The Oslo talks of 1993 may have failed to deliver lasting peace to the region, but they have been successful in opening up the soft drinks market to increasingly ferocious competition.
The Middle East is a soft drink manufacturer's dream. Temperatures regularly reach 40 [degrees] C in the shade and, thanks to the region's Islamic faith, the consumption of alcohol is banned. For more than four decades Pepsi Cola enjoyed a monopoly over the Arab world as close ties with Israel prevented Coca-Cola's sale in the Gulf and the Levantine states. Only Morocco and Tunisia judged themselves to be far enough removed from the fray to accept the sale of the US icon.
Coke's traditional lead over Pepsi in international sales, (in 1996 Coke's international soft drinks sales accounted for 69 per cent of total sales compared with 29 per cent for Pepsi) made Pepsi's domination of the region a constant thorn in the side of Coca-Cola, particularly as Israel is only a minor market; ranking number 26 in terms of worldwide volume.
However, clandestine discussions in 1993 between Israel and the PLO, ending in the Declaration of Principles, prompted the abandoning of the Arab boycott against Israel and the so-called "secondary boycott" against companies dealing with Israel.
Starting with Oman in 1991, Coca-Cola's move to conquer the Arab market was swift. In 1994 the company set up operations in Egypt, quickly followed by Lebanon and Jordan. Over the last year Coca-Cola has formed an alliance with the largest bottler in Yemen through a US$14 million dollar investment, and set up a bottling operation with the National Beverage Company to supply the West Bank and Gaza. Already US$400 million has been invested, with a further US$200 million pledged for investment before 2001.
In mid-1998 Coca-Cola announced it had already captured a 38 per cent share of the market, so sparking off a bitter row between the two soft drink giants. Pepsi refuted the claim, pointing out that at end 1997 it held a 64 per cent market share in the Gulf (including Saudi Arabia) rising to 82 per cent and 84 per cent in Jordan and Lebanon respectively. Nonetheless, there was no doubting the fact that Coca-Cola's greatest growth has taken place in Saudi Arabia and the other Gulf states, markets which traditionally have been strongholds for Pepsi.
Coca-Cola results show that Saudi sales increased by 17 per cent in 1997, with overall sales growing by 92 per cent in the three years since it returned...