Coca-Cola’s Refusal to Buy Pepsi When it Had the Chance Turned Out to Have Been a Huge Mistake
For decades after it was created in 1893, Pepsi was a niche drink with a tiny market. It was nowhere close to getting noticed by Coca-Cola, and seemingly 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 (roughly $175,000 today), 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.
In hindsight, that turned out to be a huge mistake on Coca-Cola’s part. Less than two years after he bought it, Charles Guth turned Pepsi around, and made it a profitable enterprise. By 1936, Pepsi was selling half a billion bottles a year – the second largest soda company, behind only Coca-Cola. It was right around then that Loft Inc. sued Guth, accused him of breach of fiduciary duty, and took Pepsi from him in 1939. Loft then concentrated on Pepsi, and spun off its non-soda businesses in 1941. The brand grew, 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. In 2005, PepsiCo surpassed the Coca-Cola Company in market value.
