Inca Kola represents the victory of local products and brands versus global ones. It also shows how a deep knowledge of your (local) customers + strong national branding + smart marketing, can make the difference over international know-how and deep pockets. The result, the purchase of Inca Kola by the Coca-Cola Co in 1997, reinforces these messages even more.

This is a summarized version of the story of Inca Kola tll being acquired in 1997 (story extracted from Wikipedia):

Lindley, a peruvian company founded in 1910, launched in 1935 Inca Kola, a uniquely flavored, sugary drink with low carbonation, under the slogan “There is only one Inca Kola and it’s like no other”.

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 positioning it 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” . A common logo in the late 1970s and early 1980s featured the slogan “Made of National Flavor!”.

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.
In the 1980s, Pepsi’s campaign “Pepsi Challenge” (El Reto Pepsi) backfired and helped to virtually destroy the Pepsi brand in Peru, due in large part to the fact that consumers did not enjoy being told they were wrong.

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.

In 1995 Coca-Cola faced two unexpected low-blows: First, Bembos, a national fast-food chain, stopped working with Coca-Cola and took Inca Kola in exchange. And then 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 McDonald’s and Coca-Cola.

In 1997, the Coca-Cola Company began to negotiate with the Lindley corporation, looking to buy it out.. 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 (mostly New York and the rest of the Northeast) are two of the countries where Inca Kola is bottled by the Coca-Cola Company.

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,Oro 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. As for today, Inca-Kola still dominates the soft drink market in Peru with a market share of 31% compared to the 26% that Coca-cola has.

I don´t know what is more amazing to me: The ability of Peruvian marketers to make Coca-Cola bend its knee, or the resolution of The Coca-Cola Co to lead the spirits market all around the World, no matter at what price.

Think Different!!!

Ignacio Gafo