The LA Times reports, “Prompted by a recent surge of prosperity in the Middle East, the giant American beverage companies have engaged in a fierce race to win the soft-drink allegiance of Arabs, especially youth. In the last few years, Coca-Cola Co. and PepsiCo Inc. have recorded more than 10% growth in their annual sales in the region, and executives from both companies say future prospects look promising.”

Why exactly is the Middle East becoming such a hot spot for soft-drink multinationals? It’s simple really. The regions rapidly growing population of Muslim youngsters that don’t consume alcoholic beverages due to legal restrictions and religious beliefs are driving demand for non-alcoholic alternatives. Recognizing that the market is much less competitive than Europe and the US when it comes to the non-alcoholic beverage space, both Coke and Pepsi are advertising like crazy to seize market share.

Up until now, according to the article, “the Arab world until recently was almost exclusively Pepsi territory. For almost 25 years, Coca-Cola was boycotted in many Arab countries over its alleged support for Israel. It started selling again in the Middle East in 1990 and has built its market share to about 35%”. What is a 35% stake in the market worth to Coca-Cola Co.? Approximately $70 million in annual revenues.

So what are Coke and Pepsi doing to compete against each other for a spot in the hearts of young Arabs? Similar to the West, they’re utilizing the star power of the regions pop stars to win adolescent affection. “In one commercial, Arab pop star Nancy Ajram hands bottles of Coca-Cola to a young couple quarreling, and instantly, the two lovers make up as colorful hearts and flowers flood out from the bottles. In another, Haifa Wehbe, a model-turned-singer and Arab world sex symbol, turns heads as she walks confidently through a film set in a blue, figure-hugging dress, putting her cool can of Pepsi up against the face of a sweating technician”, we read.

And that’s just the beginning! In addition to competing on price, both companies are bidding against each other for title sponsorship of any sporting, musical or talent related events they can get their hands on. Coke has gone as far as sponsoring the planting of trees in Lebanon, and Pepsi has gone to the extent of producing a full-length musical film for the Arab world.

Despite all their marketing efforts, “many Arabs regard Pepsi and Coke as symbols of U.S. cultural and economic hegemony. They remain vulnerable to occasional boycott campaigns in the Middle East. But local soft-drink companies, like Iran’s Zam Zam and Dubai-based Mecca Cola, pose little threat to their global counterparts. They may, however, push Coca-Cola and Pepsi to adopt more local branding strategies”, the article explains.

If the market only accounts for a fragment of either company’s global revenues, why is competition for domination so cutthroat? Do Coke and Pepsi know something we don’t know? Is the wealth derived from booming Middle East economies birthing a market that will dictate the “new cool”? Perhaps it has something to do with new laws that encourage companies like McDonald’s to open up franchises in the area. After all, distribution chains like McDonald’s sell a lot of beverages!

Thoughts?

Image: Stewf’s Flickr