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Sozzi: Pepsi's Sports Marketing Magic, Uncovered

Stocks in this article: PEPKOAAPLAROLL

NEW YORK (TheStreet) -- A personal quest of mine: To learn more about the encrypted DNA of global businesses. From the back stories of leading executives that oversee businesses that touch lives daily, to the process behind how a sign ends up inside a subway system, the building blocks of a company are vital for investors to understand. Heck, they're just fun to know even if you're not actively involved in the stock market.

Today's stop on the learning experience train was at a company that has always fascinated me, PepsiCo (PEP). The breadth of the Pepsi product portfolio is impressive, and a true point of differentiation from Coca-Cola (KO), which is seemingly content to relish in slow, consistent growth via carbonated soft drinks. But product innovation continues at a rampant pace at Pepsi. For example:

  • Gatorade has a family of products ranging from a performance recovery shake infused with protein to colorful carbohydrate energy gel chews that are no doubt a bestie to many cyclists.
  • Sabra, in which Pepsi is a 50% partner, no longer is only a hummus brand. Instead, it's a dip and spread brand that has taken over refrigerated coolers at supermarkets. Don't believe me? Check out these seve photos I snapped.
  • Six of Pepsi's new food and beverage launches in 2013 are on track to achieve at least $100 million each in estimated annual retail sales in the U.S.

Where do a good deal of these products present themselves to consumers? At sporting events. There is a Pepsi sign on the giant digital TV at Yankee Stadium reminding folks that a cold, caffeinated beverage is a mere few walks away at the concession stand. How do the messages for each of Pepsi's brands get told to sports-goers?

It starts with authenticity. Pepsi has built a deep understanding of sports over the course of several decades and many of its brands have become an integral part of the sports experience -- on the field, in the stadium and in the home. The company also goes way beyond simply sponsoring sporting events and placing signage in stadiums. Instead, it leverages sports as a key pillar of its marketing mix 365 days a year, maximizing the returns on its sports marketing investments and building snack and beverage product displays at retail that appeal to the local fan base while driving sales for retailers.

I reached out to Pepsi senior vice president of global sports marketing, Jenny Storms, to get a feel of the magic behind the scenes.

Storms is a former amateur skier that trained for the Olympics. Like yours truly, she vividly remembers coldcalling in the early days of a career in the hopes that someone would extend an opportunity to shine. Here is the interview.

Test, Measure, Repeat

One thing that continues to amaze me in these interviews is the amount of product testing and measurement done by large consumer brands. At Pepsi, the brand knows where it's headed, why it's headed there in the first place, and if it was the right direction to head there six months down the line. Storms shared that her team has tools to accurately assess opportunities and risks for each of the company's brands. Through this granular analysis, Pepsi knows what brands and sports resonate with consumers around the world, as well as learns how to structure a growth-oriented partnership in a new marketplace.

Own a small business? Compare and contrast the analyses you are conducting with that of Pepsi. Certainly your bank account is quite smaller, but planning and measurement should be prominent in the day-to-day operations.

Real or Faux Marketing?

On an earnings call, maybe you hear an executive state, "We will be increasing our marketing spend to support new initiatives in the latter half of the year." I would wager you believe that commitment is great as it will get the brand in front of more people, which equals more sales. Keep in mind, however, the connection of the audience to that brand's increased marketing as that is critical in determining sales potential.

For example, teen apparel retailer Aeropostale (ARO) has attached itself to the NCAA. Hardwood flooring retailer Lumber Liquidators (LL) sponsors the Professional Bowlers Tour. These are not authentic marketing plans, they are manufactured, and therefore may not provide a meaningful sales and profit boost for a company.

On the opposite side of the spectrum is Pepsi, which Storms stressed is an "authentic brand in sports" that is "on the field of play, in the stadium, and in the home." Hard to argue. There are pictures of Michael Jordan all over the Internet consuming Gatorade, and that has translated into a generation of talent drinking the product in order to be "like Mike." At the same time, Pepsi has weaved itself into the fiber of many sporting events -- be it a New York Yankees baseball game or the Super Bowl Halftime Show. And it's hard to imagine someone throwing a sports viewing party without Frito-Lay snacks occupying primary real estate on the living room table.

Pepsi works together with major sports properties as a partner from the start. Storms said Pepsi spends a lot of time understanding its partners' businesses and then works collaboratively to provide the best experience for consumers.

OMG Sports Technology, Awesome

Apple's (AAPL) iBeacon technology excites me, significantly. So much so I did an entire segment on it for opening day right here! I believe it's a crucial stepping stone to bringing real-time, actionable experiences (there is little actionable when checking in via Foursquare) to sports and local supermarkets. That said, there is an ugly downside to geo-targeting capabilities that I have found, and Storms reinforced: companies abusing it in the attempt to close a sale with a consumer navigating a mobile device.

My sense in talking with Storms, and executives at other major brands, is that they are unlikely to plaster their logos all over your device screens. In the specific instance of Pepsi, the tech is viewed from this perspective: How can it enhance the experience of the individual?

A simple example of how this could work: If Derek Jeter hits a home run to center field at Yankee Stadium, a brand could sponsor a promotion which is brought to the attention of the excited game watcher via an alert on an Apple iPhone.

According to Storms, the opportunities with this technology are very compelling with sports properties, brands and even retailers working together. Imagine the opportunity to connect the full consumer sports journey from the point of ticket purchase all the way to game day and provide that person(s) with relevant offers that enhance his sports experience.

Around the Horn with Jenny Storms

In each of these interviews, I always try and do an around-the-horn session of quick questions with short answers.

  • Favorite new Pepsi food/drink that many haven't tried yet, but should? Mountain Dew Kickstart, Fruit Punch. Lays Kettle Cooked Reduced Fat Applewood Smoked Barbeque Flavor.
  • For you and your team, what's it like the day before major sporting events? There is a heightened buzz and overall focus in the air. But we activate major sporting events 365 days a year so that's very much the mood everyday.
  • Top advice to your younger self in business?
      • Working in the sports industry isn't just about sports; gain broad experiences in business early on.
      • "You miss 100% of the shots you don't take," is a Wayne Gretzky quote that has stuck with me. Take risks!
      • Build relationships and keep them strong through the years.

-- By Brian Sozzi CEO of Belus Capital Advisors, analyst to TheStreet. This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff. Brian Sozzi is the CEO and Chief Equities Strategist of Belus Capital Advisors. He is responsible for developing and managing an equities portfolio of mid- and large-cap positions, in addition to leading the firm's digital content initiatives. He is also a personal finance columnist for Men's Health magazine.
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