Muslim countries' local sodas see boost amid Coke and Pepsi boycott over Gaza

Coca-Cola and rival PepsiCo spent hundreds of millions of dollars over decades building demand for their soft drinks in Muslim-majority countries including Egypt to Pakistan.

Now, both face a challenge from local sodas in those countries due to consumer boycottstargeting thebrands as symbols of America, and by extension Israel, at a time of war in Gaza.

In Egypt, sales of Coke have cratered this year, while local brand V7 exported three times as many bottles of its own cola in the Middle East and the wider region than last year. In Bangladesh, Coke launched anadvertising campaign against the boycott. But after a public outcry over perceived insensitivity, Coke pulled the ad in June and apologized.

And across the Middle East, Pepsi's rapid growth evaporated after the Israel-Hamas war started in October.

Pakistani corporate executive Sunbal Hassan kept Coke and Pepsi off her wedding menu in Karachi in April. She said she didn't want to feel her money had 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 said. Instead, she served her wedding guests Pakistani brand Cola Next.

She's not alone. While market analysts say it's hard to put a dollar figure on lost sales and PepsiCo and Coca-Cola still have growing businesses in several countries in the Middle East, Western beverage brands suffered a sevenper cent sales decline in the first half of the year across the region, market researcher NielsenIQ says.

Local soda brands see salesboost

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 per cent of the soft drinks category, founder Kassim Shroff told Reuters this month. Before the boycott, the figure was closer to 2.5 per cent.

Shroff saysPakola, which is ice-cream soda flavoured, made up most of the purchases before the boycott. He declined to provide figures for Coca-Cola and PepsiCo sales.

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.

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

"Some consumers are deciding to make different options in their purchases because of the political perception," PepsiCo CEO Ramon Laguarta 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."

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

In response to a Reuters request, PepsiCo said neither the company "nor any of our brands are affiliated with any government or military in the conflict." Coca-Cola has said it does not fund military operations in Israel or any country.

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.

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

In recent years though, Muslim-majority countries with young, rising populations have provided some of the soda giants' fastest growth. Now, both Pepsi and Coke are losing ground to local brands.

Cola Next, which is cheaper than Coke and Pepsi, changed its ad slogan in March to "Because Cola Next is Pakistani," emphasizing its local roots.

Cola Next's factories cannot meet the surge in demand, Mian Zulfiqar Ahmed, the CEO of the brand's parent company, Mezan Beverages, said in an interview. He declined to share volume figures.

Exports of Egyptian cola V7 have tripled this year compared to 2023, founder Mohamed Nour said in an interview. Nour, a former Coca-Cola executive who left the company after 28 years in 2020, saysV7 isnow sold in 21 countries.

Paul Musgrave, an associate professor of government at Georgetown University in Qatar, warned of long-term damage to consumer loyalty due to boycotts.

"If you break habits, it's going to be harder to win you back in the long run," he said.

Bangladesh backfire

In Bangladesh, Coke launched advertising showing a shopkeeper talking about the company having a factory on Palestinian land, seemingly in an attempt to distance the brand from connections with Israel.

After a public outcry over perceived insensitivity, Coke pulled the ad in June and apologized. In response to a question from Reuters, the company said the campaign "missed the mark."

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 US plant in Gaza, which opened in 2016, has been destroyed in the war, he said, noting that employees were unharmed.

Other American brands seen as symbols of Western culture, such as McDonalds and Starbucks, also face anti-Israel boycotts in the Middle East.

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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.

Israel's government did not respond to a request for comment.

Despite the boycotts, Coke invested another $22 million US upgrading technology in Pakistan in April, it said in a press release at the time. In recent weeks, PepsiCo reintroduced a brand called Teem Soda in the Pakistani market, with a prominent "Made in Pakistan"label.