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  • Reinventing “Pepsi:” Back To A Soda Company (Video)

    It was not good business anymore to be the face of soda company, so Pepsi changed: it felt like it had to.

    Pepsi is chasing Coca-Cola again.

    PepsiCo found out the hard way that it doesn’t make its revenue and profits from being a healthy snacks company: it makes its real money by being a soda company, which seems to have come as a surprising revelation to the company.

    I can’t blame Pepsi, because they were actually being a thoughtful and innovative company by reading the tea leaves and noticing how out of favor, carbonated beverages had become. Also, with American obesity rates skyrocketing, especially among the nation’s young and the poor: it was not good business anymore to be the face of soda company, so Pepsi changed: it felt like it had to.

    Pepsi changed dramatically and it was insistent that it was not only more than a soda company: it was kind of not a soda company anymore. Chairman and Chief Executive Officer, Indra K. Nooyi – pushed the company in a new direction – wanted a different trajectory and she achieved it, but there might have been a flaw – no one anyone could have predicted: a “Black Swan” of sorts, but one that left CEO Nooyi wondering about the long-term benefit of such a huge gamble.

    I don’t know if PepsiCo’s finance department – its forecasters really understood that in a recession, people do not want to improve, they want to be comfortable – they want safety – a sure thing, so they usually gravitate back to what makes them comfortable: yes, soda makes mothers, fathers and children fat – really fat and unhealthy – it spirals medical costs and accelerates premature death – but soda does one thing that most other things can’t do: for a little bit of money, soda makes people happy, and Pepsi forgot this.

    Now, with revenues being hit and Coca-Cola Co. leading in two beverage categories – Pepsi has awoken to its slippage, while Coca-Cola has remarkably been the anti-Pepsi. Coca-Cola had the fortunate misfortune in 1985 of trying to change its image and formula to “New Coke,” which was a disaster, and never since that catastrophe has Coca-Cola veered away from being Coca-Cola ever again. And now Pepsi is going through the same thing: trying to change back into something they intentionally changed-away from, but it has ceded much market share to Coca-Cola, and is now trying to recapture the times of stronger performance and revenue for Pepsi’s sodas: Pepsi is trying to capture “yesterday” to remake the future.

    In the Wall Street Journal article, PepsiCo Wakes Up and Smells the Cola, Mike Esterl and Valerie Bauerlein state, “PepsiCo Inc. is turning its attention back to Pepsi…The snack-food and beverage giant is launching the first new advertising campaign for its flagship Pepsi-Cola in three years—offering one of the most visible signs PepsiCo is throwing new weight behind its biggest brand after it sank to No. 3 in U.S. soda sales last year, trailing not only Coke but Diet Coke….Ceding the top two spots to rival Coca-Cola Co. marked a huge embarrassment in a cola war that traces its roots to the 19th century.”

    It might be an embarrassment to Pepsi, but growth and innovation are about trying to do the same thing better and some new things for the first time: sometimes it’s about trying to do the same thing completely different, but any company with value has to go through this process in one way or another.

    At Upstart: Business and Management for 20-40 Year Old Professionals,  I am always exhorting the need to change before you need to change, and I think both PepsiCo and Coca-Cola Co. were right to seek out new business models, even while their mainstays were working well. All we can do is learn, and the nature of business – the nature of doing business well is continuous learning: we all need to find out our value propositions for the next five to ten years, and the only way to do that is by changing even if you might not need to change.

    Interview and discussion with PepsiCo C.E.O. and Chairman, Indra Nooyi.

    Good Luck.

    Calvin Wilson
    Founder and CEO
    Upstart: Business and Management for 20-40 Year Old Professionals

    Filed Under: Gamechangers


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