Coca-Cola’s Most Costly Mistake
Pepsi was created in 1893, and for decades, remained a niche drink with a tiny market. It went unnoticed by Coca-Cola, and stood no chance of challenging the soft drink giant. Then in the 1920s, Charles Guth, president of candy manufacturer Loft Inc., asked Coca-Cola for a discount on its syrup, which was used in some of his retail stores’ soda fountains. Coca-Cola refused, so when Pepsi entered bankruptcy in 1923, Guth bought it for $10,500 (equivalent to about $190,000 in 2023), and had chemists rework its formula to come as close to Coke as possible. Over the following decade, Pepsi-Cola was offered to the Coca-Cola Company for purchase on various occasions, but the soda giant declined the offer each time. It was a costly mistake that Coca-Cola came to regret.
Guth turned Pepsi around within two years, and made it a profitable enterprise. By 1936, Pepsi was the second largest soda company, behind only Coca-Cola, with sales of half a billion bottles a year. It was right around then that Loft Inc. sued Guth for breach of fiduciary duty, and took Pepsi from him in 1939. Loft focused on Pepsi, and spun off its non-soda businesses in 1941. The brand continued to grow, and eventually merged with Frito Lay in 1965, to become PepsiCo. That new company went on to finally eclipse Coke in sales in the 1980s, and in 2005, PepsiCo surpassed the Coca-Cola Company in market value.