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For decades, Coca-Cola and PepsiCo have invested heavily in promoting their soft drink brands in Muslim-majority nations such as Egypt and Pakistan. However, both companies are currently grappling with significant challenges as local alternatives gain traction amidst growing consumer boycotts, which view these brands as representations of American culture—and, by extension, their ties to Israel—during the ongoing conflict in Gaza.
In Egypt, Coca-Cola has witnessed a steep decline in sales this year, whereas the local brand V7 has reported tripling its exports compared to the previous year. Similarly, in Bangladesh, Coca-Cola attempted to counteract the boycott with a marketing campaign but ultimately had to retract it due to backlash over perceived insensitivity, prompting an apology from the company.
The beginning of the Israel-Hamas war in October has had an immediate negative impact on PepsiCo’s previously rapid expansion in the region, reflecting a broader trend that has seen Western beverage companies face a general downturn in sales. According to market researcher NielsenIQ, there was a seven percent sales dip for these brands in the first half of the year across the Middle East.
Surge in Local Soda Brands
In Pakistan, the delivery app Krave Mart has reported a rise in local competitors like Cola Next and Pakola, which have now captured about 12 percent of the soft drink market, a significant increase from 2.5 percent pre-boycott. Pakola, known for its ice-cream soda flavor, has become particularly popular during this time.
Consumer boycotts are not a recent phenomenon; they date back centuries and have been utilized to combat various injustices, including the anti-slavery movement in 18th century Britain and the fight against apartheid in South Africa. Presently, the Boycott, Divestment and Sanctions (BDS) movement targets Israel, impacting brands like Coca-Cola and PepsiCo that are perceived as benefiting from U.S. policies in the region.
Ramon Laguarta, the CEO of PepsiCo, acknowledged the influence of political perceptions on consumer choices in a July interview, recognizing the impact of boycotts on markets like Lebanon, Pakistan, and Egypt. Despite this, he expressed confidence that the company would navigate these challenges over time.
PepsiCo’s revenue from the Africa, Middle East, and South Asia division reached $6 billion in 2023. Similarly, Coca-Cola reported $8 billion from its Europe, Middle East, and Africa operations. Both companies have reiterated their lack of political affiliations, emphasizing that they do not support military endeavors in any conflict.
Challenges from Historical Context
The major soda brands have faced consumer backlash before, particularly within the Muslim world. Coca-Cola experienced a boycott that lasted until the early 1990s after opening a factory in Israel in the 1960s, indirectly benefiting PepsiCo during that period. PepsiCo also faced boycotts after acquiring Israeli company SodaStream in 2018.
Today, local brands are capitalizing on the dissatisfaction with American products. For instance, Cola Next has rebranded its marketing to emphasize its Pakistani origins, and its production facilities are currently unable to keep up with demand. V7, an Egyptian cola brand, has also expanded significantly, now distributing to 21 countries.
Paul Musgrave, an associate professor of government at Georgetown University in Qatar, warns that ongoing boycotts could erode brand loyalty over time. He suggested that once consumers change their buying habits, it becomes increasingly difficult to regain their trust.
Missteps in Marketing
In Bangladesh, Coca-Cola faced backlash for an advertising campaign that referenced the company’s factory being situated on Palestinian land. The campaign, which was intended to dissociate the brand from Israeli connections, was deemed insensitive, prompting a swift retraction and apology from the company, which admitted the campaign “missed the mark.”
The culminating tensions also affect other American brands tied to Western culture, such as McDonald’s and Starbucks, which are facing similar boycotts. Zahi Khouri, a Palestinian-American businessman with deep ties to Coca-Cola in the region, expressed that while boycotts are a personal decision, they may not substantially aid the Palestinian cause, advocating instead for a resolution to the occupation as the most effective solution.
Despite the adverse effects of consumer boycotts, Coca-Cola continued to invest in its operations, with a $22 million upgrade in technology in Pakistan earlier this year, while PepsiCo recently reintroduced a product labeled as “Made in Pakistan.” The ongoing dynamics within the beverage industry highlight the intersection of politics, consumer choice, and market strategy in a complex global context.
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