For decades, Coca-Cola and PepsiCo have invested vast sums to establish themselves as leading soft drink brands in Muslim-majority countries. However, amid growing consumer boycotts over the ongoing Gaza conflict, both companies are facing stiff competition from local alternatives, which are rapidly gaining ground.
In Egypt, sales of Coca-Cola have plummeted, while the local brand V7 has seen its exports triple in the Middle East compared to last year. Similarly, in Bangladesh, Coca-Cola was forced to halt an ad campaign after widespread backlash against the boycott, and Pepsi’s once robust sales growth in the Middle East has sharply declined since the conflict began in October of the previous year.
The boycotts, spurred by the association of these American brands with U.S. support for Israel, have led consumers to favor local alternatives. For instance, Pakistani corporate executive Sunbal Hassan made the decision to exclude Coke and Pepsi from her wedding celebration in Karachi, choosing instead to serve a local brand, Cola Next. She explained that the boycott allowed her to take a stand against indirectly supporting U.S. policies, stating, “Through the boycott, we can avoid contributing to funds that may indirectly support Israel.
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This sentiment is echoed across the region, with reports indicating a significant decline in Western soft drink sales. Market research firm NielsenIQ noted a 7% decrease in sales for Coca-Cola and PepsiCo in the Middle East during the first half of the year. In Pakistan, local brands like Cola Next and Pakola have gained significant market share, growing from 2.5% of the soft drink category to approximately 12%, according to Krave Mart’s founder Kassim Shroff.
Boycotts as a form of protest are not new, with historical examples such as the 18th-century anti-slavery sugar boycott in Britain and the anti-apartheid movement in South Africa. Today, they are being used by consumers to express opposition to U.S. policies and Israel’s actions, particularly in the current Gaza conflict. PepsiCo CEO Ramon Laguarta acknowledged the impact of the boycott, noting that it has affected sales in markets such as Lebanon, Pakistan, and Egypt. However, he emphasized that the company would manage the impact over time and that the decline had not yet had a significant effect on the company’s overall performance.
Despite this, PepsiCo’s revenue from the Africa, Middle East, and South Asia region was $6 billion in 2023, while Coca-Cola’s revenue from the same region reached $8 billion, according to company filings. Yet, the effects of the boycott are becoming more apparent. PepsiCo, which previously saw rapid growth in the region, reported stagnating beverage volumes in the six months following the Hamas attack on Israel. Similarly, Coca-Cola reported a double-digit decline in sales volumes in Egypt during the same period.
Coca-Cola and PepsiCo have both issued statements denying any direct involvement in military conflicts. In response to queries, Coca-Cola emphasized that it does not fund military operations in Israel or elsewhere, while PepsiCo stated that its brands are not affiliated with any government or military.
Interestingly, some business leaders in the region question the effectiveness of boycotts. Zahi Khouri, a Palestinian-American businessman who founded the National Beverage Company, which bottles Coca-Cola in the West Bank, argues that boycotts don’t significantly impact the local market and suggests that only a political solution, such as ending the Israeli occupation, can bring about meaningful change. Khouri’s Coca-Cola bottling plant in Gaza, a $25 million investment, was destroyed in the conflict, although fortunately, none of his employees were harmed.
Coca-Cola and Pepsi have a long history of facing challenges in Muslim-majority countries. After Coca-Cola opened a factory in Israel in the 1960s, it was hit by an Arab League boycott that lasted until the early 1990s, giving Pepsi a competitive edge in the Middle East. While both brands have since re-established themselves in the region, the current boycott is reminiscent of those earlier struggles.
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In response, local brands are capitalizing on the opportunity. Pakistani brand Cola Next, for example, has seen a surge in demand and changed its marketing strategy to emphasize its local identity. The brand’s new slogan, “Because Cola Next is Pakistani,” underscores its appeal as a homegrown alternative to international giants. Similarly, Egyptian cola V7, founded by a former Coca-Cola executive, has expanded to 21 countries and seen a 40% increase in domestic sales.
Consumer loyalty, once firmly tied to global brands, is now being tested, according to Paul Musgrave, an associate professor at Georgetown University in Qatar. He warns that once consumers break their purchasing habits, it may be difficult for multinational corporations to win them back.
In Bangladesh, Coca-Cola’s attempt to address the boycott with an advertising campaign backfired, leading to an apology from the company after accusations of insensitivity. Despite such setbacks, both Coca-Cola and PepsiCo remain committed to their long-term growth strategies in these markets. Coca-Cola, for instance, invested an additional $22 million in upgrading technology in Pakistan this year, while PepsiCo reintroduced its Teem soda brand with a “Made in Pakistan” label to appeal to local consumers.
While economic factors such as inflation and declining purchasing power in countries like Pakistan, Egypt, and Bangladesh have contributed to the rise of cheaper local alternatives, the political and social dimensions of the boycott are also reshaping the soft drink market in the region. Nevertheless, Coca-Cola and PepsiCo continue to engage with local communities through sponsorships and partnerships, aiming to retain a foothold in these markets despite the challenges posed by the ongoing Gaza conflict.
