Generate ASCII format xcodeproj
Install xcproj.
See also issues CocoaPods/#1275 and Xcodeproj/#61
Every time CocoaPods creates the Pods.xcodeproj project (when running pod update) or alters your application xcodeproj project (on the first time when you pod install), CocoaPods generates the project using the XML PLIST format, whereas Xcode usually generates its xcodeproj files using the ASCII PLIST format.
This has no consequence at all and works great (Xcode is capable of reading your PLIST files like the xcodeproj files whether they are ASCII-PLIST or XML-PLIST, or even if they were in the binary-PLIST format for what matter).
But when it comes to merging, it can be annoying because your Pods.xcodeproj can change from XML format (when generated after a pod update) to ASCII format (when Xcode modifies it), not really helping you see nice diffs in your diff tool.
Since CocoaPods 0.24.0 (see CHANGELOG.md, CocoaPods automatically converts the generated xcodeproj file to ASCII format if the xcproj is available in the PATH.
Simply install xcproj by following the instructions in the README.md and CocoaPods will now touch the xcodeproj files it generates with it to convert them to the ASCII PLIST format.