Calculate both companies’ advertising-to-sales ratios for each year. What is each’s average ratio over the five-year period? Refer to the percentage-of-sales method in the chapter to learn about this method.

Although consumption of carbonated beverages has been decreasing, it is still an $81 billion industry in North America, which far exceeds alternatives such as water ($23 billion) and sports drinks ($9.4 billion). That’s why Coca-Cola and Pepsi still battle it out. Coca-Cola’s market share increased from 17.3 percent to 17.8 percent during the past decade. That might not seem like much but one share point equals 1 percent of market sales, so a half a share point represents $405 million. Pepsi’s market share decreased from 10.3 percent to 8.4 percent during the same period—a loss of 1.9 share points or $1.5 billion. The war is not yet over, though. PepsiCo increased its advertising budget $500 million in 2018, resulting in a $1.13 billion increase in sales compared to Coca-Cola’s almost $4 billion decrease in sales. Many marketers budget an upcoming year’s advertising expenditures using a percentage-of-sales method based on past or projected sales. The industry average advertising-to-sales ratio for beverages is 4.1 percent of sales.