Pepsi Uses Consumer Savvy to Gain on Coke
PURCHASE, N.Y. (TheStreet) -- When you compete directly with the most famous brand in the world, victories come one bottle cap at a time.
BusinessWeek
and
Interbrands
released their list of the 100 best global brands last week, with
PepsiCo
(PEP) - Get Report
sitting cozily at No. 23. The estimated value of Pepsi's brand rose 3% from a year earlier to $14 billion. While unranked
Dr. Pepper Snapple Group
(DPS)
can only aspire to such fame, it's well short of No. 1
Coca-Cola
(KO) - Get Report
, whose red-and-white behemoth was valued at $69 billion.
The key difference between Pepsi and Coca-Cola is as plain as the caps on their bottles. This past summer, when consumers bought a 20-ounce bottle of Coke Zero in the U.S., the bottle cap directed them to the My Coke Rewards Web site where they were asked to bank their points green-stamp style for prizes such as T-shirts and Omaha Steaks. The same cap on a Pepsi product gave the buyer a free song download for the
Viacom
(VIA) - Get Report
and MTV-backed video game
Rock Band
. It was not only a $2 prize from a $1.59 purchase, but it allowed fans to play Spinal Tap's
Big Bottom
instantly instead of waiting to accumulate enough points for a free subscription to
Redbook
.
So what? Ask the click counters. Coca-Cola's Web site drew nearly 5.3 million unique visitors in August 2008 compared to Pepsi's 2.3 million, according to market research firm
comScore
(SCOR) - Get Report
. A year later, Coke's traffic had dropped to 3.9 million visitors while Pepsi's held relatively steady at 2.2 million. For Pepsi, a little innovation made a big difference.
It's been the story of Pepsi this year. As Coca-Cola built on the global strength of existing drink brands like Coke Zero, Pepsi rebuilt everything from the logo up. The blue-and-red globe started smiling. Gatorade went G. Frito-Lay decided to take Doritos on a "Late Night Taco" run. Even the original recipe itself went through some tweaking, ditching corn syrup for sugar and old-school packaging in Pepsi Throwback and going green with spring water and cane sugar in Pepsi Natural (or the cheekier Pepsi Raw in the U.K.).
While Pepsi shares trailed Coca-Cola's during the first half by six percentage points, Pepsi has narrowed the gap by half during the third quarter, which ends tomorrow. Both companies are lagging behind the
S&P 500 Index
this year.
Granted, Pepsi's been down this road before. At one time, owning Pizza Hut, Taco Bell and KFC -- now the cornerstones of
Yum! Brands
(YUM) - Get Report
-- seemed like the best way to fatten the company coffers before they were trimmed in the late '90s. However, victories like Pepsi's seizure of China's cola crown (23% of the soft drink market to Coke's 22%, according to
Euromonitor International
) and big gambles like the $5 million Super Bowl ad contest at its Frito-Lay division are what keep Pepsi's rivalry with Coke from going flat.
-- Reported by Jason Notte in Boston.
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Jason Notte is a reporter for TheStreet.com. His writing has appeared in The New York Times, The Huffington Post, Esquire.com, Time Out New York, The Boston Herald, The Boston Phoenix, Metro newspaper and the Colorado Springs Independent.
