Commentary

Pepsi Wakes Up And Shakes Up

Reacting to a shakeup in PepsiCo's top beverage marketing ranks last week, one reader commented in Ad Age: "Hopefully, Pepsi will get back into the sugar water business, not the world peace business." It looks like he's getting his wish with a new campaign that's now breaking (although in all logistical probability, the spots are the doing of the departed regime). Reads the subhed in the Wall Street Journal's lede article this morning: "Criticized for Taking Eye Off Ball and Focusing on Healthy Foods, Company Plans Summer Ad Splash."

A "Summer Time Is Pepsi Time" spot, for example, shows Santa on vacation in a tropical retreat, doing the disco thing. He takes a break for a soda, declines the bartender's knee-jerk proffer of a couple of Cokes and asks for Pepsi, explaining he wants "to have a little fuuuunnn." Cute. We suspect even Haddon Sundblom would chuckle -- although probably because he suspects the commercial isn't really going to sell any more Pepsis. What kid is going to drink something popular with one of the few guys who's actually grayer than I am? And to the rest of us, those old-school Coke bottles evoke deep gulps on a hot summer day (before all those tins cans came along).

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But bottlers and analysts were cheered by the new offensive. Jim Tierney, chief investment officer at W.P. Stewart, tells the Journal's Valerie Bauerlein and Mike Esterl that PepsiCo had "focused too much on redesigning Pepsi's logo and the Refresh Project " and dropped the ball on good, old, hardball soft sell. "You just can't go dark on brands and expect them to hold their value,'' Tierney says.

PepsiCo chairman and CEO Indra Nooyi has come under increasing scrutiny recently for a strategy that seems to be taking the company away from the lucrative brands that it has built its global presence upon and into more healthy, wholesome fare that she believes represent future growth.

"Is she ashamed of selling carbonated sugar water?" Seattle-based bottler Pat Weinstein asks. "That's a question that is raised often by the most concerned of the independent bottlers."

Nooyi tells the Journal's Valerie Bauerlein that the very idea that she is not a true-blue believer in blue-can Pepsi is "rubbish." In fact, she says, "I'm the only person who drinks blue-can Pepsi on this floor."

The decline of the flagship brand's fortunes is the byproduct of a conscious decision, it seems, to not get into bare-knuckle scraps over every teensy share point.

"What's been happening in this category forever: we, Pepsi, would push like hell to get a program with the [retailer], we'd spend everything, and get a tenth of a point of market share," Nooyi reveals. "The next period, Coke would come along, push like hell, and gain a tenth. This was a zero-sum game." So where's the profit in that? In any event, the company is spending 30% more on TV advertising than it did last year for its North American beverages.

For deeper insight into Nooyi's strategy, don't miss John Seabrook's "Snacks for a Fat Planet" piece in the New Yorker edition of May 16 (the digital edition is free to subscribers; access to the issue can be purchased for $5.99). It's actually a three-pronged approach -- "good for you foods, better for you foods and fun for you foods" -- as Seabrook discusses in a no-cost podcast conversation with Blake Eskin.

Seabrook also points out Nooyi has never run a division, managed a brand or sold anything. She is a strategist whose long-term goal is to boost sales of the "good for you" products -- snacks and drinks made of grains, fruit, nuts, vegetables, and dairy.

(The print story also includes a fascinating excursion into a Frito-Lay potato chip factory, where research is underway to reduce sodium but retain taste by using different kids of crystals ... but there we are, being diverted by the salty snacks once again.)

Ad Age's Natalie Zmuda broke the story of the shakeup in PepsiCo's beverage marketing ranks on June 16. Four days later, Pepsi confirmed that the duties formerly handled by PepsiCo beverages America CMO Jill Beraud had been divvied up into three roles. Lorraine Hansen is svp-global hydration; Brad Jakeman is president-global enjoyment and chief creative officer, focusing on Pepsi and other soft drinks; Simon Lowden is CMO of PepsiCo Beverages, which has responsibility for North American beverages excluding Gatorade and Tropicana. All three report to Massimo d'Amore, who is leading the global beverages group. Beraud chose to leave the company.

In an analysis of the moves, Zmuda indicates that there is some initial confusion over who's doing what, both internally and externally. But there's more to come, Credit Suisse analyst Carlos Laboy says approvingly.

"The changes in the New York marketing organizations haven't been as profound or as robust as they need to be," he tells Zmuda. "We expect there to be a lot more change and turnover."

Barron's blogger Avi Salzman writes that CLSA analyst Caroline Levy has upgraded PepsiCo's shares to "outperform," based on generally low expectations, recent sales trends and the executive suite overhaul. "We see recent marketing appointments as a positive and expect sales and earnings growth to accelerate," she says.

One other arrow in its quiver this summer, it can be reported with certainty, is "The X Factor."

2 comments about "Pepsi Wakes Up And Shakes Up".
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  1. Richard Frank from Artists for Humanity, June 28, 2011 at 11:16 a.m.

    Hopefully, Pepsi will get back into the sugar water business, not the world peace business."... Wow, so much for having the courage to have your brand make a shift toward healthier, socially engaged, community friendly. Yes it's sugar water, (with a host of other less benign ingredients) but our kids health is worsening, and there are a ton of global issues that we want our big food companies to, at the very least, let us know that they're concerned about. Pepsi Refresh got a lot of people interested in great organizations and activities. Sure we know we're drinking "sugar water" - but shouldn't we applaud companies that are looking to do better?

  2. Darrin Stephens from McMann & Tate, June 30, 2011 at 9:22 a.m.

    Pepsi's mistake wasn't so much the Refresh Project itself, it was that they cut TV advertising to fund the a large part of the intitiative on the internet.

    Let this be a cautionary tale other marketers have also failed to heed: Don't cut your TV budget to fund something on another platform that no one will see.

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