PEPSI CHALLENGES COKE IN BRAZIL

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RIO DE JANEIRO-Pepsi-Cola is gaining ground in the battle of Brazil.

Since PepsiCo's November announcement of a $500 million offensive here, the upstart has gained 0.3 of a point share in the $6 billion soft-drink market. Its share has hit 5.3% as entrenched cola leader Coca-Cola Co. dropped 1.5 points to 38.2%.

Though seemingly minuscule, the gain measured by Nielsen Research Institute is significant in a market with a thirst so unquenchable it ranks as the world's fourth largest in soft-drink consumption after the U.S., Mexico and Germany.

The race for Brazil, where more than 30% of the 145 million population is in the prime cola-chugging age range of 10 to 24, is also getting crowded. Royal Crown Cola and locally made Pop Cola are in test before rollouts later this year.

Pepsi's challenge is to change the habits of a lifetime by repositioning itself as the choice of a new Brazil. After similar successes in Mexico and Argentina, Pepsi is shelling out close to $500 million in Brazil this year-including $100 million on marketing that includes advertising-to solve major distribution problems and build consumer appeal in a market where asking for "uma coca" has always meant a Coke.

The first of 20 new Pepsi spots in a massive Brazilian-produced campaign by Almap BBDO, Sao Paulo, features young people enumerating recent changes in Brazil like the new currency, the real, introduced last summer and the country's December presidential elections. The commercial ends with a teen-age boy who holds a can of Pepsi and says, "Now we have a choice."

An even more pointed Pepsi commercial features Coca-Cola executives in a meeting worrying about Pepsi's new look, reformulated taste, new distribution might and even its marketing strategy.

Coca-Cola, while maintaining its market share fell because cola demand is so high that it can't keep up, is nonetheless striking back with $40 million in annual spending that has resulted in a brand-defending spot called "Photocopier" from McCann-Erickson. In the commercial, a salesman demonstrating the world's most advanced photocopier has to admit no one can copy Coca-Cola.

Brazilians can even pronounce it-which is more than can be said for RC Cola.

"Our biggest challenge is to teach Brazilians how to say RC Cola," said Marcos Antonio Momesso, president of Grupo Momesso, a soft-drink distributor taking on its first cola.

Before a national rollout this summer, RC is testing in three Brazilian states, backed by a $750,000 promotional campaign by FA Comunicacao & Propaganda, Sao Paulo, using RC's international ad slogan, "Shake things up." Mr. Momesso's goal: from zero to 3% of the cola segment in the next two years.

Pepsi now has 7% of the segment and Coca-Cola, 87.8%

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