Good Marketing or Computer Virus?

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BOSTON ( -- That blur of crimson in convenience stores is Code Red rushing out the door.
Code Red, the soda, gave its name to Code Red, the computer virus.

Almost four months after a stealth launch without advertising or overt hype, the Mountain Dew line extension is fast becoming a rare thing in the fickle soft-drink category -- a smash success.

Now it must sustain the momentum.

Computer virus namesake
Many industry observers believe the soft drink received a unique boost in recognition afdter its name become the moniker of a highly publicized worldwide computer virus. In late July when two Orange, Calif., programmers first discovered the software virus, they named it after the soda they were drinking: Code Red.

After 11 weeks of distribution, ACNielsen pegged Code Red, currently sold only in 20-ounce and 1-liter bottles, as the fifth-largest-selling 20-ounce soft drink behind monster brands Mountain Dew, Coca-Cola Classic, Pepsi-Cola and Dr Pepper. In June and July, Code Red sold an estimated 3.6 million cases. That's not unprecedented; both Coca-Cola Co.'s Surge and Pepsi-Cola Co. sibling PepsiOne posted strong initial sales before trailing off. But Code Red's showing is more than quadruple Pepsi-Cola Co.'s expectations and sufficient to keep some store coolers empty.

Big sales boost
Pepsi-Cola, in fact, credits the introduction with fueling a 20% rise in North American second-quarter net sales to $962 million, even though Code Red was introduced nationally midway through the period, in May.

"It's flown off the shelves for us," said one Northeastern bottler, noting distributors have been startled at the line's success. "I can't wait for other packaging [beyond the current sizes].'"

Thanks to Code Red, PepsiCo's Mountain Dew franchise saw sales jump 26% to 12.4 million 1-liter and 20-ounce cases during June and July, according to Beverage Digest. While flagship green Dew fell 11% to 8.8 million cases during the period, Cie Nicholson, Mountain Dew's marketing director, called the cannibalization of the base brand slight, noting that excitement behind Code Red boosted the trademark.

TV spots postponed
The product is doing well enough that Pepsi postponed TV advertising from Omnicom Group's BBDO Worldwide, New York, originally slated for June. Ms. Nicholson said September or October break dates are more likely -- although even that's not certain. "Everything seems to be working now, so why change the formula?" she said.

Ms. Nicholson said the product's word-of-mouth buzz and lack of blatant advertising have helped the brand court savvy teens. She credited Code Red's initial success to its visibility at the X Games, a popular game on the Mountain Dew Web site and a strategy of sending free bottles to 4,000 select consumers before the brand hit stores. She said the name and color also work well. "Had it been called 'Mountain Dew Cherry' ... it would've done very differently."

Michael Bellas, chairman of consultant Beverage Marketing Corp., said the teased rollout fanned Code Red's flame. "Pepsi has done a great job of not forcing it into the marketplace by letting it build in the immediate consumption [channels] and gradually bringing it into the home," he said.

Trend of the times
Among other things, it's also on trend for the times and is at the center of two sweet spots -- it's a flavored soft drink, fitting neatly in one of the industry's biggest growth areas, and it's riding the coattails of the brisk-selling Mountain Dew brand.

Whether Code Red can continue on the trajectory is uncertain. PepsiOne, introduced in a full range of sizes and backed by a $26 million ad budget, sold about 84 million cases in its first year but has since leveled off. Others maintain the momentum. Diet Coke, the most successful new soft drink of the past two decades, had $100 million in ad spending and sold 175 million cases its first full year. The brand today sells 864 million cases, according to Beverage Digest.

Ms. Nicholson said she could not anticipate a year-one sales figure for Code Red, in part because of the introduction of additional sizes. Short-term sales, however, are expected to continue their climb this fall as the product rolls out multipacks and 2-liter bottles. The company also is considering a diet version of the scarlet soda.

"I don't see anything holding it back," said Tom Pirko, president of BevMark, a food and beverage consulting firm.

Copyright August 2001, Crain Communications Inc.

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