Coca-Cola dominance grows as Diet Coke pips Pepsi to win number 2 slot

NEW YORK -Coca-Cola’s dominance just got even stronger as its namesake’s diet soft drink overtook Pepsi as the second best-selling soda in America.

Last week Beverage Digest released annual market share data that showed that Pepsi is no longer playing second fiddle to Coke. Now it’s third fiddle, behind Coke and Diet Coke. There was a time that Pepsi sought to seriously challenge Coke.

Now, it seems the company is taking the fizz out of its own sales through its own brand of savvy marketing.

Rounding out the top 10 list, in order, were Mountain Dew, Dr Pepper(DPS_), Sprite, Diet Pepsi, Diet Mountain Dew, Diet Dr Pepper and Fanta.

Coke, Diet Coke and Pepsi-Cola each sold fewer cases in 2010 than in 2009, but Pepsi-Cola saw the steepest decline. Regular Coke sold 0.5% fewer cases year-over-year, Diet Coke 1% fewer and Pepsi-Cola 4.8% fewer.

Pepsi has been losing ground to Coke for some time, but it seems to have helped the process along in 2010 by turning its back on advertising in the 2010 Super Bowl in favour of a $20 million charity competition, the Refresh Project. According to Advertising Age, it was the first time in 23 years that Pepsi decided the Super Bowl just wasn’t for them.

The Refresh Project has gotten some great attention, like a New York Times article profiling how a shadowy figure from India known only as “Mr. Magic” was employed to stuff the ballot box in order to help charities win the Pepsi grants.

Coca-Cola, meanwhile, has ramped up its advertising with new commercials and online ads as well.

Credit Suisse analyst Carlos Laboy said in a research note that he was “worried about the morale implications for PepsiCo’s beverage people of having the company’s namesake brand and its top beverage brand dropped to a tertiary spot within its category at a time that a tangible sign of brand momentum for the core brands would help.”

That lack of momentum, said Laboy, has nothing to do with larger trends in the soft drink market, and everything to do with Pepsi. “There is no U.S. beverage category problem, just a Pepsi problem,” he wrote.

Laboy downgraded PepsiCo shares to neutral, from underperform, back in February. Earlier this week, UBS analyst Kaumil S. Gajrawala kept a buy rating on the stock but lowered the firm’s earnings-per-share estimate on PepsiCo shares.

Pepsi, of course, isn’t worried. “I don’t think that we’d view this as a blow,” a Pepsi spokesperson told Ad Age.

“We’re looking at our total position. Consumers want a wide range of products for a wide range of occasions. And we’re in a great position to satisfy them with that. Today we’re fighting a totally different battle on a much bigger battlefield than just colas, though we are completely committed to carbonated soft drinks.”