Coca-Cola and PepsiCo have invested hundreds of millions of dollars over decades to build demand for their soft drinks in Muslim-majority countries like Egypt and Pakistan. However, both companies are now facing significant challenges from local sodas due to consumer boycotts that target these global brands as symbols of America and, by extension, Israel, amid the ongoing Gaza conflict.
In Egypt, Coca-Cola's sales have sharply declined this year, while local brand V7 has seen its exports in the Middle East and beyond triple compared to the previous year. In Bangladesh, a backlash against Coca-Cola led the company to cancel an ad campaign in response to the boycott. PepsiCo's rapid growth in the region also evaporated after the Gaza war began in October.
Pakistani executive Sunbal Hassan chose to exclude Coca-Cola and Pepsi from her wedding menu in Karachi in April, opting instead for local brand Cola Next to avoid supporting what she views as American and Israeli interests. She noted that with the boycott, she felt she was contributing to the cause.
Despite challenges, PepsiCo and Coca-Cola continue to see growth in some areas, though Western beverage brands experienced a 7% sales decline across the region in the first half of the year, according to NielsenIQ. In Pakistan, local brands like Cola Next and Pakola have surged in popularity, capturing a significantly larger share of the soft drink market. Before the boycott, Pakola, known for its ice-cream soda flavor, was a minor player compared to the major global brands.
Consumer boycotts have a long history, from 18th-century anti-slavery sugar protests in Britain to 20th-century actions against apartheid in South Africa. Today, many consumers in these regions cite U.S. support for Israel as a reason for their boycott of Coca-Cola and PepsiCo.
PepsiCo CEO Ramon Laguarta acknowledged that boycotts are affecting sales in specific geographies like Lebanon, Pakistan, and Egypt but indicated that their overall financial impact is currently manageable. PepsiCo’s revenue from its Africa, Middle East, and South Asia division was $6 billion in 2023, while Coca-Cola’s revenue from Europe, the Middle East, and Africa was $8 billion.
In the six months following the October 7 Hamas attacks, PepsiCo's beverage volumes in the Africa, Middle East, and South Asia division barely grew, contrasting with the previous year’s strong growth. Coca-Cola also saw a significant decline in volumes in Egypt during the same period.
Both companies have stated that they do not fund military operations and are not affiliated with any government or military conflicts. Palestinian-American businessman Zahi Khouri, who runs a Coca-Cola bottling operation in the West Bank, noted that while boycotts are a personal choice, they have limited impact on sales.
Historically, soda giants have faced pressure in the Muslim world. After Coca-Cola opened a factory in Israel in the 1960s, it faced an Arab League boycott that favored Pepsi for years. Similarly, PepsiCo encountered boycotts when it acquired Israel's SodaStream in 2018.
Despite these setbacks, Muslim-majority countries with growing, young populations have been key markets for these soda giants. For instance, Coca-Cola has invested $1 billion in Pakistan since 2008, yielding significant sales growth, and PepsiCo has seen similar gains. Local brands are now capitalizing on the shift, with Cola Next emphasizing its Pakistani origins and V7 experiencing strong sales growth in Egypt.
In response to the boycotts, Coca-Cola invested $22 million in upgrading technology in Pakistan, and PepsiCo reintroduced Teem soda in Pakistan with prominent "Made in Pakistan" labeling. Both companies continue to invest in community initiatives, such as sponsoring charities, musicians, and cricket teams, to maintain their presence in these markets.
Georgetown University's Paul Musgrave suggests that breaking consumer habits through boycotts may have long-term implications for brand loyalty, though it is challenging to quantify the financial impact.