KARACHI: Coca-Cola and rival PepsiCo spent hundreds of millions of dollars over decades building demand for their soft drinks in Muslim-majority countries, including Egypt and Pakistan. Now, both face a challenge from local sodas in those countries due to consumer boycotts that target the globe-straddling brands as symbols of America, and by extension Israel, at a time of war in Gaza.

In Egypt, sales of Coke have cratered this year, while local brand V7 exported three times as many bottles of its own cola in the Middle East and the wider region than last year. In Bangladesh, an outcry forced Coca-Cola to cancel an ad campaign against the boycott. And across the Middle East, Pepsi’s rapid growth evaporated after the Gaza war started in October.

Pakistani corporate executive Sunbal Hassan kept Coke and Pepsi off her wedding menu in Karachi in April. She said she did­n’t want to feel her money had reached the tax coffers of the Un­i­ted States, Israel’s staunchest ally.

“With the boycott, one can play a part by not contributing to those funds,” Hassan said. Instead, she served her wedding guests Pakistani brand Cola Next.

She is not alone. While market analysts say it is hard to put a dollar figure on lost sales and PepsiCo and Coca-Cola still have growing businesses in several countries in the Middle East, Western beverage brands suffered a seven per cent sales decline in the first half of the year across the region, market researcher NielsenIQ says.

In Pakistan, Krave Mart, a leading delivery app, has seen local cola rivals like Cola Next and Pakola soar in popularity to become about 12pc of the soft drinks category, founder Kassim Shroff told Reuters this month. Before the boycott, the figure was closer to 2.5pc.

Shroff said Pakola, which is ice-cream soda flavoured, made up most of the purchases before the boycott. He declined to provide figures for Coca-Cola and PepsiCo sales. Many consumers shunning Coca-Cola and PepsiCo cite US support of Israel over decades, including in the current, ongoing war in Gaza. “Some consumers are deciding to make different options in their purchases because of the political perception,” PepsiCo CEO Ramon Laguarta told Reuters in a July 11 interview, adding that boycotts are “impacting those particular geographies” such as Lebanon, Pakistan and Egypt.

PepsiCo’s total revenue from its Africa, Middle East and South Asia division was $6 billion in 2023, earnings relea­ses show. The same year, Coca-Cola’s revenue from its Europe, Middle East and Africa region was $8bn, company filings show.

In the six months following the Oct 7 Hamas attacks on Israel that triggered the invasion of Gaza, PepsiCo beverage volumes in the Africa, Middle East and South Asia division barely grew, after notching up 8pc and 15pc growth in the same quarters of 2022/23, the company said. Volumes of Coke sold in Egypt declined by double-digit percentage points in the six months ended June 28, according to data from Coca-Cola HBC, which bottles there. In the same period last year, volumes rose in high single digits.

In recent years though, Muslim-majority countries with young, rising populations have provided some of the soda giants’ fastest growth. In Pakistan alone, Coca-Cola says it has invested $1 billion since 2008, yielding years of double-digit sales growth. PepsiCo had similar gains, according to securities filings.

Now, both are losing ground to local brands.

Cola Next, which is cheaper than Coke and Pepsi, changed its ad slogan in March to “Because Cola Next is Pakistani,” emphasising its local roots. Cola Next’s factories cannot meet the surge in demand, Mian Zul­fiqar Ahmed, the CEO of the brand’s parent company, Mezan Bev­erages, said in an interview. He declined to share volume figures.

Published in Dawn, September 5th, 2024