PepsiCo, every mention
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every year anyone David Rosenthal 82Ben Gilbert 36Howard Schultz 7
Verbatim, from the transcripts: the passages where PepsiCo comes up
The Walt Disney Company: The most successful enterprise for monetizing human nostalgia (Audio) · Acquired
- ▶ 3:15:50 Ben Gilbert You won't believe this, in addition to Coca-Cola, Pepsi.
- ▶ 3:45:16 David Rosenthal So, the four exhibitions that they create for the 1964 World's Fair, many of which should probably sound familiar to you, It's a Small World, sponsored by Pepsi and UNICEF.
- ▶ 3:49:46 David Rosenthal Think everybody that Walt is partnering with at the World's Fair, Ford, GE, Pepsi, all the companies that are corporate sponsors back at Disneyland.
Ferrari: What happens when you staple a luxury brand to a sports team? (Audio) · Acquired
- ▶ 1:53:34 David Rosenthal Luca has the test drivers at Ferrari go out and buy a Honda NSX and do like his own version of the Pepsi challenge, like
Coca-Cola: The Complete History & Strategy (Audio) · Acquired
- ▶ 1:22:18 Ben Gilbert Which is funny because Pepsi also did do some Santa illustrations, but Coke kind of ran away with it, and it became clear pretty early.
- ▶ 1:22:43 Ben Gilbert Which, interestingly, is owned by Pepsi today.
- ▶ 1:33:10 David Rosenthal Pepsi tried to sell itself to Coca-Cola, like sell its operations to Coca-Cola three separate times over the years.
- ▶ 1:33:33 David Rosenthal And that is what changes Pepsi's fortunes.
- ▶ 1:34:24 David Rosenthal In 1934, Pepsi in almost a last ditch effort to try and just do something to stay alive and save the company tests using recycled beer bottles, which are 12 ounce bottles to sell Pepsi also for a nickel.
- ▶ 1:34:45 Ben Gilbert And when you say save the company, just before you go on, this is not new to Pepsi.
- ▶ 1:34:50 Ben Gilbert The Pepsi
- ▶ 1:34:51 Ben Gilbert That exists today is like four Pepsis later from the Pepsi that was started around the same time Coca-Cola was.
- ▶ 1:35:01 Ben Gilbert Pepsi's been bankrupt two, three times and sold to new owners and completely new companies started with the word Pepsi in it.
- ▶ 1:36:03 David Rosenthal Pepsi starts selling 12 ounce bottles also for a nickel.
- ▶ 1:36:57 Ben Gilbert Now it doesn't do much for Pepsi's brand.
- ▶ 1:37:50 David Rosenthal They sue Pepsi for trademark infringement.
- ▶ 1:37:58 David Rosenthal So in this court process, the president of Pepsi at the time, a guy named Walter Mack ends up discovering that Coca-Cola had illegally bribed and intimidated
- ▶ 1:38:24 David Rosenthal Mac brings this evidence to the court where Coca-Cola is suing Pepsi for trademark infringement.
- ▶ 1:38:59 David Rosenthal The outcome of this is that Pepsi Cola becomes the only Coke competitor that is allowed to use the word Cola legally at this point in time.
- ▶ 1:39:26 David Rosenthal He tries to bribe Mac by saying like, you know, do you really want to be running this Pepsi thing?
- ▶ 1:39:44 David Rosenthal I'm giving Pepsi.
- ▶ 1:40:07 David Rosenthal So, the result of this is that Pepsi becomes Coke's first real legitimate competitor.
- ▶ 1:40:34 David Rosenthal And Pepsi establishes a pretty meaningful foothold.
- ▶ 1:43:54 Ben Gilbert Pepsi was basically saying, hey, you can't just say this supplier gets an exemption by name.
- ▶ 1:49:57 David Rosenthal For Pepsi,
- ▶ 1:50:24 David Rosenthal He defects to Pepsi.
- ▶ 1:50:32 Ben Gilbert They don't write Pepsi, they say the imitator.
- ▶ 1:50:43 David Rosenthal Basically, as soon as he gets to Pepsi, Steele stages a coup and kicks out Walter Mack, who had been running Pepsi for like the last 20 years.
- ▶ 1:50:52 David Rosenthal He shoves him out, and Steele becomes the new president of Pepsi.
- ▶ 1:51:38 David Rosenthal And not only does he turn around Pepsi's fortunes,
- ▶ 1:51:43 David Rosenthal I think Pepsi really becomes the more interesting company than Coke for at least the next call it, 3040 years here after World War II.
- ▶ 1:52:11 David Rosenthal So, Steele, when he gets to Pepsi, says, alright, we're gonna do three radical things.
- ▶ 1:53:05 David Rosenthal So this is a huge opportunity for Pepsi.
- ▶ 1:53:23 David Rosenthal This was a big area for Pepsi to make inroads.
- ▶ 1:53:29 David Rosenthal I mean, Coca-Cola is Atlanta's biggest company, its traditional southern company, whereas Pepsi's based in New York.
- ▶ 1:55:06 David Rosenthal Pepsi discovers James Dean, you know, like the actor James Dean.
- ▶ 1:55:22 David Rosenthal This ultimately would morph into, like, the Pepsi generation ads later, and then the choice of a new generation, generation X.
- ▶ 1:55:49 David Rosenthal Just generally better operational practices to Pepsi from Coke.
- ▶ 1:55:59 Ben Gilbert Cause Pepsi had a similar, or today even still has a similar bottling system, right?
- ▶ 1:56:05 David Rosenthal Yes, but Pepsi, at least until this point in time,
- ▶ 1:56:22 David Rosenthal That's what Steel's working with here when he gets to Pepsi.
- ▶ 1:56:27 David Rosenthal So on the back of this, Pepsi's U.S. market share jumps pretty astronomically.
- ▶ 1:58:32 David Rosenthal I'm pretty sure Pepsi doesn't even know this yet.
- ▶ 1:59:13 David Rosenthal One, right away, they respond to Pepsi in television.
- ▶ 2:02:19 David Rosenthal Meanwhile, by that point in time, Pepsi had launched Diet Pepsi and, uh, was doing quite well with that.
- ▶ 2:04:12 David Rosenthal There's one more thing though that Coca-Cola does in response to this insurgent Pepsi challenge, shall we say in the, uh, fifties and sixties.
- ▶ 2:08:36 Ben Gilbert And lastly, Coke sales teams are prohibited from selling syrup to restaurants for less than McDonald's pays, even if it means they're going to lose the business to Pepsi.
- ▶ 2:09:19 David Rosenthal In 1965, Pepsi buys the Frito-Lay company.
- ▶ 2:09:25 Ben Gilbert Famously, where there's still one company today at PepsiCo.
- ▶ 2:09:48 Ben Gilbert The wild thing is today, if you look at the health of Pepsi's beverages business and their food business with Frito-Lay products, Frito-Lay is a much, much better business.
- ▶ 2:09:59 Ben Gilbert While the revenues are a little bit smaller than the Pepsi business by revenue, Frito-Lay generates twice as much profit inside the parent company, PepsiCo.
- ▶ 2:18:04 David Rosenthal So back in 1967, a young Wharton MBA graduate joins Pepsi after a few years of working at IPG, the big ad agency, which owned, and I believe still owns McCann Erickson, parent company of McCann.
- ▶ 2:18:39 David Rosenthal So Pepsi, as we've discussed,
- ▶ 2:20:11 David Rosenthal So, he and Pepsi start working on a big bottle, and they pretty quickly realize like, oh, glass is not gonna work.
- ▶ 2:20:56 David Rosenthal And here's the kicker for Pepsi.
- ▶ 2:21:21 David Rosenthal Pepsi gets a big jump on this against Coke.
- ▶ 2:21:38 David Rosenthal So, uh, on the back of this success, Don Kendall, the, uh, then CEO of Pepsi is like, all right, kid, you passed the test.
- ▶ 2:21:56 Ben Gilbert And good for Pepsi to log this win.
- ▶ 2:22:14 Ben Gilbert Pepsi's very close behind all the big drink companies.
- ▶ 2:23:28 David Rosenthal You are now going to take over all of marketing for Pepsi.
- ▶ 2:23:36 David Rosenthal So the executive takes over marketing, he's getting settled in, he's surveying the current state of things, and he notices that the local Pepsi bottler down in Dallas, Texas is doing something really interesting.
- ▶ 2:24:23 David Rosenthal And so this local agency happens to also be the agency of the Pepsi bottler in Dallas.
- ▶ 2:24:28 David Rosenthal And so they go to the Pepsi bottle and they're like, Hey, guess what we discovered?
- ▶ 2:25:13 David Rosenthal Pepsi's market share in Dallas jumps by 14% thanks to these ads.
- ▶ 2:26:15 David Rosenthal We're gonna distribute them to all of Pepsi's local bottlers all around the country.
- ▶ 2:28:45 David Rosenthal In 1977, Pepsi outspends Coke in advertising for the first time in history.
- ▶ 2:28:52 David Rosenthal And Pepsi actually passes Coke in market share in the bottled market.
- ▶ 2:29:06 Ben Gilbert Pepsi basically never was able to break into the fountain business and the volumes that even today
- ▶ 2:29:17 David Rosenthal So it's interesting in the late seventies, Pepsi does try to break in.
- ▶ 2:29:28 Ben Gilbert Which actually kind of backfires because then Coke uses it to counter sell and they start going around to everyone else that is considering Coke or Pepsi and saying, Pepsi owns these restaurants that are competing with you.
- ▶ 2:29:39 Ben Gilbert And so then Coke is able to win sales on that, which is, I think is part of why Pepsi then spun that all out as yum brands, but also just kind of, cause I think it was a drag on their business.
- ▶ 2:30:26 David Rosenthal And, you know, he loves Pepsi.
- ▶ 2:32:17 Ben Gilbert The response comes in 1985, and the Pepsi Challenge was in 75, and Pepsi had already been taking share from Coke starting in, like, 1970.
- ▶ 2:45:45 David Rosenthal And Pepsi, of course, in typical Pepsi fashion says, oh,
- ▶ 2:46:20 David Rosenthal But from the time that Pepsi launched the Pepsi challenge in
- ▶ 2:50:18 David Rosenthal Well, news of what is about to happen leaks over the weekend, and Pepsi takes out a full-page ad in newspapers across the country on Monday morning with the announcement reading, the other guy just blinked.
- ▶ 2:50:36 Ben Gilbert After 87 years of going at it eyeball to eyeball, the other guy just blinked, and they gave all
- ▶ 2:50:44 Ben Gilbert All their employees the day off to celebrate.
- ▶ 2:58:06 David Rosenthal This is what finally stopped the Pepsi challenge is Pepsi won and then
- ▶ 2:58:14 David Rosenthal After Pepsi winning and Coke losing, Coke was able to come back.
- ▶ 3:08:07 David Rosenthal Pepsi ends up swooping in buying Quaker Oats and Gatorade, and Gatorade is like a home run for Pepsi ever since.
- ▶ 3:10:42 David Rosenthal Now, the interesting thing, though, back to Pepsi, they've managed this, at least from a business standpoint.
- ▶ 3:10:52 David Rosenthal You know, first with Frito-Lay, then with Quaker Oats and Gatorade, then in the bottled water market, so Pepsi launches Aquafina, Coke launches Dasani.
- ▶ 3:12:49 Ben Gilbert So in 2012, Monster reached out to potential buyers, including Coca-Cola and Pepsi, but Coke decided against pursuing it because the price was high.
- ▶ 3:15:50 David Rosenthal Doesn't make a dent in PepsiCo's number one position in sports drinks.
- ▶ 3:21:32 David Rosenthal I'm pretty sure we talked about with Howard on our Starbucks episode, the Starbucks Pepsi partnership with Frappuccino, right?
- ▶ 3:21:39 Ben Gilbert The Pepsi was the bottler that made the CPG version of the Frappuccino.
- ▶ 3:27:17 David Rosenthal I think there's a strong argument that Pepsi was the more interesting company.
- ▶ 3:27:40 Ben Gilbert Pepsi has 10%.
- ▶ 3:27:46 Ben Gilbert Coca-Cola does have 47% market share, and Pepsi has 19%, but in soft drinks, I mean, that category has just gotten a lot more competitive, and Coke has lost share.
- ▶ 3:31:59 David Rosenthal One, I think Pepsi was great for Coke.
- ▶ 3:32:03 David Rosenthal I think neither Pepsi nor Coke would be what they are today or be as great a product and company as they are today if it weren't for the other one.
- ▶ 3:32:12 David Rosenthal I mean, the Pepsi challenge is what made Pepsi.
- ▶ 3:34:14 David Rosenthal Pepsi, master of counter positioning.
- ▶ 3:35:00 David Rosenthal This is why it was such a big deal when in the seventies with the Pepsi challenge, Pepsi started outspending Coke in marketing.
- ▶ 3:35:08 David Rosenthal If you were really astutely paying attention to the dynamic, that should have tipped you off of like, oh, Coke is in big trouble relative to Pepsi.
- ▶ 3:35:16 David Rosenthal Like if Pepsi can afford now to make the investment to spend the same or more in marketing dollars, they're going to catch up.
- ▶ 3:37:52 Ben Gilbert But if Pepsi said we broke into the vault and we got the Coca-Cola formula and we're releasing something called Pepsi C and that is identical to Coke, something would go with it.
- ▶ 3:38:03 Ben Gilbert There would be some amount of value transferred from Coke to Pepsi.
- ▶ 3:39:23 David Rosenthal And to your point about Pepsi.
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