A Not-So-Secret Recipe for Pepsi to Regain Its Footing

An Ad Age Editorial

Published on .

Pepsi may be down, but it's far from out. With a focus on the core brand, dedicated advertising and the development of new marketing talent, Pepsi could easily stage a comeback in a couple of years. The question is, does it want to?

PepsiCo reiterated its complete commitment to carbonated soft drinks amid news that Pepsi had ceded the No. 2 spot in the category to Diet Coke. But, at the same time, PepsiCo's CEO Indra Nooyi has been touting a commitment to "good-for-you" and "better-for-you" products. She's unveiled plans to build a $30 billion portfolio of health and wellness products, from about $10 billion, by 2020. It makes sense. Consumers are gravitating toward lower-calorie, lower-sugar products. But Pepsi doesn't exactly fall into the health-and-wellness category.

By the way, the idea that Diet Coke surpassed Pepsi simply because of a trend toward diets is flawed. By that logic, Diet Pepsi would have grown or performed similarly to Diet Coke. Instead, Diet Pepsi's volume fell 5.2%, compared with Diet Coke's 1% volume decline. And Diet Pepsi and Pepsi were the only two top 10 soft-drink brands to lose share in 2010. To quote Credit Suisse analyst Carlos Laboy, "There is no U.S. beverage category problem, just a Pepsi problem."

To rectify that problem, PepsiCo will need to invest in the core Pepsi brand -- the stuff that comes in a blue can. As of late, Pepsi derivatives seem to be getting the bulk of the attention, while Coca-Cola supports its core brand -- the stuff that comes in a red can -- with Super Bowl buys, a hefty presence on "American Idol" and a music campaign that featured a partnership with Maroon 5. It was Pepsi Max that got Super Bowl exposure, while Diet Pepsi had a huge presence at Fashion Week. Even Pepsi Throwback has received advertising support. Pepsi, meanwhile, has largely been relegated to efforts revolving around Refresh Project.

We're not bashing Refresh Project. It was bold, it got people talking, and it's played well in local markets. But it couldn't carry the entire weight of a mass-market brand. Now, Pepsi says it will sink $60 million into a sponsorship and integration with "X Factor," while PepsiCo boosts ad spending 30% across beverage brands.

If PepsiCo can also shore up its bench of marketing talent -- it's been without a chief marketer in its sparkling-brands division since the departure of Lauren Hobart in January -- it will have all the ingredients it needs to wage the next battle in the cola wars.

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