How Pepsi Cola Duplicated Their Rivals And Made Billions

every single day pepsico products are enjoyed more than 1 billion times in more than 200 countries around the world and each year the mammoth company generates over 70 billion dollars in net revenue but for that to happen it first had to overcome multiple bankruptcies to understand the making of pepsico we need to go back all the way to the year 1889 that's when pharmacist caleb bradham first created pepsi cola like many pharmacists at the time caleb had a soda fountain in his drugstore where he served his own drinks his most popular beverage was something he called brad's drink it was a mix of sugar water caramel lemon oil cola nuts nutmeg and other additives and it was the perfect product to refresh and energize his customers as the drink caught on he decided to give it a snappier name and hoping to duplicate the success of coca-cola he named it pepsi cola just like the original cola the drink was sweet carbonated and well cola flavored and it eventually became so popular that caleb founded his own company in 1902 he called it the pepsi cola company at first pepsi had been marketed as a digestive aid and it tried to attract customers with the words exhilarating invigorating aids digestion perhaps not the most enticing slogan but it seems like pepsi colon noticed that too as the brand flourished they switched tactics and they dropped the slogan and began relying more on the power of celebrities to increase sales they hired barney oldfield as a spokesman barney was a famous race car driver of the era and he quickly became famous for his slogan drink pepsi it will satisfy you the ad campaign was a massive success and pepsi cola would continue to use celebrities in the coming decades but then disaster struck after many years of success the company fell on hard times after world war one caleb had gambled on the fluctuations of sugar prices during the war and believing that sugar prices would continue to rise he bought enormous amounts of sugar but unfortunately for him the exact opposite happened this left caleb with an overpriced sugar inventory he lost the company and pepsi cola went bankrupt what now [Music] at the time of pepsi cola's bankruptcy coca-cola had already long emerged as the dominant brand it was being sold around the united states and numerous foreign countries and the future could not have looked worse for tiny pepsi a group of creditors took over the company's trademark patents and other assets for just thirty thousand dollars and a couple of months later roy margarell bought them out for thirty five thousand dollars with full control of pepsi roy worked to keep the company alive personally loaning it money and moving the offices and plant to richmond virginia but despite his brave efforts he was unable to keep the company solvent when the great depression hit and by 1931 pepsi cola was declared bankrupt again that same year charles guth entered the game wanting to establish a new and successful pepsi cola company he quickly got to work and he not only had a chemist formulate a better drink but he also set up new bottling operations he began selling 12-ounce bottles for just five cents as pepsi was basically offering twice as much as what coke offered in its six ounce bottles it began touting itself as twice as much for a nickel and not much later it scored an unexpected hit as its nickel nickel radio jingle became the first to be broadcast coast-to-coast eventually the song would be recorded in 55 languages and it was even named one of the most effective ads of the 20th century but there was also a problem with the lower profit margin charles knew that the company would have to grow if it wanted to survive so he built bottling plants around the country and signed up hundreds of bottlers today this would be called scaling for the next two decades pepsi cola kept expanding and when alfred steele became pepsi's chief executive officer in 1950 it blew up exponentially as a former vice president of coca-cola alfred knew it's all about advertising and his emphasis on giant advertising campaigns and sales promotions increased pepsi cola's net earnings 11-fold it finally made pepsi the chief competitor of cola but cola was still outselling it by more than five to one [Music] coke had built its dominance with three little but very powerful words the real thing now how do you compete with a slogan like that well pepsi thought they knew exactly how to do that after all if coke was the original real thing then that meant it was the choice of older people right pepsi's solution was to set its sights on the then youthful baby boomers and it shifted its focus on younger people with the theme pepsi the choice of a new generation this marketing shift began in the early 60s and it didn't take long for it to work in just a few years time pepsi cut coke's lead in half the pepsi brand was growing up quickly and to keep up with the momentum it kept changing in different ways in 1964 it released its first diet soda and with it pepsi became the first national cola to offer a no calorie option to consumers diet pepsi was clearly targeted at young people and that same year the company also acquired the popular mountain dew brand not even a year later pepsi cola merged with snack maker frito-lay and pepsico was born realizing it needed to keep diversifying the newly created pepsico quickly set out to do just that and from 1977 to 1986 it purchased four major restaurant chains pizza hut taco bell kfc and 7up international of course it also kept focusing on its pepsi brand and things were going so well that the once failing pepsi was now threatening to displace coca-cola as the top soda brand in the u.s in addition the brand also made international headlines in 1974 when it became the first u.s product to be produced and sold within the ussr but would this be enough [Music] although coca remained the world's best selling soft drink pepsi continued to gain market share in the 1970s and early 1980s their pepsi generation ads attracted younger drinkers while older consumers were now targeted by its aggressive pepsi challenge campaign the campaign consisted of consumers taking blind taste tests and more often than not they were surprised to learn they preferred the sweeter taste of pepsi and not coca-cola coca-cola's headquarters in atlanta trembled with fear and even worse was that their own research verified pepsi's claim once again there was no stopping pepsi and in 1984 it broke new ground when it hired michael jackson to be its spokesman at the time mj was in the midst of his thriller success and the creative tv commercials were such a hit that pepsi would hire numerous other celebrities throughout the decade such as tina turner joe montana and michael j fox but it was with mj that pepsi truly made marketing history back in the 80s essentially two kinds of people existed coke drinkers and pepsi drinkers and if you loved michael jackson you now had good reason to want to be part of the pepsi clan coca-cola had already offered mj a 1 million dollar deal but this was rejected and the jacksons moved on to pepsico instead at the time pepsico's ceo roger enrico was looking for a big idea the goal was to make pepsi look young and coke look old and who would be better for that than the king of pop they struck a five million dollar partnership and it not only shattered the record for a celebrity endorsement deal but it also linked the two entities for an entire decade by 1985 war was raging in the cola duopoly and pepsi began to outsell coke in supermarkets would this finally be enough to beat its big rival [Music] while the war between cola and pepsi continued pepsico also had to pay attention to other aspects of its business between the late 1970s and early 1990s it had continuously further expanded by buying up businesses outside of its core focus of packaged food and beverage brands but by 1997 it became clear that these many non-core businesses were not as lucrative as they had hoped while restaurants made up 36 percent of its portfolio they only accounted for about 22 percent of its 3.7 billion dollar profit realizing it would be better to simply focus on soft drinks and frito-lay snacks again an exit plan was set in place and the previously acquired fast food restaurants were spun off into a new separate company named tricon global restaurants which later became yum brands after having rid itself of the fast food chains a new era of acquisitions and mergers began and it seemed like this time pepsico wanted to take a new route looking to add more seemingly healthy products it acquired the tropicana and dole juice brands from the sea graham company in 1998 and in 2001 it merged with the quaker oats company to form a new division quaker foods and beverages after its massive success in the u.s pepsico now started focusing more on expanding its operations in other countries too by the early 2000s russia had already been its second largest market and after buying a controlling interest in russia's largest juice manufacturer in 2008 and three years later completing its acquisition of whim build dan foods pepsico eventually grew to be the largest food and beverage company in the whole of russia [Music] today pepsico is one of the most successful brands in the entire world its product portfolio consists of a wide range of foods and beverages including 23 brands that generate more than one billion dollars each in annual sales and the company's success is driven by an expansive food and beverage portfolio that includes frito-lay gatorade pepsi cola mountain dew quaker tropicana and sodastream to just name a few like its rivals the pepsi brand has diversified far beyond what caleb bradham could have ever dreamed of the pepsi cola drink is currently almost as famous for its memorable commercials as for its never-ending battle with its eternal rival and since its inception in 1898 it has grown to be one of the most recognizable products in the world this was the story of pepsico did you already know of its multiple bankruptcies and which other details do you think could have been added to this story share it in the comments and make sure to check out our channel for more inspiring business videos

Channel: Business Stories

Views: 92,347

Keywords: Business, Business Story, Business Stories, Story, Storytime

Id: wS4GMKCjMl0

Length: 12min 36sec (756 seconds)

Published: Fri Apr 08 2022