPIs for cold availability would give investors a way to underwrite the turn.
The Scorecard That Matters
Early progress won’t show up in slogans; it will show up in execution math with indicators of higher ad intensity, more compliant displays in small formats, more cold-box doors, faster resets, and sustained trial in zero-sugar. Over time, those inputs should translate into margin expansion and share stabilization, proof that Pepsi exchanged trucks for traction.
Pepsi doesn’t need to reinvent the cola playbook; it needs to borrow the incentives. Lighten the asset base, simplify the pantry, and redeploy resources to focus on brand and availability. That’s how blue closes the gap with red.
