Coca-Cola or Pepsi: Can You Guess Which Brand Is Tops in Consumer Loyalty?

Although the soda industry is made up of dozens upon dozens of beverages choices, chances are good that the soda you last consumed was made by either Coca-Cola (NYSE: KO  ) or PepsiCo (NYSE: PEP  ) , which absolutely dominate the industry.

To put into perspective just what sort of breadth I'm talking about with the beverage sector, let's have a closer look at industry giant Coca-Cola.

Coca-Cola bottling plant in Hebei, China, Source: Coca-Cola.

According to a Business Insider report from 2011, more than 3% of all beverages consumed around the world were Coca-Cola product, 94% of the world's population recognizes the Coca-Cola logo (likely having to do with it selling its products in all but two countries worldwide), and its portfolio boasts more than 3,500 products. That sort of geographic and product diversity has allowed Coke a way of marketing to the vast majority of people on this planet with one beverage or another, giving it the impressive cash flow that has allowed it to transform into one of the markets safest investments, and one of Warren Buffett's largest holdings.

But keep in mind that PepsiCo. is no slouch, either. PepsiCo has 22 brands that gross more than $1 billion in sales annually, and its products are consumed more than 1 billion times per day! It's also the largest food and beverage business in the U.S., Russia, India, and a number of other countries.

Source: PepsiCo.

One similarity between the two soft-drink giants is their steady cash flow growth over the years. PepsiCo has increased its dividend in 42 consecutive years, with Coca-Cola one-upping PepsiCo with 52 straight annual dividend increases. This consistent shareholder return is what drives investors back to the two consumer-goods giants over and over.

Understanding how engagement and loyalty drive growth
But have you ever wondered what really drives consumers to Coke and PepsiCo in the first place? Both obviously have a diverse product pipeline and a long history of meeting of exceeding consumer expectations, otherwise they wouldn't be worth what they're worth today. In other words, determining which brand drives better consumer loyalty isn't as cut-and-dried as it might seem.

However, consumer engagement and customer loyalty are crucial aspects to both brands since consumers will forge their perception of a company from its ads and the how their friends, family, and the public views a product, or number of products. In short, ads are only as effective as Coke and Pepsi's free advertisers: its customers.

Thankfully, a survey conducted annually by research firm Brand Keys did the hard work for us and was able to answer once and for all which soda brand is tops when it comes to customer engagement and loyalty -- at least for 2014. Before I spill the beans, which brand do you believe has the better draw among Americans?

Got your answer?

If you guessed Coca-Cola, you'd be 100% correct!

Source: Coca-Cola.

How Coca-Cola keeps bringing customers back
Based on Brand Keys' Customer Loyalty Engagement Index, Diet Coke and regular Coca-Cola topped both the diet soft drink and regular soft drink categories, with Pepsi sliding into the fourth spot in the diet category and fifth in regular soft drinks, behind the likes of Mountain Dew and Dr Pepper in both categories.

What makes Coca-Cola hands-down better when it comes to garnering return customers? Let's have a closer look.

Source: Coca-Cola.

Perhaps the biggest differentiating factor that makes Coca-Cola the United States' go-to soft-drink is that it's viewed as one of the most patriotic brands. According to a survey conducted last July by Brand Keys as well, Coke ranked as a 97% on an emotional engagement scale that was capped at 100%. This tied it for second with Hershey and placed it behind only Jeep at 98%. That's not bad considering that Brand Keys considered 197 brands for its research. Being an American icon affords Coke the luxury of using its branding power to boost prices when needed, and also gives the company a notable emotional connection with consumers.

Pepsi, on the other hand, tends to redesign its marketing campaign around whatever is trendy, which hasn't given it much staying power with Americans throughout the years. In 2001, Britney Spears was a spokesperson for Pepsi, but you don't hear nearly as much about Britney anymore through the media. This focus of latching onto the latest trend does work for Pepsi, but it can set the company up for engagement peaks and troughs with consumers.

The other big differentiating factor is simply brand awareness. It may not seem obvious at first, with Coke and Pepsi products seemingly competing at every turn, but there's a sizable gap between Coca-Cola and Pepsi when it comes to brand awareness, and even impressions.

Coke, for example, has been the sponsor for the Olympics since 1928, according to Interbrand, and it's scored in excess of 90% brand awareness based on a study by Research Now within the United States. Coca-Cola has also done a phenomenal job of reaching younger generations by promoting its online presence. Currently, Coca-Cola has more than 81 million Facebook likes, which is more than double rival Pepsi at more than 31 million likes. Being a multi-generational brand allows Coca-Cola to forge that bond with Americans young and old, adding incredible stability to its cash flow.

As long as Coca-Cola is able to maintain its commanding lead in awareness and retain its emotional attachment with consumers to American history it's quite likely investors are going to continue to benefit with steady profit growth and many years of rising dividend payouts.

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Read/Post Comments (12) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 27, 2014, at 7:24 PM, haleema wrote:

    I prefer pepsi for no apparent reason.

  • Report this Comment On April 27, 2014, at 8:25 PM, scannerman wrote:

    I know if I drink pepsi I get sick within a few days; where I can drink Coca Cola several times a day an never get sick... But also; if I drink Orange Juice I get sick within a few days Go Figure?? But has Anyone ever heard of pepsi and Jack Daniels; But Jack Daniels and Coca Cola.. LOL

  • Report this Comment On April 27, 2014, at 10:01 PM, TYPEONEGATIVE wrote:

    Pepsi has a sour taste, like many other brands.

    Whatever Coke uses, it's like no other. I don't care if it is pig's blood.

    As for loyalty, My 2 and a half car garage is a Coke decorated room.

  • Report this Comment On April 27, 2014, at 11:27 PM, zumirezsurfer wrote:

    article misses the info on the steady decline of CSD's - carbonated soft drinks, but against two different opposing but growing trends: healthier beverages and explosion of energy drinks, both areas where coke and pepsi are weak.

  • Report this Comment On April 27, 2014, at 11:28 PM, whyaduck1128 wrote:

    I barely needed to read the article; as soon as I saw "Coca-Cola", I knew which way it was going. It's appalling how much MF cozies up to any company remotely related to the All-Knowing, Never-Wrong Warren Buffett.

    And no, I don't own any PEP stock.

  • Report this Comment On April 28, 2014, at 12:04 AM, Rambo4 wrote:

    We can't believe what the FDA tells us. I did, and I paid the price. FDA stated that ASPARTAME when given to mice and rats in LARGE doses, get HOLES in their brains. They then stated that humans DON'T drink it in those doses...WRONG. For 23 years, because I believed the FDA was SAFE, I drank Diet Pepsi at work. After that length of time, I got 5 HOLES in my brain, and had to have 2 BRAIN surgeries to FIX it. Spinal fluid was leaking out of my nose, and one can't ignore it, cuz if you get a virus into your system, that is where it will go, to your WEAK spot, causing MENINGITIS. So, ANY diet product that has ASPARTAME in it, is like drinking a slow death. And if you think about it, look at how many people that diet, and are diabetics use SUGAR FREE drinks and food. The only diet soda out ther is DIET RITE, and that has sucralose. So, most likely that will be just a matter of time, and most doctors will tell you, that when you add ANY kind of sweetner to your daily regime, it IS NOT good for your body... and think of all the business that use ASPARTAME... just check it out when you go grocery shopping, on ANY diet pop.

  • Report this Comment On April 28, 2014, at 12:42 AM, Frier wrote:

    I seldom buy sugar drinks and when I do I prefer the

    taste of Pepsi over Coca Cola. I have wondered why

    they do not offer "Stevia or"Truvia" sweetened drinks

    over sugared sweetened and the same with "Reeses" peanut butter and chocolate candies.

  • Report this Comment On April 28, 2014, at 2:10 AM, bode02 wrote:

    I've noticed that many of the fast food places, including theaters and stadiums, that dispense the Cokes or Pepsi weaken their drinks so what you get is strong carbonated water with weak taste.

    I'll guess they do this to stretch out their supply to make more sales from a box of soda syrup...

    I won't buy any dispenser drinks now....

  • Report this Comment On April 28, 2014, at 2:39 AM, bigbobboise wrote:

    It is simple, coke esp fountain Coke tastes superior to Pepsi. Pepsi is too sweet...and tastes much like every other generic cola. royal crown has a kind of stronger 'cola nut' taste which is preferable to Pepsi. Many Costco food stands have removed Coke in favor of the dreaded Pepsi. Yuck..needless to say, I don't get beverages @ Costco anymore.

  • Report this Comment On April 28, 2014, at 9:28 AM, lm1b2 wrote:

    Coke taste better then Pepsi which is sweeter! In taste testes between Coke,Pepsi,and Royal Crown,Royal Crown wins,and yet does not sell nearly as much of the other two giants,go figure ! When i was a teenager i drank Pepsi,as i got older switched to Coke,don't like Pepsi at all now !

  • Report this Comment On April 28, 2014, at 12:07 PM, OlGrunt wrote:

    When I can get it, I prefer RC. If only the bottlers of RC would expand or increase their production, I think they would pick up a decent sized segment of the cola business. I also buy store brand colas a lot. Between only Pepsi and Coca-Cola, I prefer Pepsi. Coke just seems to have a "bite" and strong flavor that I don't care for.

  • Report this Comment On August 27, 2015, at 12:28 AM, Bichons9 wrote:

    I am a loyal Coca Cola (diet) purchaser and stock holder..HOWEVER, what attracts many to Coke is the CARBONATION!!!!!!! Prior to PEPSi CHANGING THEIR CAN TO LiGHT BLUE in early 2000's, their carbonation was good, but not since. Also, you made a point that I have tried to make to marketing with no interest. The reply was.."we have professionals that make changes or suggestions!!! One of my suggestions was, as an active "Rewards" member, "I hope the stock marketers are doing more to help coke than this "Rewards" program..I used my rewards points to obtain all Coca Cola, caps, totes T-shirts to send to all of my friends-relatives. As I told them, You no longer offer Coke T-shirts??? Everyone wears my t-shirts..which are FREE walking advertisements for Coca Cola!!! The reply was "..we change our rewards from time to time" REALLY?? They offer stupid magazines, products with no logos of Coca Cola, and ONE SIZE MEDIUM SPRITE GREEN.TSHIRT!! I JUST DON'T GET IT!!! Please improve your marketing of Coca Cola,,for my portfolio's sake!!!!!! I would like to see Diet Coke Fizzle= even more carbonation!!! Oh, that's right, It's too bad that You don't take suggestions from your LOYAL BUYERS!!!!

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Sean Williams

A Fool since 2010, and a graduate from UC San Diego with a B.A. in Economics, Sean specializes in the healthcare sector and in investment planning topics. You'll usually find him writing about Obamacare, marijuana, developing drugs, diagnostics, and medical devices, Social Security, taxes, or any number of other macroeconomic issues.

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