Pepsi Uses Consumer Savvy to Gain on Coke

It's been the story of Pepsi this year. As Coca-Cola built on the global strength of existing drink brands like Coke Zero, Pepsi rebuilt everything from the logo up. The blue-and-red globe started smiling. Gatorade went G. Frito-Lay decided to take Doritos on a "Late Night Taco" run. Even the original recipe itself went through some tweaking, ditching corn syrup for sugar and old-school packaging in Pepsi Throwback and going green with spring water and cane sugar in Pepsi Natural (or the cheekier Pepsi Raw in the U.K.).

While Pepsi shares trailed Coca-Cola's during the first half by six percentage points, Pepsi has narrowed the gap by half during the third quarter, which ends tomorrow. Both companies are lagging behind the S&P 500 Index this year.

Granted, Pepsi's been down this road before. At one time, owning Pizza Hut, Taco Bell and KFC -- now the cornerstones of Yum! Brands(YUM) -- seemed like the best way to fatten the company coffers before they were trimmed in the late '90s. However, victories like Pepsi's seizure of China's cola crown (23% of the soft drink market to Coke's 22%, according to Euromonitor International) and big gambles like the $5 million Super Bowl ad contest at its Frito-Lay division are what keep Pepsi's rivalry with Coke from going flat.

-- Reported by Jason Notte in Boston.

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