INCA KOLA

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Inca Kola is a very successful cola soft drink made in Peru. It is common in parts of South America, and while it has not enjoyed major success elsewhere, it can be found in Latin American specialty shops worldwide. The sweet flavor reminds some people of bubblegum. Inca Kola is yellowish-gold in color, and sold in glass & plastic bottles of various sizes and a can of the same color with an Inca motif. As of 2005, Inca Kola is sold in supermarkets in the United States in 2 liter bottles, cans, and individual bottles.

Inca Cola

HISTORY

In 1910, in the Rímac neighborhood, one of Lima's oldest and most traditional, an immigrant English family began a small bottling company under their family name, Lindley. Through the years, this enterprise brought success and in 1928, the company was formally chartered in Peru, whereupon José R. Lindley became its first General Manager.

Through friendly relations with local beverage makers, Lindley learnt of an ancestral concoction based on Lemon verbena (Aloysia triphylla), "Hierba Luisa" in Spanish. He enjoyed the flavor and experimented with various mixtures, other ingredients and levels of carbonation until finally, in 1935, the company launched "Inca Kola" under the slogan "There is only one Inca Kola and it's like no other" (Inca Kola sólo hay una y no se parece a ninguna), a uniquely flavored, sugary drink with low carbonation which began to take Peru by storm.

By the mid 1940s, Inca Kola was already a market leader in Lima, and, thanks to innovations introduced in 1945, bottling volume expanded greatly, growing steadily and positioned as a traditional Peruvian drink, using national and indigenous iconography and images.

Through the late 1950s, Inca Kola enjoyed an enormous surge in national consumption, reaching levels of 38% market penetration by 1970, eclipsing all other carbonated drinks in Peru and firmly establishing itself as "Peru's Drink" (La Bebida del Perú).

DEVELOPMENT

Pepsi and Coca-Cola

In the early years, Inca Kola began to slowly erode Pepsi and Coca-Cola's market share through aggressive marketing and low prices. Its standing as the only national drink greatly helped to win over customers as more and more people converted for nationalistic, price and flavor reasons.

The combined marketing muscle of Coca-Cola and Pepsi could not unseat Inca Kola as the most popular drink. Inca Kola began a marketing campaign that offered money and marketing assistance to small and medium-sized restaurants. Additionally, the brand focused its marketing efforts on campaigns to persuade consumers that Inca Kola was a better complement to food than Coca-Cola or Pepsi.

Pepsi downfall

In the 1980s, Pepsi's infamous "Pepsi Challenge" (El Reto Pepsi) campaign helped to virtually destroy the Pepsi brand in Peru, due in large part to the fact that consumers do not enjoy being told they're wrong. The campaign was quite simple actually: Tasting centers were set up in and around Lima where people could freely participate in a blind taste test between Pepsi and Coca-Cola. Attendees were presented with two covered bottles and two glasses, each bottle was opened and poured into its respective glass, whereupon the tester was asked to drink each and declare his or her favorite, but not before being asked which they preferred and drank regularly.

The campaign was a disaster, as one of three results came from the testing, all detrimental to Pepsi: 1) People were angered by the fact that they were "wrong" in their choice and abandoned Pepsi, switching to either Coca-Cola or Inca Kola; 2) Those who chose Coca-Cola over Pepsi either switched to or stayed with Coca-Cola; 3) Those who were ambivalent between them cemented their ambivalence and switched to Inca Kola.

A "fact" that has been repeated many times in Lima, yet the only source is a television interview with an employee of a local polling firm, is that over 80% of the people who took the taste test chose Coca-Cola, this being attributed to the fact that Coca-Cola had long since changed the formula for Peru (one of only three countries with that privilege), adding more sweetener to the mix in order to better fit the local palate.

As a result of this campaign, Pepsi's market share dropped to a virtually non-existent 3%, and remained as low until Pizza Hut, Kentucky Fried Chicken and other Pepsi properties established themselves in Peru, selling only Pepsi products in their locales. As a quirky note to this, there are many people who will not visit those establishments simply for the fact that they do not serve Inca Kola.

Coca-Cola rivalry and buyout

As a result of the Pepsi debacle, two rivals were left in Peru to battle in the soft drink wars, Coca-Cola, with a 21% market share, and Inca Kola with the lion's share of 35%. Coca-Cola aggressively marketed its drink in all places, from the smallest corner store to the largest sporting event in Peru. Attempting to reinvent itself as a drink to be enjoyed with foods, a massive marketing spree tying Coca-Cola to any and all possible meals was begun, going as far as promoting itself along other brands, restaurants and placing "Coca-Cola Girls" in every possible corner of Lima.

This reached ridiculous proportions when even tiny corner stores had red and white jumpsuited models urging people to buy Coca-Cola. The closest Coca-Cola ever got to Inca Kola was in 1995, when they were neck and neck with 32% and 32.9%, respectively. That year, however, proved to be the last, as two major events took place that forever widened the gap.

First, Bembos, a national fast-food chain that eventually bested McDonald's and practically drove out Burger King from Peru, swiched from Coca Cola to Inca Kola after failing to reach an agreement. The restaurant offered better service and a flavor more in tune with national tastes. Bembos originally served Coca-Cola, but failed to reach an agreement, and forced Bembos to switch brands almost overnight. Later, when the two companies joined, Bembos began to sell both Coca-Cola and Inca Kola side-by-side.

Second, and as a result of Bembos and market studies, McDonald's forced Coca-Cola to allow Inca Kola to be sold in its locales (at the time, the only place in the world where Coca-Cola agreed to such an arrangement). This was the final blow, as Inca Kola had been able to come between eternal partners McDonald's and Coca-Cola.

In 1997, The Coca-Cola Company began to negotiate with the Lindley corporation, looking to buy it out, as the Lindleys had been shopping around for a partner. A deal was established in 1999 where Coca-Cola bought 50% of the Inca Kola Corporation and 30% of the Jose R. Lindley Corporation for 300 million dollars, and ceded all bottling rights for Coca-Cola products in Peru to the Lindley Corporation; a joint-venture agreement was forged for foreign markets, whereby Coca-Cola would use its marketing power to push Inca Kola in other countries. To date, Ecuador and the United States (New York) are two of the countries where Inca Kola is bottled by the Coca-Cola Company.

Secondary market

During the time that the two giants were negotiating, various smaller companies began to emerge in Peru, selling drinks that competed both with Coca-Cola (Peru Cola, Cola Nacional, Inti Cola, Kola Real, etc.) and Inca Kola (Don Isaac Kola, Triple Kola, Concordia, etc.). These competed mainly on price, since, by reverse engineering, they had all come up with formulas that emulated the originals almost undiscernibly. They began to quickly eat up market share in low-income sectors of the country with down-home advertising which appealed to those families.

Their main point of attack was the fact that Inca Kola was no longer a Peruvian company, having sold out to a foreign company, and therefore not deserving of their money. But the Inca Kola brand was so strong at that point that no manner of advertising attempts were able to break it.

Current situation

• Inca Kola: 31%

• Coca-Cola: 26%

• Kola Real: 17%

• Pepsi: 8%

• Sprite: 4%

• Others: 14%

Currently, the situation stands with Inca Kola as the leader and Coca-Cola second, with the surprising Añaños Group and their Kola Real as a close third.

Odd facts

• Inca Kola has become entrenched in Chinese-Peruvian restaurants, popularly called "Chifas", many people asked says it is as if the two were made for each other. As such, many Chifas in Lima serve Inca Kola as the only soft drink.

• Inca Kola purportedly comes in the largest number of bottling variations of any drink in the world. At last count, it came in 7 glass bottle sizes, 12 plastic bottle sizes, 2 can sizes and 3 volume dispenser sizes.

• Douglas Ivester, chairman of the Coca-Cola company in 1999, when he went to Lima for the buyout, was quoted as saying "Looks like piss, tastes like bubble-gum." upon his first experience with Inca Kola.

• Almost one third of the people who drink Inca Kola prefer it warm (room-temperature) ("sin helar") instead of refrigerated.

• Peru is one of only two countries in the world (as of 2004) where Coca-Cola is massively sold that it is not the market leader, the other being Scotland, where Irn-Bru shares equal footing with Coca-Cola.

LINKS:

• Eric J. Lyman In the Company of Giants: Inca Kola, 1998

A healthier alternative

Solar Cola - a taste for adventure capitalists

We are seeking venture (seed) capital to develop our supply chain and begin a world marketing campaign.  We are offering shares in our company by way of equity funding.  Although, this product has potential for good growth, the value of shares in any company, private or public, can go down as well as up.  

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