SHANGHAI: PepsiCo, the US soft drinks giant, is making increased headway in China, where competition with its major rival, Coca-Cola, is starting to intensify as the two companies try to drive growth in the downturn.

Pepsi was rated at number 23 in Business Week's latest Best Global Brands survey, while Coca-Cola took the number one position, but, according to researcher Euromonitor International, Pepsi is inching ahead in China.

Aided by an innovative approach to digital marketing, the brand is already the top-selling cola in the country with 23% of the soda market versus Coke's 22%, and China now "represents our single biggest opportunity today outside the US," according to Pepsi ceo Indra K. Nooyi.

Last year's "Go China" campaign competition in advance of the Beijing Olympics attracted 28 million submissions and more than 122 million online votes and more recently, the Pepsi Challenge hit the headlines with birthday celebrations for the 60th anniversary of the People's Republic.

Both promotions were the brainchild of Harry Hui, Pepsi's chief marketing officer for China, who says: "Consumers in China are bombarded with messages, so merely telling them what they should drink or eat might not resonate."

"Giving them a platform where they can talk back fosters a deeper relationship with the brand."

Not surprisingly, Coke too is turning up the volume in China. Pepsi may already be the top cola brand, but it is still behind Coke's Sprite, the top-selling soda. Coke's Minute Maid leads the juice segment, with 10.3% of the market versus a puny 1.4% for Pepsi's Tropicana.

Pepsi executives believe that their internet-led approach will pay dividends as they move more heavily into juices and other noncarbonated drinks, but they acknowledge that plans to boost distribution links are just as important as marketing innovation.

To really succeed, says Ken Newell, Pepsi's beverage chief for the country, "we must build plants further into China."

Data sourced from BusinessWeek; additional content by WARC staff