Pepsi Case Study

Pepsi is a world-known soft drink that has been producing the beverage for more than 100 years. In April of 2017, Pepsi launched a new commercial featuring Kendall Jenner. Through this commercial, “Pepsi was trying to send a global message of unity, peace, and understanding”. However, the general public’s response to the ad way anything but positive. Less than 24 hours after its debut, the ad was removed from the internet. Pepsi’s commercial is accused of being disrespectful, diminishing police brutality and the Black Lives Matter protests. This case study analyzes how Pepsi attempted to bring everyone together and harmonize the world through their commercial.

1.  Company History

In the early beginnings of what we now know as PepsiCo, started by a merger in 1965 of two very different brands. The first brand, Pepsi-Cola, was created in the late 1890s by a pharmacist Caleb Bradham (Our History). The second brand, Frito-Lay, Inc. was formed also by a merger between the Frito Company and the H.W. Lay Company in 1961. The company now reports $510 Million in sales and employs over 19,000 employees (Our History).

 

The information from the preceding section was gathered from “Reference for Business” as a descriptive timeline of Pepsi’s history;

 

Pepsi has a high standard of excellence since it is one of the leading companies of its time. During Pepsi-Cola’s early years it went through many setbacks. During World War I, the price of sugar increased dramatically making times tough for them. After the war the price plunged substantially, but they never recovered. The company was sold from Bradham to Roy C. Megargel. That didn’t last long, Charles G. Guth bought out Megargel and owned 91% of the company with intent of internationalizing. He did so until he was forced to step down for legal reasons.

 

The president of the company then changed hands quickly into Walter S. Mack, Jr., who was a former executive. In 1941, Loft Inc, a New York candy and fountain company made plans to merge with Pepsi-Cola to form Pepsi-Cola Company. In 1948 sales did plummet it was a big year for Pepsi-Cola Company. They moved their headquarters and started selling their product in cans.

 

In 1950, Mack was promoted to company chairman and Alfred N. Steele took over as president, former vice-president of sales at Coca-Cola. Steele got the transformation of the company underway and made changes in order to better the company. After expanding the company and becoming chairman in 1957, Steele died of a sudden heart attack in 1959 and was then replaced by Herbert Barnet and a man by the name of Joan Crawford, Steele’s wife, was elected as a board member. In 1959, president Nixon and the soviet premier stopped by the Pepsi booth at the Moscow trade show. The Premier was filmed drinking a Pepsi and this was viewed as one of the major stunts in Pepsi’s history.

 

During the 1960s and 1970s, Pepsi-Cola had outstanding success under Kendall. During this time, the widely-known Diet Pepsi. Mountain Dew, and On-Tap root beer were introduced to the product lineup. Also, in the 1970s Pepsi was the first soda brand to release half-liter and liter bottles to America. In 1970, after the merger of Frito-Lay and Pepsi to form PepsiCo, $1 billion in sales were reached because of the helping hand of Frito-Lay. During the late 1970s, PepsiCo added Taco Bell and Pizza hut to their empire.

 

1983 marked the beginning of more expansion and the start of production in China. Also in that same year, PepsiCo introduced the even bigger 3-liter container. Another significant publicity event for Pepsi happened in 1985 when the “Space Can” was opened on board of the Challenger, United States space shuttle. After Kendell’s many years of reorganizing and building the company, he was replaced by D. Wane Calloway in 1986. During the late 1980s and early 1990s, PepsiCo made joint ventures to disperse nine drinks including the widely-known Lipton Original Iced Teas, Ocean Spray Juices, and Mug root beer. Also during this time, the company purchased many restaurants including Kentucky Fried Chicken (KFC).

 

In 1996, Calloway, who was battling cancer, was replaced by Robert A. Enrico. In 1997, the company decided to form a new company from the three fast food restaurants they owned and was named Tricon Global Restaurants Inc., consisting of Taco Bell, Pizza Hut, and KFC chains. The very prevalent water bottle company Aquafina was created by PepsiCo in 1997. Another acquisition to the company was Tropicana Products, Inc. in 1988.  In 1999, Pepsi signed a 10-year deal with the Subway Chain. As it can be interpreted, the 1990s was big year for the company in acquiring many different companies and expanding beyond their original views.

The 2000s was no different for acquiring more businesses. In 2001, they gained Quaker Oats through a $13.4 billion contract. And with them came all of Quaker Oats’ business too. Then later, Pepsi gained Gatorade into their empire making them even more diverse in their beverage department. Then, up and coming present day, Indra Nooyi was integrated into the company as the CFO. This was a progressive movement for Pepsi because she is the highest ranking Indian-born woman in corporate America.

 

Mission

Vision

 

2.  Overview

On April 5, 2017, a globally known soda company thought they had a solution to the world’s problems. While in their minds they were changing the world, the public and the media thought otherwise. That company is Pepsi, one of the largest soda brands in the world. The issue came to light when Pepsi released a controversial television commercial related to protesting and Black Lives Matter movements. The commercial starts with attractive young men and women marching down a city street in a protest fashion. The young men and women are laughing and smiling while holding up signs with messages like “LOVE” and “Join the Conversation”. While this is going on, Supermodel Kendall Jenner is on the side of the street doing a photo shoot. She notices the march that is happening and a young man signals her to come along. She then rips off her blonde wig, wipes off her makeup and joins the crowd. After making her way to the front of the crowd she approaches a barricade of police officers. While in reality, violence might occur at this point, Kendall grabs a can of Pepsi and hands it to the officer. The officer then smiles and everyone cheers as they have now set aside their differences to come together as one. Pepsi seemed to believe the commercial “captures the spirit and actions of those people that jump into every moment”, while the public was frustrated with the fact that the commercial did not portray how the situation is actually handled in reality.

 

3.  Timeline

The “Black Lives Matter” movement was started after the shooting death of African American teen Trayvon Martin. It gained popularity through social media and continued to be controversial with more police and African American related deaths.

In the most recent presidential election with Hillary Clinton and Donald Trump, the “Black Lives Matter” activists became increasingly involved. They would show up to campaign events as well as having a leading activist by the name of DeRay McKesson endorsing Hillary Clinton in the Washington Post.

Despite all the support from Black Lives Matter activists, Donald Trump was elected the President of the United States. Shortly after the “All Lives Matter” movement sprang up on social media in response to “Black Lives Matter”.

In April of 2017, Pepsi created an ad starring Kendall Jenner in an attempt to bring all people together. However near the end of the ad, Kendall Jenner hands a police officer a can of Pepsi and everyone seems to get along. Although the ad miraculously passed approval both by Pepsi and , but the media did not take it the right way. Everyone on Twitter exploded saying it seemed like she was at a Black Lives Matter event and by handing the officer a Pepsi everything could be solved. The ad was immediately taken down and Pepsi issued an apology to Kendall Jenner. Pepsi’s stock was seemingly unaffected at the time of the ad, but oddly enough it decreased after the apology.

4.  Marketing

Pepsi uses public relations as their mains marketing strategy. The brand will help the community by participating in social responsibility, a commonly used practice in several Pepsi campaigns. Pepsi is also known for using for using celebrities to promote their product, frequently done through commercials, and, through individual social media accounts. In addition, Pepsi also promotes their brand business signs and through sponsoring a sporting event.

In order to create a successful marketing campaign, a company first needs to identify their target audience. However, Pepsi does not typically target one specific audience. Pepsi commercials are typically focused around a variety of the latest social trends. By doing this, the company’s advertisements target much more of the American population. For example, one commercial that was done by Pepsi used an NFL player, Drew Brees, and a popular boy-band, One Direction. By including the football player and One Direction, the commercial was able to target both football fans, and fans of One Direction.

Imbedded in Pepsi’s advertisements, is an underlying message. This message is designed to appeal to consumer’s emotions. The current product slogan, “Live for now” motivates Pepsi fans to live each moment to the fullest. By using global, pop-culture icons and popular music professionals, Pepsi connects the consumer to happiness and entertainment.

The following chart, borrowed from MarketResearch.net, illustrates PepsiCo’s segmentation, targeting and positioning:

Type of segmentation Segmentation criteria PepsiCo segment
Geographic Region Domestic/international
Density Urban/rural
 

 

Demographic

Age 15-45
Gender Males & Females
Life-cycle stage Bachelor Stage young, single people not living at home
Newly Married Couples young, no children
Full Nest I youngest child under six
Full Nest II youngest child six or over
Income Average, above average and high earners
Occupation Students, employees, professionals
Behavioral Benefits sought Refreshment, enjoying good taste, satisfaction of a habit, spending time
Personality Easygoing/determined/ambitious
User status Regular users
Psychographic Social class Working class, middle class and upper class
Lifestyle Aspirer, Succeeder, Explorer

 

 

5.  Corporate Communication Following the Incident

Upon realizing the out-roar of emotions by the general public, Pepsi submitted an

apology regarding the insensitivity of the commercial and for putting Kendall Jenner in

that position.

 

6.  Company Communication Methods

Pepsi often uses various social media sites such as, Twitter, Pinterest, Google+ and Facebook. The main way Pepsi communicates and gets their message out is through television advertisements, like the Kendall Jenner Ad. Overall they use both these methods and various sites to promote Pepsi in current and engaging ways. Pepsi’s social media use is mostly to engage young adults and teens.

However, most companies usually respond to criticism on social media, but Pepsi occasionally responds to positive comments and ignores the negative. Even though television ads are the most popular they also have advertisements on the radio and pop-ups on the internet. Television ads are popular because of various celebrities seen in the campaigns such as, Kendall Jenner, Michael Jackson, Beyoncé, and Jeff Gordon.

They have changed their campaigns from time to time, but currently it is “Live for Now” and they use that in their ads and sponsorships. It is similar to their global campaign which is “Embrace your past, but live for now” that currently features Beyoncé.

7.  Public Response

Pepsi is a brand that has aspired to create unity and understanding. However, after the air of their latest commercial, they are being mocked as tone-deaf and culturally unaware.  Shortly after the commercial was made public, the NBC late night comedy show, Saturday Night Live, created an episode that reenacts a behind the scene look during the creation of the Pepsi commercial. The episode mocks the director, showing him on the phone explaining his idea to a friend, “there’s this huge protest in the street, reminiscent of Black Lives Matter. Everybody is marching and they get to these police officers and you think it’s going to go bad because there’s kind of a standoff, and then Kendall Jenner walks in. She walks up to one of the police officers and hands him a Pepsi. That Pepsi brings everyone together” (SNL 2017). Elle Hearns, the executive director of the Marsha P. Johnson Institute and formerly an organizer for Black Lives Matter, said “no one is finding joy from Pepsi at a protest,” she said. “That’s just not the reality of our lives. That’s not what it looks like to take bold action” (Daniel 2017).

The Morning Consult conducted a survey regarding the Pepsi commercial. The survey included 2,200 people that took place from April 6th to April 9th. This poll found that after viewing the commercial about 44% of people had more favorable view of Pepsi, and only 25% had a less favorable view (Faber 2017).

 

 

9.  Social Media Response

Pepsi was consumed with controversy after their latest commercial made its debut. Social media users criticized the ad saying the commercial made light of very serious issues in America when Kendall Jenner solving issued between protesters and police by handing the officer a Pepsi and smiled. Social media users were in an absolute uproar. Social media users criticized everything about the two-minute commercial including, how peaceful the protest was, to Pepsi selecting Kendall Jenner as the star in the ad. Twitter, Instagram, Snapchat and Facebook, which are normally filled with selfies, food pictures and funny everyday memes, exploded with a combination of disbelief and outrage at the commercial.

 

Bernice A. King, the daughter of Martin Luther King Jr., took it to twitter to voice her opinion of the commercial stating, “If only Daddy would have known about the power of #Pepsi”. In this tweet, she is referring to a part of the ad when Kendall Jenner handed a police officer a Pepsi, which made him smile, and the crowd of protesters cheered. According to Brand watch, Pepsi’s social media mentions increased by more than 7,300% following the two days after the ad aired. There were 427,000 mentions of Pepsi on Twitter, Facebook and Instagram alone. and on April 5th Pepsi increased to another 1.25 million mentions on social media. Due to the backlash received, Pepsi was forced to remove their commercial less than 24 hours after debut. Pepsi’s goal was to unite people of all different backgrounds, and although it wasn’t the type of unification they were hoping for, they did succeed.

Examples of negative tweets:

 

9.    Financial Impact

In an interview done by PEOPLE magazine, an unnamed industry executive stated that the ad cost Pepsi between $2 million and $5 million just to produce and the media buy would be roughly $100 million.

Per the New York Stock Exchange, Pepsico, Inc. (PEP) opened at 111.99 on April 4th, the day the ad was launched, and closed at 112.08. The day that the controversial ad was pulled, the stock opened at 112.04, peaking at 112.59 and closed at 111.94. The day after it was pulled, stock opened at 112.12, peaking at 112.28, and closed at 111.58. The common consensus as to the stock price dropping was due to the apology issued by Pepsi both to Kendall Jenner and to the public.

On the other hand, one would believe that Coca-Cola would benefit from the Public Relations disaster produced by Pepsi. Coca-Cola opened at 42.51 and closed at 42.68 on April 4th. The stock opened the next day at 42.65 and closed at 42.57. The day after the apologies went public, the stock opened at 42.58 and closed at 42.67. As shown by the stock prices, there was not a significant spike in stock prices.

 

 

 

References

Farber, Madeline. “A Lot of People Actually Liked Pepsi’s Kendall Jenner Ad.” Fortune. Time Inc., 13 Apr. 2017. Web. 05 May 2017. <http://fortune.com/2017/04/13/pepsi-kendall-jenner-ad-poll/>.

Joyce, Gemma. “Data On the Extent of the Backlash to the Kendall Jenner Pepsi Ad.” Brandwatch. N.p., 07 Apr. 2017. Web. 02 May 2017. https://www.brandwatch.com/blog/react-kendall-jenner-pepsi-ad/

Nichols, Laura. “Plurality of Americans Actually Like Ad That Pepsi Pulled.” Morning Consult. Morning Consult, 13 Apr. 2017. Web. 05 May 2017. <https://morningconsult.com/2017/04/11/plurality-americans-actually-like-ad-pepsi-pulled/>.

Our History. (n.d.). Retrieved May 04, 2017, from http://www.pepsico.com/Company/Our-History/

Pepsi Commercial – SNL. Dir. Beck Bennett. Perf. Beck Bennett and Cecily Strong. NBC, 2017. Saturday Night Live, 09 Apr. 2017. Web. 01 May 2017.

PepsiCo, Inc. – Company Profile, Information, Business Description, History, Background Information on PepsiCo, Inc. (n.d.). Retrieved May 04, 2017, from http://www.referenceforbusiness.com/history2/40/PepsiCo-Inc.html

“Timeline: The Black Lives Matter Movement.” ABC News. ABC News, 22 July 2016. Web. 06 May 2017. <http://www.abc.net.au/news/2016-07-14/black-lives-matter-timeline/7585856>.

Victor, Daniel. “Pepsi Pulls Ad Accused of Trivializing Black Lives Matter.” The New York Times. The New York Times, 05 Apr. 2017. Web. 30 Apr

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