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Case 2
PEPSI ONE
INTRODUCTION
On June 30, 1998, PepsiCo shocked the beverage industry with its introduction of a revolutionary new sugarfree cola with no aftertaste. Within one hour of FDA
approval of acesulfame potassium (ace K), the main
sweetening ingredient, the launch of Pepsi One was
announced. Samples of the new drink were in the hands
of reporters and bottlers within hours.
How was PepsiCo able to formulate a new core
brand so quickly? The answer is that Pepsi is no longer
an American company but has become a truly global organization. Pepsi has proven that it is a truly global company by developing a new product to satisfy an overseas
market segment. As the product was highly successful
in foreign markets, PepsiCo brought it back to the U.S.
market for a successful launch once ace K was approved.
Cha
14-2
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closer to regular brand Pepsi for people who are entering the category.
Market research and tests had been analyzed to determine the best positioning for Pepsi One. The new
drinks target group is young men in their 20s and 30s
who are scared away from diet drinks by the word diet
and by the bitter aftertaste. The product also targets consumers who switched to bottled waters instead of diet
drinks. Pepsi believes that the new product will reach a
whole new audience. Initial cannibalization of Diet Pepsi
is not considered to be severe, because Diet Pepsi consumers love the taste of Diet Pepsi . . . and Pepsi One
has a unique taste all to itself.
The new product was supported by a new and
unique marketing strategy to capture the American market. At this point the chairman of PepsiCo Inc. stated,
This is a real-time business, and were going to be a
real-time company. Pepsis launching strategy for Pepsi
One, which started in October 1998, was to quickly attract consumers and make them try the new drink over
and over again. Pepsi went for a national launch using all
available channels, packages, and geographies. The only
place where Pepsi One was not available initially was in
fountains. But in March of 1999, five months after the
launch, Pepsi One was also distributed through fountains. Industry analysts estimate that Pepsi will spend
$100 million in the first year to promote the product, to
boost sales in the low-calorie market and to gain market
share. Pepsi predicts that Pepsi One will attain sales of
$1 billion in its first year.
In the initial phase of the launch, Pepsi shipped
millions of free six packs to the doorsteps of cola
drinkers. Pizza Hut distributed free cans with every
pizza delivery. 7-Eleven gave away free samples to
buyers of sandwiches, and even greeters at 2,500 WalMart stores were equipped with free samples. Since the
drink targets young men, Pepsi created Pepsi One
lounges in approximately 100 shopping malls. While
waiting for their wives or girl friends, men can watch
sports and enjoy Pepsi One. Free samples were distributed at all targeted malls, and the turnaround to buy
the drink was 60 percent the next day. The initial
launch was very successful.
To support the national rollout of Pepsi One, Pepsi
signed Academy Award winner Cuba Gooding, Jr. as
spokesman. Cuba Gooding, Jr. starred in Pepsi One commercials featuring the slogan: Only ONE has it all. The
actor, who can be seen in adventurous and humorous settings, was signed to reinforce the message that Pepsi One is
for everybody, not just dieters. The first spot, Parachute,
finds Gooding in an airplane with a group of skydivers and
communicates the message that You havent tasted life
until youve tasted the massive cola taste of Pepsi One!
The second spot, Wired, plays in the boardroom of an
Internet company where a young millionaire cant help but
Supermarkets
51%
Drug & mass
merch. 6%
Fountain
21%
Convenience
stores 10%
Vending
12%
Changed
APPENDIX 1
PEPSICO ACQUISITIONS, DIVESTITURES, AND INTERNATIONAL EXPANSION
1898
1964
1965
1967
1970
1972
1974
1977
1978
1981
1984
with 1985
the
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1997
1998
Changed
APPENDIX 2
BRAND AND IMAGE DEVELOPMENT
Over the past 100 years Pepsi has developed into one of the worlds most recognizable
brands. This brand growth has taken place in all of the core soft drink and snack food
brands. The marketing slogans used by Pepsi have evolved in line with the product image.
1999
Changed
APPENDIX 3
ALL CHANNEL CARBONATED SOFT DRINK COMPANIES/BRANDS
Companies
1 Coca-Cola Co.
2 Pepsi-Cola Co.
3 Dr. Pepper/
Seven Up
4 Cott Corp.
5 National Beverage
6 Royal Crown
7 Monarch Co.
8 Big Red
9 Seagrams
10 Private label/other
Industry totals
Brands
1 Coke Classic
2 Pepsi-Cola
3 Diet Coke
4 Mountain Dew
5 Sprite
6
Dr. Pepper
with the
DEMO VERSION
7 Diet Pepsi
8 7Up
9 CF Diet Coke
10 Minute Maid
1998
Share
1997
Share
Share
Change
98 Cases
(millions)
97 Cases
(millions)
Volume %
Change
1997
Rank
44.5
31.4
14.4
43.9
30.9
14.5
0.6
0.5
0.1
4399.5
3100.2
1423.9
4208.6
2965.7
1392.5
4.5
4.5
2.3
1
2
3
2.7
2.0
1.3
0.5
0.3
0.3
2.6
100.0
3.2
2.0
1.5
0.5
0.3
0.3
2.8
100.0
0.5
Flat
0.2
Flat
Flat
Flat
0.2
270.0
194.0
126.1
46.0
33.7
28.0
258.6
9880.0
305.0
188.0
148.4
51.9
30.4
26.5
273.0
9590.0
11.5
3.2
15.0
11.4
10.9
5.7
5.3
3.0
4
5
6
7
8
N/A
10
1998
Share
1997
Share
Share
Change
98 Cases
(millions)
97 Cases
(millions)
Volume
% Change
1997
Rank
20.6
20.6
Flat
14.2
14.5
0.3
8.6
8.5
0.1
6.7
6.3
0.4
6.6
6.2
0.4
6.1
5.9
0.2
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5.4
5.5
0.1
2.1
2.3
0.2
1.8
1.8
Flat
1.2
1.0
0.2
2037.5
1978.2
3.0
1399.8
1391.5
0.6
851.8
819.0
4.0
665.1
605.2
9.9
651.8
598.0
9.0
599.4
566.8
5.8
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529.7
524.5
1.0
210.9
216.7
2.7
179.7
172.8
4.0
121.5
93.6
29.8
APPENDIX 4
COLA SHARES OF THE MARKET FOR CARBONATED
SOFT DRINKS IN THE UNITED STATES
Year
Total
/
Regular
/
Diet
/
1977
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
61.0
63.5
63.3
63.0
61.3
61.8
60.4
59.0
58.6
58.3
58.1
58.2
57.1
2.5
0.2
0.3
1.7
0.5
1.4
1.4
0.4
0.3
0.2
0.1
1.1
51.7
46.2
45.2
43.9
41.0
40.5
39.5
38.9
39.0
39.2
39.1
39.5
39.1
5.7
1.0
1.3
2.9
0.5
1.0
0.6
0.1
0.2
0.1
0.4
0.4
9.3
17.3
18.1
19.1
20.3
21.3
20.9
20.1
19.6
19.1
19.0
18.7
18.0
8.0
0.8
1.0
1.2
1.0
0.4
0.8
0.5
0.5
0.1
0.3
0.7
1
2
3
4
5
6
7
8
9
N/A
Changed
APPENDIX 5
SOFT DRINK AD SPENDING RISES SLIGHTLY IN 1997:
U.S. TRACKED MEDIA SPENDING ($ MILLION)
Coca-Cola Co
Pepsi-Cola
Dr. Pepper/Seven-Up
Dr. Pepper
7Up
Cadbury Bev
Triarc
Total
1997
1996
1995
1994
277.1
197.8
129.4
79.9
38.7
10.8
26.4
630.7
327.6
169.3
128.7
67.0
33.2
28.5
4.5
630.1
215.0
177.5
108.2
62.1
23.1
23.0
6.4
507.1
237.2
148.3
N/A
59.8
27.0
19.6
8.5
500.4
APPENDIX 6
15 U.S. MARKETS: COCA-COLA VERSUS PEPSI
Market
Company
Atlanta
Coke
Boston
Coke
Chicago
with
the DEMO VERSIONCoke
of
Dallas/Ft. Worth
Coke
Denver
Pepsi
Detroit
Pepsi
Los Angeles
Coke
Miami/Ft. Lauderdale
Coke
Minneapolis/St. Paul
Coke
New York
Coke
Philadelphia
Pepsi
Phoenix/Tucson
Pepsi
Providence
Coke
San Francisco/Oakland
Coke
Seattle/Tacoma
Coke
Cola
Diet Cola
Coke
Diet Coke
Coke
Diet Coke
Pepsi
Diet Coke
CAD-KAS
PDF-Editor
(http://www.cadkas.com).
Coke
Diet Coke
Pepsi
Diet Pepsi
Pepsi
Diet Pepsi
Coke
Diet Coke
Coke
Diet Coke
Coke
Diet Coke
Pepsi
Diet Coke
Pepsi
Diet Pepsi
Pepsi
Diet Coke
Coke
Diet Coke
Coke
Diet Coke
Coke
Diet Coke
APPENDIX 7
TOP DIET SOFT DRINKS
Rank
1
2
3
4
5
6
7
8
9
10
Top 10
Brand
Diet Coke
Diet Pepsi
Caffeine Free Diet Coke
Caffeine Free Diet Pepsi
Diet Dr. Pepper
Diet Mountain Dew
Diet 7Up
Diet Sprite
Diet Rite
Fresca
Share of
Diet Drinks
Share of All
Soft Drinks
33.2%
19.9%
6.9%
4.0%
3.5%
2.9%
2.3%
1.9%
1.2%
1.1%
77.2%
8.5%
5.1%
1.8%
1.0%
0.9%
0.8%
0.6%
0.5%
0.3%
0.3%
19.9%
APPENDIX 8
1997 8-OZ. SERVINGS PER CAPITA
Canada
USA
Europe
471
(15.3%)
861
(29.5%)
191
(6.2%)
402
380
274
246
240
315
301
357
112
139
248
271
221
252
115
Canada
USA
Europe
471
(15.3%)
861
(29.5%)
191
(6.2%)
90
72
27
17
16
848
3083
184
78
30
26
21
496
2920
191
N/A
89
12
24
1470
3084
APPENDIX 8 (continued)
APPENDIX 9
WORLD CONSUMPTION OF SOFT DRINKS BY REGION
(1992 1996, IN MILLIONS OF LITERS)
1992
1996
4,546.6
2,284.3
5,650.7
8,488.1
74,181.8
16,630.9
872.1
7,621.0
44,501.2
6,246.0
2,801.8
11,794.2
10,456.0
84,896.0
24,514.0
1,181.9
11,930.0
53,128.4
164,776.7
206,948.2
% of Total in 1996
3.0
1.4
5.7
5.1
41.0
11.9
0.6
5.8
25.7
100
APPENDIX 10
WESTERN EUROPE LOW CALORIE
CARBONATED CONSUMPTION
Year
2,670
2,935
2,959
3,142
3,254
3,256
3,435