Peter Klinge
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This title refers to the book the Pepsi CEO of the 80’s Roger Enrico wrote in 1986, The Other Guy Blinked: How Pepsi Won the Cola Wars
This is the 
business story of how at an epochal stage Coca Cola lost its way in the century old battle between the 2 beverage giants. In the mid- 80s Coca Cola introduced New Coke- a debacle with classic marketing errors.
Coke was reacting to years of the Pepsi Challenge. The Pepsi Challenge began in the 1970’s and was spearheaded by John Sculley. Yes the same Sculley of Apple Computer notoriety. By introducing a sweeter tasting Coke to compete with Pepsi and withdrawing the original formula Coke stepped into a marketing trap.
Classic brand marketing blunders at Coke’s Atlanta headquarters ensued, and Pepsi Cola benefited from almost 2 decades of growth seemingly outwitting Coke at every turn.
But the 1st decade of the 21st century has been less opportune for Pepsi, and Coca Cola is once again hitting its stride across the globe. The fortunes of both companies are reflected in their market capitalization as of 2/9/12.
Coca Cola $154B 18 PE
PepsiCo 100B 16 PE
Market share demise in 2010: for the 1st time in recent history Pepsi dropped from # 2. Diet Coke unseated Brand Pepsi to be the # 2 brand in carbonated soft drink (source Beverage Digest). Diet Coke was introduced in the early 1980’s. Market shares look like this:
Coke Brand 17% represents 1.6 B cases of soda
Diet Coke 9.9%
Brand Pepsi 9.5% with a decline of -4.8% in volume
In $74B US retail sales for CSDs a share point is worth $740MM (per 2009 figures). So the Coke brand is selling over $12B at U.S. retail in the US alone. The margin of Coke over Pepsi internationally is by a much wider margin.
AdAge in its 2/9/12 online article PepsiCo Announces Millions in Additional Ad Spend …The company reveals plans to reinvest in marketing. This article points directly to the issues Pepsi has had.
Specifically, they reduced marketing spending significantly relative to their sales, and Coke continued to invest aggressively.
PepsiCo’s issues appear to be more on the beverage side of the company. Frito Lay is dominant in snack foods. Only in North America and in grocery is Pepsi a strong competitor to Coke. As Pepsi’s position has weakened the last 10 years the company’s marketing and distribution power diminishes with bottlers, grocery, Convenience and Gas stores, and restaurant chains. This too can weaken their prized and profitable position in everything snack food.
The fountain sales business comes under greater pressure. This includes the YUM Brand restaurant business of KFC, Taco Bell, and Pizza Hut that were spun out of Pepsi Co along with David Novak, and other key Pepsi veteran executive stars.
FMCG- Fast Moving Consumer Goods such as Pepsi and Coke own huge trademark product brands where a bottle of Coke might mean 10s of billions of dollars in worldwide retail sales. They rely heavily on promoting lifestyle imagery versus product or quality benefits.
This type of image marketing to remain top of mind with a consuming public requires diligence and persistence of who the company is, where it’s going and how its brand(s) fit into current consumer tastes- always changing and fickle among a proliferation of beverage choices.
The most recent Super Bowl advertising featured Coca Cola Polar Bears, and Pepsi’s Elton John/X Factor talent duo. Pepsi’s commercial brings back Pepsi’s music association and heritage of previous pop stars e.g. Michael Jackson, Madonna, Ray Charles, and Britney Spears to mention a few.
But the choice of Elton John seemed odd to me. Elton John appeared in a Coke Commercial c 1990. Elton is a classic icon for sure but hardly a hip, cool, leading edge performer normally associated with Pepsi. He seems more Coke than Pepsi.
Meanwhile the Coke Polar Bears reach back to the 80’s for Coca Cola. Very family friendly, somewhat contemporary, well executed and very classic traditional Coke; and somewhat expected.
I myself am a “Cola Wars” veteran as they’d call us back in the 80’s and 90s. I worked at Coca Cola advertising agency SSC&B Lintas and then Pepsi agency BBDO.
On my early ‘90s tour I learned from great marketing and advertising leaders. Some were well known at the time: Mr. Enrico, Phil Dusenberry and company at BBDO, and Alan Pottasch, the so called father of the Pepsi Generation. Mr. Pottasch’s Pepsi tenure began in the early 1960’s and for more than 4 decades he presided as Pepsi Cola’s advertising director. He maintained the integrity of the brand through successive Pepsi CEO and marketing department changes.
He cultivated long term advertising agency partnerships, most notably with BBDO, and work deftly with every CEO in shaping and defining the Pepsi Generation.
The Pepsi Generation and related the Choice of a New Generation sustained the company for decades. Represented a Pepsi brand that was consistently irreverent, cool, hip and leading edge; the contrary challenger brand of the “classic” status quo.
Sometimes there were controversial personalities or incidents such as Madonna or when shooting a commercial Michael Jackson’s hair caught fire*. But the Pepsi Brand was always unexpected and often poking fun at the staidness of Coke.
If you’re young at heart and spirit then Pepsi is for you, and the brand associations will excite you.
I was a VP mid-level executive at BBDO responsible specifically for Diet Pepsi’s Ray Charles “You Got the Right One Baby… Uh Huh” campaign. I was privileged to be part of the magic of this campaign’s creation. We launched the 1st Ray Charles commercials in the Super Bowl the same week of Operation Desert Storm in the 1st Gulf War against Iraq in 1991. This link is to the Ray “Performance” spot Ray Charles Performance 1991
About a decade ago I published an article on that period. I’ll summarize what I think worked then and what will again for Pepsi today.
The result of these problems is reflected in their slowing business performance and retreat from Coke. The reinvestment of marketing over the next several years is a start, but will be ineffective and uneconomic if the leadership fails to reclaim the company’s heritage and renew a sense of purpose.
What that is and how it’s defined and presented in the marketplace will be exciting to observe.
* A fun read about advertising and Pepsi is Phil Dusenberry’s book
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By Peter Klinge, Jr.
The great recession led to cost cutting, layoffs, retrenchment, and a good deal of fear. Today with an improved outlook, more companies are turning their attention to the question of how to build profitable top line growth.
Our experience indicates that if a company does not look aggressively at how to change their approach to revenue generation they’ll be disappointed if they expect the economy alone to bring back strong revenue growth.
Here we’ll outline strategic and tactical approaches for companies to address ‘how’ to change the trajectory of revenue growth. Continue reading
Good long term businesses execute well on many fronts. Marketing is as significant a competency as any business function.
Regardless of industry or customer audience marketing informs the who, what, and how of an organization to the marketplace. I write about and work in companies as an executive to drive home how an idea that bridges across customer, organization, and management of vision.
The essence of marketing is tapping consumer desire to sell a product. In developed economies product marketing is not ‘need based’ but desire driven.
For example, purchasers of soap want to know if it does more than just clean, they also want to know that it deodorizes, scents, etc. Continue reading
