Pepsi, Coke Raise Prices Ahead of July 4

Increases to Roll Out Across Packages, Brands to Combat Rising Commodity Costs


Consumers' favorite beverages are about to get a bit more expensive.

Heading into the July 4 holiday, both PepsiCo and Coca-Cola have said to expect price increases, as the companies try to offset higher commodity costs.

PepsiCo aims to raise prices of its soft drinks in the U.S. as the economy improves, CEO Indra Nooyi said. The company in April vowed to increase beverage prices from July 4 to offset higher commodity costs, with rival Coca-Cola also saying prices would increase 3% to 4% in the second half.

"The economy is better now than it was last year," Ms. Nooyi said in an interview on the sidelines of a consumer goods forum in Barcelona earlier this month. "Ultimately the test is going to be when unemployment rates come down. Everybody is focused on it."

Trade publication Beverage Digest reported that Coca-Cola's two biggest bottlers in the U.S. will be raising prices in the coming weeks, citing two retail customer pricing letters. One from Coca-Cola Refreshments stated that it will raise prices by 3% to 4% on July 31. Coke Consolidated says it will raise prices 3% to 5% in early July. In communicating with retail customers, both bottlers cited rising costs in ingredients, with Coke Consolidated saying that, in the last year, corn prices are up 110%, aluminum is up 24%, plastic is up 42% and crude oil is up 43%.

Coca-Cola Refreshments said that the "magnitude of this increase will vary across packages and brands."

New Pepsi Ad Tweaks Coke With Help From Santa

Cola Wars Now Involve Full-Calorie 'Blue Can' Brand as It Looks to 'Own the Summer'


PepsiCo is out with another ad tweaking the competition.
 



A new campaign, "Summer Time Is Pepsi Time," for the flagship Pepsi brand, takes a swipe at rival Coke with a little help from Santa Claus. It's the third effort from the company in the past year to attack a Coca-Cola brand. Late last summer a Pepsi Max spot took on Coke Zero, and in March Sierra Mist took aim at Sprite.

"Its right for Pepsi to play with this inside joke that in summer time everybody drinks Pepsi, even the most iconic Coke celebrity, which is Santa," said Massimo d'Amore, CEO-PepsiCo Beverages America, adding that the "spirit" of the campaign is closer to the Pepsi Max ads than to the comparative Sierra Mist ads. "Hyper-competition is always good to sell more soda. Consumers love the cola wars. Since we launched the Max campaign, Max is growing triple digits and Coke Zero is still growing, so everybody wins when we get into the cola wars."


The ads are also meant, in part, to silence critics and pacify bottlers who have complained that Pepsi hasn't paid enough attention to its full-calorie flagship brand. Measured media spending behind the brand has dwindled in recent years, falling to $154 million in 2010 from $193 million in 2006, according to Ad Age's Leading National Advertisers Report, while spending has also focused on Pepsi Max and, more recently, Diet Pepsi. Last year PepsiCo shifted its major sports sponsorships from Pepsi to Pepsi Max. And Diet Pepsi had a significant presence earlier this year at New York's Fashion Week, and is currently running a campaign featuring Sofia Vergara to promote its recently launched Skinny Can.

Compounding the situation, Diet Coke surpassed Pepsi as the country's No. 2 soda in 2010 behind brand Coke. In the wake of that news, PepsiCo said it would pump up spending behind its beverage brands by 30%.

"We have, in the last nine months, relaunched Max [and focused on] Diet, so it's normal now that we bring the action and excitement to the 'blue can,'" Mr. d'Amore said, referring to the flagship brand. "We have six months of really heavy communication weight on Pepsi, following the first six months which were heavy on Max and Diet. I can assure you the alignment with the bottlers and their morale [is good]. They're very satisfied now and looking for creative ways to activate the ['Summer Time is Pepsi Time'] campaign in their markets."

Mr. d'Amore added that on the heels of the summer campaign, activity around Fox's fall series "X Factor" will pick up. The Simon Cowell-created singing competition will focus on Pepsi, which could be a major boon for the brand if the show's success mirrors that of "American Idol" and its Coke sponsorship. "We're feeling very good about the next six months on Pepsi," Mr. d'Amore said.

In the "Summer Time" spot, which was created by Omnicom Group's TBWA/Chiat/Day and broke last night on ABC's "The Bachelorette," Santa parties on the beach to the 1990s hit "This Is How We Do It." When he goes to get a soda, the bartender serves up a Coke, but Santa turns it down and asks for a Pepsi. "Pepsi? But Mr. Claus, I thought you had a deal with ... you know," the bartender says. Santa replies, "I'm on vacation; I wanna have a little fun." A second spot is also on tap from TBWA. The campaign also includes radio, out-of-home and digital buys, as well as social-media elements. Today, for example, the "Naughty Elf" from Pepsi's TV spot will take over the brand's Twitter handle. And a Foursquare partnership will see consumers checking into hot summer locations, such as beaches.

"We want for Pepsi to own the summer," said Mr. d'Amore. "It's a time when people want to have fun, go on vacation. ... The entire blue system, whether the bottlers or ourselves, is committed to really owning the summer."
In addition to the campaign, this summer will also be a busy time for the newly restructured marketing teams at PepsiCo headquarters. As first reported by Ad Age, Pepsi created three new marketing roles amid the departure of Jill Beraud, chief marketing officer-PepsiCo Beverages America. Brad Jakeman, former exec VP-chief marketing officer at Activision Blizzard, has taken on the role of president-global enjoyment and chief creative officer. He will focus on trademark Pepsi, as well as the company's other soft-drink brands. Lorraine Hansen, a Kraft Foods alum, joined the company as senior VP-global hydration. And Simon Lowden moved from Pepsi International to become CMO of PepsiCo Beverages Co., which has responsibility for North American beverages excluding Gatorade and Tropicana.

Mr. d'Amore said the executives will be settling into their new roles in the next month, with Mr. Jakeman and Ms. Hansen expected to be "fully operational" by the end of July. Mr. d'Amore said that he believes the new structure, which introduces global roles, is the "right structure" for the company.

"It's the first time we really have a global brand management for the beverage business of PepsiCo," Mr. d'Amore explained. "This is the right of passage from a multi-regional to a global company. I think this is a huge enhancement to the way we run the beverage business around the world, and because of the new structure and quality of the people we appointed, we're not losing any focus on the U.S."

Major Changes at PepsiCo as Marketing Department Reorganizes

Jill Beraud Leaving as Brad Jakeman Joins, Simon Lowden Gets New Role

PepsiCo is undergoing a major transformation in its beverage marketing ranks.

The company is restructuring its marketing department to include three new marketing roles, with an eye toward embracing a more global approach. The three executives, expected to be two external candidates and one internal candidate, will take on various duties handled by Jill Beraud, chief marketing officer-PepsiCo Beverages America. Ms. Beraud has chosen to leave the company amid the restructuring, according to executives close to PepsiCo.

Brad Jakeman, who gaming giant Activision Blizzard confirmed today had left his role as exec VP-CMO, will be taking on the role of head marketer for the Pepsi trademark globally. According to executives familiar with the matter, his new role will involve responsibility for Pepsi, Diet Pepsi and Pepsi Max, primarily, though he will also be working on the company's other soft-drink brands, such as Mtn Dew and Sierra Mist.

A second executive is expected to be the global chief marketer for beverage brands, not including carbonated soft drinks, Gatorade or Tropicana. That would leave brands such as SoBe, Aquafina and Propel. Simon Lowden, who currently has a chief marketer role for Pepsi International, is said to be taking on the role of CMO for the U.S. beverages business.

According to the executives, PepsiCo plans to announce the moves in the coming weeks. It's most likely that all three executives will report to Massimo d'Amore, CEO-PepsiCo Beverages America, in some fashion. A PepsiCo spokesman declined to comment.

The moves position PepsiCo to embrace more global ad executions, a key differentiator between it and rival Coca-Cola. In the last several years, Coca-Cola has embraced a more global approach, for example, in 2008 running Olympic-themed ads from Wieden & Kennedy in at least 25 countries, while 150 countries used some element of the Olympic campaign. And, most recently, Fanta launched a campaign in 190 countries. Coca-Cola has also trimmed its global agency roster from 82 creative agencies to a number in the 30s.

PepsiCo, by comparison, executes in a more local or regional fashion. For example, while its new logo rolled out in the U.S. in late 2008, the company continued to run ads featuring the old logo six months later overseas. BBDO handles Pepsi outside of the U.S., while TBWA/Chiat/Day handles it stateside. OMD handles media globally. A PepsiCo spokesman declined to comment on what any potential restructuring could mean for its agencies.

Pepsi and Diet Pepsi have both been losing ground. In 2010, Pepsi's share of the soft-drink market fell 0.4%, allowing Diet Coke to move past it as the second biggest soft drink brand in the U.S. Diet Pepsi saw its share fall 0.3% last year, according to Beverage Digest. Other brands, including Mtn Dew and SoBe have been strong performers, however. Still, acknowledging the need for an increased marketing presence, PepsiCo announced this spring that it would ramp up ad spending across its beverage portfolio by 30% this year. That will include new ads for Pepsi, Diet Pepsi and Gatorade. The company is also sinking $60 million into its sponsorship and integration with "X Factor," the Simon Cowell-created music competition that is meant to compete with "American Idol," which is sponsored by Coke.

Ms. Beraud was brought in as the global CMO for PepsiCo in late 2008 but was shifted in mid-2009 to head marketing for the beverages division when Dave Burwick departed. It's not clear where Ms. Beraud will be headed. She joined PepsiCo from Limited Brands, parent of Victoria's Secret, where she spent 13 years. Ms. Beraud was named an Ad Age Woman to Watch in 2009. At the time, she called the global CMO role exciting and intriguing, noting that she had admired PepsiCo from afar for years.

Pepsi Max Presents... A Christmas Story from Snoop Dogg

PEPSI STORMS BACK INTO THE SUPER BOWL

Sets Consumer-Generated Push for Pepsi Max on Advertising's 'Largest Stage'

                            

 
 

NEW YORK (AdAge.com) -- Pepsi is back in the big game.

After a year-long hiatus, the beverage giant is coming back with three 30-second spots supporting Pepsi Max, and will be taking a page from sibling Dorito's playbook with a "Crash the Super Bowl" campaign.

DAVE CHAPPELLE "PEPSI COMMERCIAL"

INTERNET WEEK NYC POWERED BY PEPSICO

NIGEL SYLVESTER X GATORADE :: GO ALL DAY

Gatorade Go All Day the night episode - More BMX Videos

BIG CITY DREAMS MAY NOT EQUAL BIG ENDORSEMENT DOLLARS

BBDO x TROPICANA BRINGS LIGHT TO ONE OF CANADA'S DARKEST PLACES

Americans in the lower 48 states who experience seasonal affective disorder might be interested in the latest doings from Tropicana in Canada. In January, the Pepsi brand and its agency, BBDO Toronto, visited the northern town of Inuvik in the Northwest Territories, which experiences weeks of darkness during the depths of winter, and brought the sun—or actually, an artificial, electric-lit facsimile of the sun—to incredulous, grateful residents. Footage from the event is being used in a campaign breaking this week in Canada that's built around the theme, "Brighter mornings for brighter days." Though the stunt is a bit reminiscent of Juan Cabral and Fallon's Cristo-esque work in Europe, it seems a better positioning than what Tropicana has going in the U.S., which might be summed up as "Weirder packaging for confused consumers."

NEW COKE: ONE OF MARKETING'S BIGGEST MISTAKES TURNS 25

WHAT'S A SPORT? GATORADE REDEFINES TO BROADEN TARGET

NEW YORK (AdAge.com) -- The pressure is on Gatorade to perform this year, following a tough 2009 that had analysts, beverage industry watchers and the ad industry believing the granddaddy of sports drinks had lost its mojo.

NEW LINES: G-series drinks cater to pre-, during- and post-activity. The turnaround hinges on a new campaign, an overhauled product lineup including before and after workout drinks, and a broadened definition of sports to include things such as surfing and acrobatics to lift Gatorade, which saw a 15.5% decline in volume last year. Executives have committed to delivering 4% to 6% revenue growth, following a job-led economic recovery, an ambitious target being watched closely by analysts who want to see signs of a turnaround by year's end. It is also being viewed by some industry insiders as an important moment in the career of Massimo d'Amore, CEO of PepsiCo's Americas Beverages Group.

While Mr. d'Amore manages an entire portfolio of brands -- he's been involved in many of the changes in the beverage division over the past 18 months -- he's said that Gatorade has gotten a lot of his "focus and attention." The bets Gatorade is making are high-profile, given it is the leader in the sports drink category and PepsiCo's fourth-largest brand worldwide. And its clear Mr. d'Amore has been intimately involved in the development and execution of the multi-year effort.

"The success of G is closely tied to the future of Massimo's career at PepsiCo," said one executive familiar with the company.

PepsiCo chose not to comment on outsiders' views of the company. But at a recent investor meeting, CEO Indra Nooyi expressed confidence in the direction of Gatorade and Mr. d'Amore.

Waiting for results

This year, 12 products -- some new, some repackaged -- are hitting store shelves; new distribution deals with GNC and Whole Foods have been struck; the target consumer has been tweaked to include action sports, surfers and dancers; and teens are receiving plenty of attention.

Analysts and industry watchers who have been privy to PepsiCo's pitch say it makes sense. But they're still looking for results, and fast.

The first proof point will be a campaign set to launch later this month. While last year's campaign was focused on image, this year's push will need to focus on educating consumers about the changes to the product lineup.

Two new lines, G Series and G Series Pro, offer athletes solutions for pre-, during- and post-activity. Gatorade believes the pre- and post-workout market is sizable and will provide incremental buying occasions, even as some are questioning why consumers would toss three different products in their gym bags.

"The average consumer is already consuming during the before-and-after occasion," said Sarah Robb-O'Hagan, chief marketing officer at Gatorade. "Different consumers have different nutritional needs on game day vs. training days. What we've seen as we've developed these products is different consumers mixing and matching their own regime to meet their needs."

Attracting teens

The G Series' core target is the 13- to 17-year-old high-school athlete, while G Series Pro's target is the 16- to 24-year-old who is in the business of being athletic, whether as an elite athlete or personal trainer.

Capturing the teen consumer has been identified as a priority for the brand, with Ms. Robb-O'Hagan, conceding that teens thought the brand was dated. Last year's shift to G was meant to grab their attention. With that accomplished, she said, the brand has been working with teens to test and promote the new products. Through May, a mobile locker room is making its way to high schools, showcasing the G Series products.

"What we're focusing on this year, from a marketing standpoint, is making sure that the high-school athlete understands the G Series, understands the three-part series," she said. "If we land that strongly with the teen consumers, we have a lot of opportunity."

Gatorade is also expanding its idea of who is an athlete, looking to surfers, gymnasts and skateboarders. In the past, the brand has focused on traditional sports and leaned more male than female.

 

What goes hand-in-hand with that is the elimination of lifestyle users, those who boosted the brand in the earlier part of the decade. "Gatorade did such a great job with its marketing that it attracted consumers who were drinking it because it was cool, not for exercise rehydration," said John Sicher, editor and publisher of Beverage Digest. "Gatorade lost a lot of that volume last year. It should be able to grow from a new base as it engages and re-engages consumers who want an exercise-hydration beverage."

Growth potential

And, despite competition from brands outside the category such as Vitaminwater, Gatorade and the sports-drink category in general both have growth potential, Mr. Sicher said. According to Beverage Digest, the sports drink category was worth $7.5 billion in 2008. Sports-drink volume had been tracking up 17% between 2004 and 2009, according to Beverage Marketing Corp., but fell 12.3% between 2008 and 2009.

But can Gatorade return to its glory days, the days of iconic marketing campaigns such as "Be like Mike"?

"Gatorade's glory days were about athletics, but it was also a lifestyle beverage. What they're saying is it shouldn't go back to that," said Mr. Faucher. "All the line extensions, that's not the way it's supposed to be going forward. That means you're simply not going to get it to grow the way it did."

Execs argue that there is still plenty of room for growth, however. The brand's research shows that it has 27% penetration among the 68 million performance athletes it has traditionally focused on, and just 12% penetration among the 55 million fitness athletes it is now setting its sites on.

"We're segmenting to grow," Ms. Robb-O'Hagan said. "Instead of focusing on only one hydration product, we're really starting to segment it down and meet different needs for different athletes."