Pepsi has progressed in Syria since a ban on its sale was lifted just under a year ago, and in the process has stolen a march on Coca-Cola which was also removed from the blacklist but is yet to capitalise. Paul Cochrane reports from Damascus.

The soft drinks market in Syria is undergoing unprecedented growth, expected to surge by 17% to 18% this year, having grown by 12% last year, and Pepsi's market share is growing, just under a year since it resumed trading in the country after a 50-year absence.

Pepsi, which is franchised to Syrian drinks manufacturer Joud, was launched in August last year following a decision by Syria's economy minister to lift a ban on certain US and western firms that were blacklisted over 50 years ago by the country's Bureau for the Boycott of Israel.

Moreover, Pepsi's progress in the Syrian market is made all the sweeter for PepsiCo by the fact that Coca-Cola has not been able to capitalise in the same way, primarily because it lacks a bottling partner in the country.

Largely due to strong sales of Pepsi and 7-Up, Joud's share of the US$100m Syrian soft drinks market is expected to increase from 47% to 50% by the year end, according to Joud marketing manager Lilas Rabbat. In order to overcome any possible anti-American sentiment, Joud has been marketing Pepsi very aggressively with TV and radio slots and a poster campaign.

"We didn't give it a chance to be a foreign brand," says Rabbat. "We made it known it was bottled here, and used the same marketing strategy we did for 7-Up." Joud has also been introducing new pack and flavour variants for the brand every two months in order to build market share.

However, the Syrian bottler is not exporting Pepsi to Iraq or Jordan, as PepsiCo already has local bottling agreements for the brand in both countries. Joud has also stopped exporting its other brand, Mandarin, to Iraq as it was considered a small market fraught with logistical problems.

Coca-Cola on the other hand is not faring as well in the Syrian market, despite also being removed from the blacklist. With no bottling plant, Coca-Cola is imported from Jordan and Lebanon, but sales account for less than 2% of the market.

The higher price of Coca-Cola is thought to be holding the brand back. Coca-Cola retails for SYP20 (US$0.40) a can, against SYP15 for a can of Pepsi, which is about the price of most soft drinks brands. "Price is very important here," said Rabbat, adding that low-level government employees earn between US$100 to US$150 a month.

Management problems with the Coca-Cola franchise have also affected the brand. Coca-Cola was run by the son of the recently disgraced former vice president Abdel-Halim Khaddam, who is now in exile in France following an outburst against President Bashar Assad at the end of 2005. His son has reportedly sold his shares in the franchise to a Saudi investor.

Coca-Cola is expected to launch in the next few months, although a Coca-Cola spokesman was not available to confirm this.

"If Coca-Cola starts manufacturing, they are not to be underestimated," says Rabbat. "They have learnt from Pepsi's experience how to market here. They will copy us." But as people associate Coca-Cola with America more than Pepsi, Joud would still be at a marketing advantage, Rabbat added.

Boycott campaigns in 2001 throughout the Arab world, in a show of solidarity with the second Palestinian uprising, saw Coca-Cola lose market share and Pepsi control 75% of the Middle East market, which it has retained, if not expanded, due to its presence in Syria.