Boycott of Coke and Pepsi over Israel's war on Gaza boosts local sodas in Muslim countries

Srinagar, Sept 4:  The boycott by consumers of Coca-Cola and PepsiCo is challenging the mighty soda companies who spent hundreds of millions of dollars over decades to built a demand for their drinks in Muslim-majority countries including Egypt and Pakistan.

The local sodas in these countries have gained momentum amid the boycotts targeting the Israeli and American owned brands amid Israel's genocidal war against the Palestinian people in the besieged Gaza strip,

The local brand in Egypt, V7 exported three times as many bottles of its own cola in the Middle East and the wider region than last year with sales of Coke witnessing a drastic drop, Reuters reported.

Facing backlash, Coca-Cola had to cancel an ad campaign targeted against the boycott in Bangladesh.

In the Middle East or West Asia, Pepsi's growth declined following Israel's heightened assault on Gaza.

Pakistani corporate executive, Sunbal Hassan dismissed Coke and Pepsi from her wedding menu in Karachi in April.

She didn't want that her money reached the tax coffers of the United States, Israel's staunchest ally.

"With the boycott, one can play a part by not contributing to those funds," Hassan told Reuters.

Instead, she served her wedding guests Pakistani brand Cola Next.

Market researcher NielsenIQ says the Western beverage brans suffered a 7% sales decline in the first half of the year across the Middle East.

In Pakistan, Krave Mart, a leading delivery app, has seen local cola rivals like Cola Next and Pakola soar in popularity to become about 12% of the soft drinks category, founder Kassim Shroff said. Before the boycott, the figure was closer to 2.5%.

Consumer boycotts date back at least as far as an 18th century anti-slavery sugar protest in Britain. The strategy was used in the 20th century to fight apartheid in South Africa and has been widely wielded against Israel through the Boycott, Divestment and Sanctions movement.

Many consumers shunning Coca-Cola and PepsiCo cite U.S. support of Israel over decades, including in the current, ongoing war on Gaza.

"Some consumers are deciding to make different options in their purchases because of the political perception," PepsiCo CEO Ramon Laguarta had told Reuters in a July 11 interview, adding that boycotts are "impacting those particular geographies" such as Lebanon, Pakistan and Egypt.

"We will manage through it over time," he said. "It's not meaningful to our top line and bottom line at this point," he had said.

PepsiCo's total revenue from its Africa, Middle East and South Asia division was $6 billion in 2023, earnings releases show. The same year, Coca-Cola's revenue from its Europe, Middle East and Africa region was $8 billion, company filings show.

In the six months of Israel's heightened war on Gaza after the Oct 7 attacks by Hamas militants on Israel, PepsiCo beverage volumes in the Africa, Middle East and South Asia division barely grew, after notching up 8% and 15% growth in the same quarters of 2022/23, the company said.

Volumes of Coke sold in Egypt declined by double-digit percentage points in the six months ended June 28, according to data from Coca-Cola HBC (CCH.L), which bottles there. In the same period last year, volumes rose in high single digits.

Palestinian-American businessman Zahi Khouri founded Ramallah-based Coca-Cola bottler National Beverage Company, which sells Coke in the Occupied West Bank.

The company's $25 million plant in Gaza, opened in 2016, has been destroyed in the war, he said. Employees were unharmed, he said.

Khouri said boycotts were a matter of personal choice but didn't really help Palestinians. In the West Bank itself, he said, they had limited sales impact.

"Only ending the occupation would help the situation," said Khouri, who supports the creation of a Palestinian state alongside Israel.

HISTORICAL TARGETS

The big soda companies are no stranger to pressure among the Muslim world's hundreds of millions of consumers. After Coke opened a factory in Israel in the 1960s, it was hit by an Arab League boycott that lasted until the early 1990s and benefited Pepsi for years in the Middle East.

Coke still lags Pepsi's market share in Egypt and Pakistan, according to market research firm GlobalData.

PepsiCo, which entered Israel in the early 1990s, itself faced boycotts when it purchased Israel's SodaStream for $3.2 billion in 2018.

In recent years though, Muslim-majority countries with young, rising populations have provided some of the soda giants' fastest growth.

In Pakistan alone, Coca-Cola says it has invested $1 billion since 2008, yielding years of double-digit sales growth. PepsiCo had similar gains, according to securities filings.