Why Pepsi Went Bankrupt

here's the truth Pepsi don't want you to know Pepsi started off as a ripoff of Coca-Cola and they even tried to sell their company to Coca-Cola on three separate occasions but Coke kept turning them down as a result Pepsi struggled and literally went bankrupt on two separate occasions and yet fast forward to present day and PepsiCo makes around 80 billion dollars of Revenue a year more than double the Coca-Cola Company you see Pepsi is no longer just a drinks business they are a gigantic Empire that owns more food and beverage products than you can even imagine lays Gatorade Cheetos Aquafina Tropicana Quaker Oats Mountain Dew Doritos the Brand's PepsiCo owns are endless in fact at one point Pepsi even started buying giant fast food chains like KFC and Pizza Hut they were even negotiating a deal to buy a huge Fleet of Navy warships so how did all of this happen how did Pepsi go from bankruptcy to global domination from humble beginnings to controversial conglomerate with blood on its hands welcome to the insane history of Pepsi [Music] foreign with a man named Caleb D Bradham who was born in 1867. Caleb grew up in a very small farming town in North Carolina his father worked as a local Merchant but his family was very wealthy and because of this Caleb was able to receive the best education and went off to become a doctor at the University of North Carolina however his father suddenly ran into financial trouble and could no longer afford to make the tuition payments so Caleb was forced to drop out of school despite this when he returned to his small town the locals treated him as if he actually was a qualified doctor because there was no other doctor available for miles around so Caleb gave out medical advice whilst also working as a local teacher so he could save up money within two years he'd earned enough money to go back to college but this time he decided he didn't actually want to be a doctor anymore maybe it was because of years of helping the local residents with their medical problems but Caleb had decided he now wanted to become a pharmacist instead so after graduating in 1892 at age 25 Caleb Bradham purchased a building in New Bern North Carolina to open the Bradham pharmacy at the time drugstores like this were incredibly popular and were a place where locals would actually hang out and socialize it was common to have a counter for people to sit and chat whilst having some snacks and a cold drink that's because most of the pharmacies had a soda fountain where soda was made by mixing carbonated water with whatever flavor the customers chose and there were hundreds of flavor syrups to choose from like orange grape Rose and countless more Caleb it was a very social person so by running a pharmacy of his own he quickly made friends with nearly everyone in the town now that exact same year Caleb started his Pharmacy business 1892 the Coca-Cola company was founded in Atlanta Georgia they had developed a cola syrup recipe that was sold at Pharmacy soda counters and so it wasn't long before Caleb Bradham had been introduced to Coca-Cola's drink Caleb very quickly saw the huge potential of it it was immediately a popular choice amongst customers when deciding what to order from the soda fountain but Caleb thought the only problem was that the original founder of Coca-Cola had mixed addictive chemicals into the recipe so Caleb had the idea to make his own very similar version of cola syrup but leave out the ingredients he considered harmful because Caleb wanted to make a true health drink that relieves indigestion but had the same color flavor that everyone seemed to love and thus Caleb's Cola syrup was a mix of natural flavors like caramel rare oils and fruit juice extract once Caleb settled on the formula he started to offer it as a new flavor at the soda counter in his Pharmacy and encouraged his friends to try it the locals nicknamed his Cola beverage Brad's drink in reference to the surname of its creator Caleb Bradham and for the next five years the locals would regularly request Brad's drink at the pharmacy soda fountain simply because they like the taste after years of hearing the locals tell him how good it was Caleb finally built up the confidence to try to sell his product elsewhere by this time Coca-Cola was growing massively successful and Caleb knew that there was a demand for more Cola drinks on the market so in 1898 he officially changed the name of his product to Pepsi Cola the word Pepsi comes from the Greek word Pepsis which means Digest because at this point Caleb still believed focusing on the health aspect was going to be key however what actually was most popular was The Taste and before long he was selling large kegs of Pepsi syrup to supply other soda fountains across the country for years Caleb was creating Pepsi Cola in the back room of his Pharmacy and in 1903 Caleb officially established the Pepsi Cola Company he closed down his Pharmacy so he could fully focus on Pepsi in the first year as an actual registered company they sold over 8 000 gallons of syrup and Caleb reinvested his earnings into advertising in local newspapers which helped the brand grow even more sales more than doubled to 20 000 gallons of syrup in 1904 and Pepsi was now far too big of an operation to run out of the pharmacy so Caleb bought a bigger building to use as a factory to produce Pepsi in larger quantities he also partnered with botling companies who wanted to be part of the Pepsi franchise thus allowing Pepsi to be sold by the bottle instead of just as a syrup salted soda fountains by 1910 Pepsi Cola was working with 250 bottling companies across 20 24 States and by 1915 Pepsi cola's assets were worth more than one million dollars Caleb Bradham bought a big house for his wife and children to live in and he was so popular in the local area people were encouraging him to run as the governor of North Carolina by all accounts Caleb had made it but that all changed after the start of World War One during the war the price of sugar skyrocketed due to strict rations before the war a pound of sugar cost just five cents but during the ration it jumped to 22 cents per pound and the price seemed to be increasing every month so Caleb assumed that the price would continue to rise and he decided to pour huge amounts of money into stockpiling more sugar if his theory was right that the price of sugar would keep increasing like this all the sugar he'd bought would soon be extremely valuable he'd also be able to produce his drink much cheaper than any competitors who would be paying way higher prices for their sugar however Caleb's theory was completely wrong just six months later the sugar price crashed down to three cents per pound making it even cheaper than before the war started to make matters worse most factories in America had to prioritize making products for the war effort so Pepsi went from having 250 bottling factories to just two so the amount of product they could sell was drastically cut down basically Caleb had spent more on sugar than what the company was able to earn they couldn't use it all and the current market price for that sugar was way below what he paid for it things spiraled out of control and in 1920 Pepsi Cola filed for bankruptcy Caleb was 53 at this point and he had to sell off all the remaining company assets like the Pepsi trademark and drink formula and thus Caleb returned to his old career as a pharmacist by 1934 Caleb was dead and so the original creator of Pepsi never got to see the insane success his company would soon go on to have I wonder [Music] after acquiring what was left of a Pepsi company for eight straight years the new owners desperately tried to increase the value of the business but when the stock market crashed in 1929 and suddenly the economic situation was looking very Bleak at this point Pepsi had just one bottling plant in Richmond Virginia and they were failing to make a profit so Pepsi declared bankruptcy a second time and they were forced to sell Pepsi to The Loft candy company in 1931. so Pepsi had now gone bankrupt twice with two different owners and had now been passed on to a third different owner however for Pepsi's biggest competitor Coca-Cola things were looking much brighter whilst Pepsi had been struggling so much through World War One and the Great Depression Coke had managed to secure a wartime contract with the United States government to sell Coke overseas and so they've been expanding all over the world of course the new owners of Pepsi were desperate to make money back on their investment and after seeing Coke's success they thought they'd come up with the perfect solution sell Pepsi to Coca-Cola throughout the 1920s and 30s there were three separate attempts to sell Pepsi to Coca-Cola but they refused every time in retrospect imagine how much money Coke could have saved themselves if they bought out their future biggest Rivals when they had the chance but at the time understandably no one believed that Pepsi could turn their luck around so when Coke rejected the chance to buy Pepsi three separate times eventually the Pepsi owners The Loft candy company realized they needed to try and find another way to save the business one of the first great decisions they made was when Pepsi began using recycled beer bottles to save money on production costs this meant they were able to charge just five cents for a 12 ounce bottle of Pepsi that was twice the amount of soda that was offered in a Coca-Cola bottle for the same price remember the Great Depression was still going on at the time so people were looking to save money any way they could so buying Pepsi instead of coke was an obvious choice for a lot of people given they were getting double the amount the next important decision by Pepsi was their heavy investment in advertising campaigns has this really helped the company take off there were Billboards skywriting a comic strip and even a popular new jingle that played over the radio basketball history for you this Pepsi Cola radio jingle was just 15 seconds long in total so it was cheaper to buy than the typical 60-second advertisement this way Pepsi were able to pay more radio stations Across America to run these ads over and over again until people had the jingles stuck in their heads however now that the Pepsi company was growing in popularity Coca-Cola obviously wasn't happy about losing business to Pepsi so in 1938 Coca-Cola took Pepsi-Cola to court for trademark infringement over their use of the word Cola obviously Coke are known about Pepsi cola's name for years but they hadn't bothered to sue them until now because until now they didn't think Pepsi was any sort of threat but it was quickly becoming Clear Pepsi was cutting into Coke sales so in court Coca-Cola argued that Pepsi was infringing on their copyright while Pepsi counted that coke was trying to form an illegal Monopoly over the entire Cola into industry in the end Pepsi Cola got to keep its name although they eventually shortened the name to just Pepsi but there was trouble on the horizon for Pepsi in 1939 World War II began and after what happened with the sugar rationing in World War One you might think that another War would spell another disaster for Pepsi but this time around they came up with a clever plan to stay in business Pepsi decided to change the colors of their brand to red white and blue to show their patriotism they also set up a campaign called your man in service where Pepsi installed recording booths all around the United States so that soldiers could record a message to their family for free this obviously generated a lot of Goodwill and patriotism towards Pepsi then during the 1940s Pepsi also made the very successful decision to Market their drink to the African-American community and hired an all-black sales and marketing team to create the ads this was huge because most of Pepsi's competitors only featured black people in the form of stereotypes so the African-American Community was a huge untapped Market that most other brands were ignoring with all of these successful advertising campaigns Pepsi was able to make get through World War II stronger than ever they were just getting started [Music] foreign fifty Pepsi hired a man named Alfred Steele as the new CEO this was slightly controversial as he was the former vice president of Coca-Cola unless Alfred was an expert on what it took to make a Cola Company successful and he quickly made several changes to the Pepsi brand in particular he liked to focus on giant advertising campaigns and big sales promotions he started introducing beautiful and glamorous women to Pepsi advertisements and Alfred still also just so happened to be married to the famous actress Joan Crawford so he brought her on as a model for Pepsi too since she was one of the biggest names in Hollywood her celebrity endorsement of the products massively boosted sales Alfred also pushed for a brand new logo and slogan they completely redesigned a swirl bottle which made the drink look more stylish Alfred's extensive ad campaigns and branding changes helped Pepsi grow out of its Poor Man's color image that some people associated with Pepsi he also made changes behind the scenes like giving teams within Pepsi's company more autonomy thus empowering them to bring new ideas forward all of these changes helped increase Pepsi's sales from 1.6 million in 90 150 to 11.5 million dollars in 1958. Alfred Steele is remembered for being one of the most successful CEOs in all of Pepsi history without him the brand might not be what it is today but sadly his career was short-lived because he died of a heart attack in 1959 so it was time for Pepsi to find new leadership and the job soon fell to a man named Don Kendall who'd been with Pepsi for his entire career he'd worked his way up the corporate ladder from a syrup salesman all the way to Pepsi president and then CEO and one of his first decisions was quite surprising Don decided to bring Pepsi to the Soviet Union it was of course a massive market and importantly a market Coca-Cola had not entered now that was largely because this was during the Cold War and so there was actually an organization called The House Un-American Activities Committee which would make sure that U.S businesses had nothing to do with the Soviet Union however that changed in 1959 when U.S president Dwight Eisenhower wanted to bring American culture to the Soviet Union and show them the benefits of capitalism and thus they hosted the 1959 American National X exhibition in Moscow Pepsi's new leader Don Kendall saw this exhibition as a big opportunity to introduce Pepsi to the Soviet Union and he was right there's even a photo of the former Soviet leader sampling Pepsi for the first time during this exhibition and after this successful introduction at the exhibition Pepsi managed to agree a deal with the USSR where Pepsi would become the very first American brand to be sold in the Soviet Union however there was one big problem because of controls the Kremlin put on their currency at the time the Soviet Ruble it was actually illegal to trade their currency globally meaning there was literally no International Currency Exchange Market for the ruble unless it was essentially worthless outside the USSR and Pepsi certainly didn't want to be stuck with profits that they couldn't take out of the Soviet Union so instead of selling Pepsi to the Soviet Union for cash they agreed to use a barter system for years Pepsi accepted stolench near vodka as payments and Pepsi also received exclusive rights to distribute this vodka in the United States so basically the Soviet Union got Pepsi concentrates and in return Pepsi got and vodka which they could sell in the US and therefore make US dollars from it and so this workaround seemed win-win as Pepsi could sell their product in the Soviet Union whilst bypassing the currency issue and for a while this was all well and good until 1979 where Pepsi became unable to sell enough of the Vodka for this deal to make Financial sense anymore so they needed to figure out something else they could receive from the USSR instead ideally something more valuable so Pepsi could very quickly sell it for dollars now there is a long-standing story that in 1989 the Soviet government paid Pepsi by giving them a fleet of decommissioned warships the idea was Pepsi would be able to make money from selling the ships for scrap metal and this was reported in the New York Times saying PepsiCo recently bought from the Soviets 17 submarines Cruiser a frigger and a destroyer they are being resolved for scrap the head of Pepsi then joked to George Bush's National Security advisor where disarming the Soviet Union faster than you are and so because of this warship deal worth hundreds of millions of dollars articles have popped up saying that Technic quickly Pepsi briefly became the sixth largest military in the world before they sold the ships for scrap metal however this isn't actually the case although Pepsi having its own Navy Fleet would take the meaning of Kohler Wars to a whole new level the actual truth seems to be that even though Pepsi considered this warship deal they didn't go through with that instead they drew up a new agreement for the Soviet Union to build Pepsi commercial freight ships instead which they could sell all these out and ironically all of this was completely irrelevant anyway as the plan fell through when a few months later the Soviet Union collapsed in 1991. Pepsi did remain a huge presence in Eastern Europe still though and in fact Russia was one of the handful of countries where Pepsi outsold Coca-Cola and over the years Pepsi expanded its presence in Russia like in 2008 PepsiCo bought the majority of shares in Russia's largest juice manufacturer and then acquired another huge Russian brand Wimbledon foods which made PepsiCo the largest food and beverage manufacturer in Russia however in 2022 battle changed after Russia's invasion of Ukraine and so Pepsi stopped manufacturing in Russia unless Pepsi's unusual decades-long relationship with Russia was finally over before we get to the next chapter of the story let's quickly talk about what's going on in present day right now it seems like artificial intelligence is at the top of the discussion for many businesses all over the world even Pepsi is using AI to create products consumers don't know they want yet but with all of these exciting AI developments going on how can you yourself be a part of this AI Revolution well that's where today's video sponsor comes in the investment platform MooMoo if you go to MooMoo and type chat GPT in the search box you can see the performance of AI stocks related to chat GPT and check out their analyst ratings to get assessments on whether you may want to buy hold or sell any of these AI stocks yourself and it gets even better when you open a free account you get one free stock just for registering then you get four more stocks if you deposit a hundred dollars and 10 more free stocks if you deposit a thousand dollars so that's up to 15 free stocks this is a limited deal though so click the link below now to get your free stocks and then you can also begin using moomoo's AI stock feature once you've done that let's get back to the story thank you foreign over the years Pepsi became dissatisfied with simply selling beverages they wanted to expand into snack foods because they knew that their Target customer was buying both soda and snacks at the grocery store at the same time they were complementary products so what if Pepsi sold both but rather than starting from scratch in a new market in 1965 Pepsi merged with the snack company Frito-Lay and together they became a new Corporation Called PepsiCo between them the brands had combined sales of over 500 million dollars already and within five years of forming PepsiCo together they reached 1 billion dollars in sales this merger between Pepsi and Frito-Lay was a move that worked very well for both of them as they knew teaming up to become one giant Corporation would be the fastest way to expand into new markets and pull their resources to help grow across the world what's interesting is that just a few years earlier in 1961 the Frito company and the HW Leon company had been two separate businesses that merged together to form the Frito-Lay company and yet just four years after that they were merging with peps sea to create PepsiCo and so all of this really just illustrates how business actually works two successful companies merge together to form one even more powerful company that can then crush or acquire smaller competition and this is basically how conglomerates get formed which is why nowadays you may be shocked to know just how many brands are owned by PepsiCo lays Gatorade Cheetos Aquafina Tropicana Quaker Oats Mountain Dew Doritos cap and crunch Rockstar and so many more it'd be hard to go shopping and not buy something owned by PepsiCo but as if dominating in food and beverages wasn't enough PepsiCo even acquired three of the top 10 restaurant chains in the United States Pizza Hut Taco Bell and KFC goes without saying but as soon as they bought these restaurants they required them to only serve Pepsi on beverages from their soda fountains for example KFC used to sell Coca-Cola but had to immediately switch to selling Pepsi instead after the sale to PepsiCo ironically though this strategy of acquiring fast food restaurants sort of backfired a bear firstly the industry was very competent additive and ended up diverting a lot of pepsico's resources away from their more profitable products but also the biggest problem was that by getting involved with some fast food chains it made rival fast food chains not want to sell Pepsi for example take a chain like Popeye's Chicken if they were to sell Pepsi in their restaurants they'd be kind to supporting KFC because Pepsi owned KFC so basically pepsico's idea of owning fast food restaurants to drive up sales of their beverages wasn't really having the desired effect and so they spun off all their main restaurants into a separate company so technically PepsiCo no longer owns them however this didn't stop PepsiCo trying to expand into other random Industries like at one point Pepsi acquired the sporting goods company Wilson but once again after a few years they realized these other Acquisitions were a bit of a distraction and went back to doubling down on Beverages and snack foods and so pepsico's profits continued to rise and everything seemed to be going great little did Pepsi know they were about to create one of the biggest marketing disasters in history that would cause them to attend billions of dollars and have very fatal consequences [Music] foreign 1992 Pepsi ran a contest in the Philippines called number fever they printed numbers on each Pepsi bottle cap ranging from zero zero one to 999 and every night they would reveal a winning number on the evening news if you had a Pepsi brand bottle cap with that number on you could redeem it for a prize now most of the prizes you could win were fairly small but there was also a big grand prize 1 million pesos equivalent of around 50 000 which was well over 600 times the monthly salary in the Philippines at the time needless to say winning that prize would be a completely life-changing amount of money for the average Filipino look for the winning numbers you could be a millionaire so the contest became hugely popular it reached a point where around half of the people in the Philippines were participating in the contest by collecting Pepsi bottle caps but not only were people buying more Pepsi for a chance to win some were even searching the streets or looking through crash trying to find bottle caps that had been thrown away in case one of them had a winning number now obviously Pepsi had a budget for this campaign and so the idea was they had a computer system to determine which numbers to print on bottle caps as this way they could make sure that only two bottle caps were printed with the number for the grand prize of 1 million pesos that meant only a maximum of two people could win the big grand prize and Pepsi had control over how much money they gave away during the whole campaign and the campaign worked great Pepsi sales massively increased in the country because everyone wanted a chance to win and so Pepsi decided it was working so well they would extend the contest by an additional five weeks however this is where the problems began the computer system they were using to determine which numbers to print on bottle caps had not been designed for the competition to run this long and so suddenly extending the competition caused a glitch that would have very drastic consequences on May 25th 1992 they announced the winning number of the 1 million peso prize number three four nine now remember there were supposed to be two people who had the winning bottle cap number however instead of just two winners like Pepsi expected because of this glitch they had printed over 600 000 bottle caps with the number 349 so as you can imagine when the winning number was announced hundreds of thousands of people across the country began celebrating thinking they just won a million pesos many of these people were in dire poverty and this was gonna change everything for them all their struggles were finally over people began passing in the streets and hundreds began showing up at the Pepsi Factory to claim their prize it was chaos outside and the police eventually had to show up meanwhile Pepsi Executives were panicking and scrambling to figure out what to do next if they actually paid everyone with the winning bottle cap number the amount they were owed it would cost Pepsi over 30 billion US Dollars it would literally bankrupt the company so they instead announced the winning number was a mistake but as a Goodwill gesture said that everyone who had a 349 bottle cap would be offered 500 pesos this was the equivalent of about 8 in dollars a pretty big come down from the fifty thousand dollars they were sure they'd won so as you can imagine people were incredibly angry and upset about this many began rioting in the streets people were throwing Molotov cocktails into the windows of the Pepsi Factory and bombing trucks tragically these riots left many people injured and five people dead a group of winners called Coalition 349 decided to get together and Sue Pepsi but in the end Pepsi only had to pay a fine of 150 000 pesos which was completely insignificant to them especially since the campaign had brought in millions of dollars of profit to many it was seen as a giant billion dollar Corporation giving people in poverty this glimmer of hope and then ripping it away and just to add to the controversy even more there were some newspapers that reported on a police testimonial from the time that claimed Pepsi had hired mercenaries to bomb their own trucks in order to make it look like Coalition 349 had done it and thus make them out to be thugs and damage their perception in court now of course Pepsi deny this and in May well be the case that the police officer's testimonial was wrong but either way this whole incident is a very dark part of Pepsi's history it was a genuine Mistake by Pepsi but their negligence had very real consequences and this wasn't the only time that Pepsi got in trouble for running a faulty contest in 1996 Pepsi started a campaign where you could exchange points for prizes from their Pepsi stuff catalog you could earn points by buying Pepsi products or purchase points for 10 cents each in the commercial for the contest they claim that for 7 million points you could win a Harrier jet this caught the attention of a business student named John Leonards at the time a Harrier jet was worth 23 million dollars and Jon realized that he could buy 7 million Pepsi Points for seven hundred thousand dollars so clearly this was actually a great deal after a few phone calls with investors John got the money together and sent in the paperwork to claim Harrier Jazz however Pepsi claimed that their commercial was just a joke and never sent him as jet so Jon decided to sue the company for false advertisement in the end though Pepsi won the case and they changed that commercial to include just kidding at the end and also increase the cost to 700 million points so once again Pepsi got away with it however to be honest PepsiCo has a whole string of controversial ads like they made one for Mountain Dew that got described like this it's been called the most racist commercial in history the most racist commercial ever and of course more recently who can forget the live for now Pepsi ad where Kendall Jenner seems to end the riots by giving a police officer a Pepsi at a time of huge serious protests including against police brutality the idea of some Mega Rich influencer handing over a Pepsi to suddenly solve everything just seems so tone-deaf and to many it just felt dismissive of people who'd been protesting for years or even been abused or arrested or as SNL put up um I stopped the police from shooting black people by handing them a Pepsi I know it's cute right however despite having several terrible ads Pepsi can also be credited with one of the greatest marketing campaigns ever foreign the ongoing rivalry between Coca-Cola and Pepsi is often known as the Kola Wars and over the years the two companies never held back from trying to knock one another down in their advertisements they were the two biggest soft drink companies in the world but Pepsi was always in second place however in 1975 Pepsi very nearly won the war when they introduced the Pepsi challenge this was an experiment where they filmed random participants doing a blind taste test one cup at Coca-Cola one cup had Pepsi but people didn't know which was which and were asked which one they preferred the taste of on average slightly more people chose Pepsi so Pepsi began running massive ad campaigns telling the world that in blind taste tests people prefer Pepsi at first Coca-Cola strongly denied this saying that there was no way it could be true and Pepsi obviously had a biased experiment but after doing their own blind taste tests Coca-Cola got the same results more people really did seem to prefer Pepsi slightly more when they couldn't see which drink was which this all seemed to indicate the main reason Coke was number one in sales was just because of their brand loyalty this made Coca-Cola so nervous that they came out with a formula called New Coke in 1985 and this new formula did score better than Pepsi and blind taste tests but this completely backfired on coke they received thousands of angry letters and phone calls from fans who wanted the original Coke taste back instead people hated the fact they changed the recipe and eventually Coke were pressured into reverting back to Coca-Cola Classic this was where Coke got lucky though people were so happy and thankful to have the original taste back after it had been taken away but Coca-Cola seemed to massively increase brand loyalty and people were no longer talking about the Pepsi challenge they were talking about the fact that original Coca-Cola had returned and so the brutal reality for Pepsi is that despite all the success they've had in the last 100 plus years when it comes to the simple battle between Coco Pepsi Coke's brand is still the winner and if you want to know the real reason why Coca-Cola will always beat Pepsi's brand then click this thumbnail now to find out the dark secret to Cope's success I'll see you there in a second cheers

Channel: MagnatesMedia

Views: 1,508,750

Keywords: Pepsi, Pepsico, Business, Company, Conglomerate, Business success story, companies, businesses, entrepreneurship, how pepsi became popular, pepsi success, pespi marketing, pepsi controversy, pepsi scandal, pepsi bankrupt, PEPSI, Pepsi cola, pepsi history, disturbing history of coca cola, disturbing history of pepsi, magnatesmedia, magnates media, magnetsmedia, magnets media, caleb bradham, pepsi's story, pepsi marketing, pepsi business, business documentary, documentary

Id: JQeptSh_o7I

Length: 28min 51sec (1731 seconds)

Published: Fri Apr 21 2023