Can Pepsi Make a Comeback?

Summary

The Journal: Can Pepsi Make a Comeback? Episode Release Date: April 11, 2025

Hosts: Allison Poley (Guest Host)
Produced by: The Wall Street Journal & Gimlet

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1. Introduction

In this episode of The Journal, guest host Allison Poley delves into the current state of PepsiCo, exploring whether the iconic beverage can reclaim its former glory amidst fierce competition and shifting consumer preferences. The discussion is enriched by insights from Laura Cooper, a seasoned reporter covering the soda industry.

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2. The Rise and Rivalry: Pepsi vs. Coca-Cola

The episode begins with a nostalgic look at Pepsi's golden era. Allison reminisces about Pepsi's cultural dominance in the early 2000s, highlighting celebrity endorsements like Britney Spears that positioned Pepsi as the "cool" alternative to Coca-Cola.

Allison Poley [01:14]: "I look back and think that [Pepsi] were the coolest when Britney Spears was selling it back in the early 2000."

Laura Cooper provides historical context, tracing Pepsi's aggressive marketing strategies during the Cola Wars, including the famous Pepsi Challenge that aimed to dethrone Coca-Cola as the leading cola brand in the U.S.

Laura Cooper [03:23]: "Pepsi was positioning Coke as being really old fashioned and Pepsi was the hip, cool soda for young people."

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3. Diversification and Decline of PepsiCo

As PepsiCo expanded beyond beverages into snacks and fast food in the 1980s and beyond, Pepsi's focus began to wane. Cooper explains that while PepsiCo successfully acquired brands like Frito-Lay, KFC, Taco Bell, and Gatorade, Pepsi sales started to decline as resources were diverted.

Laura Cooper [05:42]: "Pepsi Cola sales had been dipping lower and lower."

By the late 2010s, this diversification strategy contributed to Pepsi slipping from the second to the third position in the U.S. soda market, overtaken by Dr. Pepper.

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4. Current Strategies to Revive Pepsi

Facing an inflection point, PepsiCo appointed Ram Krishnan as the head of beverages in the U.S., tasked with reversing the downward trend. Krishnan adopted a hands-on approach, traveling extensively to understand consumer behavior and optimize shelf placements in major retailers.

Allison Poley [08:35]: "He's traveling four days a week across the country doing this."

A pivotal strategy under Krishnan involved integrating food and beverage distribution to leverage PepsiCo's robust distribution network, ensuring better product visibility and availability.

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5. Marketing Innovations and Collaborations

To rekindle Pepsi's appeal, PepsiCo launched a new marketing campaign emphasizing that "Pepsi goes better with food." This campaign underscores Pepsi's unique flavor profile suited for pairing with various cuisines, positioning it as the preferred choice in dining settings.

Additionally, PepsiCo reignited the Pepsi Challenge by introducing a showdown between Pepsi Zero Sugar and Coca-Cola Zero Sugar, aiming to engage younger, health-conscious consumers through digital platforms like TikTok and Instagram.

Laura Cooper [10:48]: "Krishnan is trying to bring Pepsi back into the mainstream by advertising on TikTok and Instagram."

The acquisition of prebiotic soda brand Poppy signifies PepsiCo's commitment to catering to Gen Z's preference for healthier beverage options.

Allison Poley [11:30]: "Poppy is considered to be a healthier soda and that is important to bringing in Gen Z and a bunch of new consumers."

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6. Challenges in the Soda Category

Despite these efforts, the soda industry faces significant challenges. Increasing health consciousness among consumers has led to a decline in traditional soda consumption. Public figures like RFK have criticized sugary carbonated drinks, labeling them as "poison," which has further dampened the category's appeal.

Allison Poley [11:15]: "RFK has come out and referred to sugary carbonated drinks as poison, that just the category as a whole is having a harder time."

Consumers are shifting towards alternatives like energy drinks, seltzers, and healthier beverage options, making it difficult for traditional sodas to maintain their market share.

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7. Competition with Coca-Cola

Coca-Cola continues to dominate the beverage industry, maintaining its status as the top cola brand. Its focused strategy as a pure beverage company, without the distractions of a diversified portfolio, has been pivotal to its sustained success. The company's iconic marketing, such as the perennial polar bears during Christmas, keeps it consistently in the public eye.

Allison Poley [12:38]: "Coca Cola is a pure beverage company. They do not have food. And when I spoke to their CEO, he believes that their focus on this core area of beverage helped them win."

In contrast, PepsiCo's broader focus has diluted its brand identity in the cola market, making it challenging to reclaim its former position.

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8. Future Prospects and Conclusions

PepsiCo's strategic pivots, including acquisitions like Poppy and revamped marketing campaigns, present a potential pathway for rejuvenating Pepsi's market presence. However, the effectiveness of these initiatives remains to be seen as the company navigates a market increasingly wary of sugary and traditional sodas.

Allison acknowledges the uphill battle ahead but remains cautiously optimistic about PepsiCo's ability to innovate and adapt to changing consumer preferences.

Allison Poley [13:38]: "I do think the PepsiCo definitely has an opportunity here and that they are doing everything they can to regain market share."

The episode concludes with a reflection on PepsiCo's commitment to evolving its product offerings and marketing strategies in hopes of winning back consumers and restoring Pepsi to its rightful place in the soda hierarchy.

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Key Takeaways:

• Historical Strengths: Pepsi's past success was driven by cultural relevance and aggressive marketing.
• Diversification Challenges: Expanding into snacks and fast food may have diverted focus from core beverage products.
• Current Strategies: Emphasis on marketing, acquisitions like Poppy, and leveraging digital platforms to engage younger audiences.
• Industry Challenges: Health concerns and shifting consumer preferences pose significant hurdles for traditional sodas.
• Competitive Landscape: Coca-Cola's focused strategy reinforces its market dominance, making Pepsi's comeback more challenging.

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Notable Quotes:

• Allison Poley [01:14]: "I look back and think that [Pepsi] were the coolest when Britney Spears was selling it back in the early 200."
• Laura Cooper [03:23]: "Pepsi was positioning Coke as being really old fashioned and Pepsi was the hip, cool soda for young people."
• Allison Poley [08:35]: "He's traveling four days a week across the country doing this."
• Allison Poley [11:30]: "Poppy is considered to be a healthier soda and that is important to bringing in Gen Z and a bunch of new consumers."
• Allison Poley [12:38]: "Coca Cola is a pure beverage company. They do not have food."

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This summary provides a comprehensive overview of the episode "Can Pepsi Make a Comeback?" from The Journal, capturing the essential discussions, strategies, and challenges faced by PepsiCo in its quest to regain market prominence.

Transcript

[Kate Limebaugh]

Hey, it's Kate. Here to say that my colleague Allison Poley has stepped in to guest host today's episode. Enjoy.

[Allison Poley]

You don't want me to open my Pepsi on here? I can do it. You want to hear it?

[Laura Cooper]

Wait. Yes.

[Allison Poley]

Oh, my God. It's exploding. Covered in Pepsi over here. Oh, my God.

[Laura Cooper]

I recently sat down with my colleague Laura Cooper, who covers soda pop. So importantly, do you say soda or pop?

[Allison Poley]

Soda. I'm from New York. It's all soda to me.

[Laura Cooper]

I say pop.

[Allison Poley]

Where are you from?

[Laura Cooper]

I'm from Cleveland. I was a big pop drinker growing up.

[Allison Poley]

If you're from the Midwest, I'm gonna assume probably Pepsi.

[Laura Cooper]

Yeah, there are a lot of Pepsi products and placements in the Midwest. For sure. Pepsi wasn't just a part of my life growing up. There was a time when those classic blue cans were embedded in the American zeitgeist. When would you say Pepsi was at its coolest?

[Allison Poley]

I mean, I look back and think that they were the coolest when Britney Spears was selling it back in the early 2000.

[Laura Cooper]

But today, the magic of Pepsi seems to have fizzled. Pepsi, which has almost always been the number two cola in America after Coke dropped to number three behind Dr. Pepper last year. And now PepsiCo is reckoning with the fact that Pepsi might not be as cool anymore.

[Allison Poley]

I do think it's an inflection point, and I do think that it's a really emotional issue for everyone who's ever worked at PepsiCo and really loves Pepsi.

[Laura Cooper]

So PepsiCo needs to save Pepsi.

[Allison Poley]

Yes. And they're working on it.

[Laura Cooper]

Welcome to the Journal, our show about money, business and power. I'm Alison poley. It's Friday, April 11th. Coming up on the show, Pepsi lost its way. Can it get back on track?

[Allison Poley]

Foreign.

[Unknown]

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[Laura Cooper]

When we think of the soda world or pop world, as I would say, who are the two main competitors?

[Allison Poley]

Of course, Coca Cola and Pepsi. Right. If you were to walk into any fast food restaurant, you'll either see Pepsi or Coke.

[Laura Cooper]

Right?

[Allison Poley]

And you'll see Pepsi or Coke with Dr. Pepper. Because Dr. Pepper is neutral and can be with either.

[Laura Cooper]

Okay. Pepsi has a long standing rivalry with Coke and Coke has always been the top cola in the country. In the 1960s, PepsiCo tried to kick Coca Cola off the number one pedestal by starting up a competition that would come to be known as the Cola Wars. The company launched a new campaign it called Pepsi Generation. You're in the Pepsi generation.

[Allison Poley]

They were positioning Coke as being really old fashioned and Pepsi was the hip, cool soda for young people. And Pepsi also did the Pepsi Challenge. That's when they have consumers drink Coke and Pepsi in a blind taste test and tell them which one they like better. All across this country, people took the.

[Laura Cooper]

Pepsi Challenge and Pepsi won. Yeah, my mom told me about the Pepsi Challenge when I was younger and so I had her do it for me. By the 80s, Pepsi was on its way up. In 1985, Coca Cola responded by launching a product called New Coke, which was a major flop. Meanwhile, PepsiCo was signing million dollar collaborations with stars like Michael Jackson.

[Allison Poley]

A lot of that led to really cool collaborations with artists. I think everyone understood what Pepsi was going for and they really were doubling down on hiring talent and just becoming part of culture.

[Laura Cooper]

All this was working for PepsiCo. Pepsi's share of US soda sales peaked in the late 80s and got close to unseating Coke from the number one spot. While PepsiCo was chasing Coke, the company was also looking at ways to expand its business. It wanted to be more than just a soda company and so it acquired other brands. First snacks and then fast food.

[Allison Poley]

So over the years, Pepsi had already began accumulating food. They purchased Frito Lay, they purchased a bunch of restaurants like KFC and Taco Bell and Pizza Hut. They also bought things like Quaker Oats, which owned Gatorade, which is a huge beverage.

[Laura Cooper]

PepsiCo kept going. In the 2000s, when consumers started to become more health conscious, the company saw an opportunity. It bought a juice brand, a Kombucha brand, and formed a joint venture to sell Sabra Hummus. The company even added energy drinks to its offerings.

[Allison Poley]

So like for instance, Rockstar Energy drink was purchased by PepsiCo.

[Laura Cooper]

Okay.

[Allison Poley]

It took a stake in Celsius, which I see people drinking as an alternative to coffee on the subway every day. Yeah, and there's also, you know, they went into creating new snack brands, things like Mini Doritos and Cheetos, Mac and Cheese and all kinds of things that are different from, you know, Pepsi for instance.

[Laura Cooper]

But as PepsiCo was pouring resources into other products, Pepsi Cola sales had been dipping lower and lower. And then last year, now there's a new number two. Coca Cola remains king. But Dr. Pepper has moved into second place, just ahead of Pepsi. Pepsi is now number three. After decades of trying to win the top slot, Pepsi actually slipped even further down. And now the company needs to do something about it. That's after the break.

[Unknown]

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[Laura Cooper]

It wasn't just Pepsi sales that were dropping. As of last year, beverage sales across PepsiCo's US business were down. With their most prestigious soda in the number three slot, the company told Laura that maybe they'd lost their focus. The man hired to turn those numbers around for Pepsi and for all beverage sales was Ram Krishnan, PepsiCo's new head.

[Allison Poley]

Of beverages in the US Ram joined and he really had a big job to do. He's told me that his marching orders were to regain share for Gatorade and Mountain Dew and Pepsi and he set out to do that.

[Laura Cooper]

Here's Krishnan speaking at a conference.

[Allison Poley]

The consumer's expectation is every time I interact with a retailer or brand, you know me and you know me well. He's been on the road trying to talk to people, trying to look at shelves in places like 711 and really understand the consumer and where the brand is. He spends time with local sales teams. He goes and meets managers. And these are stores we all know like Walmart or Dollar General. And the idea is let's walk through the aisles, let's make sure the shelves are full, let's make sure that the PepsiCo drinks we need are highlighted the way they're supposed to be highlighted. You know, he's an extremely high up executive and he's traveling four days a week across the country doing this.

[Laura Cooper]

One of the big things that came out of Krishnan's work was how the drinks got into stores. And the company did that by leaning on its food business.

[Allison Poley]

And PepsiCo foods are known to have a very robust distribution strategy and be very, frankly, just to be very good at that.

[Laura Cooper]

PepsiCo decided to unite their food and beverage distribution operations under the same leadership. Krishnan also wanted to bring more attention back to the company's core product, Pepsi. So he Launched a new marketing campaign.

[Allison Poley]

So in advertising, the company has really positioned to only really market it as Pepsi goes better with food. Food deserves Pepsi. And the positioning is like Pepsi is better than Coke or any other beverages for pairing with food. Because of a unique mix of spices, the level of carbonation, and the sweetness in Pepsi, it actually goes well with most foods. So they've had, you know, of commercials to this end of people going into major fast food restaurants and swapping out Coke drinks with Pepsi when they're eating burgers. We help people sneak Pepsi into places that don't serve it.

[Kate Limebaugh]

What if they catch us?

[Laura Cooper]

Krishnan is trying to bring Pepsi back into the mainstream by advertising on TikTok and Instagram. He's also dusted off the Pepsi Challenge, this time pitting Pepsi zero sugar against Coca Cola zero sugar.

[Unknown]

So get ready for a new Pepsi challenge in 2025. Coming soon to a sit near you.

[Laura Cooper]

Krishnan says store sales of classic blue can Pepsi have started to inch up. And that's not all. He says the company has also reversed the decline in Gatorade's market share. His latest move was a deal to acquire prebiotic soda brand Poppy, which is popular among health conscious soda drinkers and had ads at the super bowl this year.

[Kate Limebaugh]

But soda feels like a lot of sugar right now. And these other drinks, too much buzz, no flavor. What if there were a better soda?

[Laura Cooper]

Why did PepsiCo buy poppy?

[Allison Poley]

Well, Poppy is considered to be a healthier soda and that is important to bringing in Gen Z and a bunch of new consumers. So I would say this also just shows that PepsiCo is committed to growing its soda offerings, whatever those may be, and bringing in new consumers.

[Laura Cooper]

But PepsiCo still has an uphill road ahead.

[Allison Poley]

I think that the soda category in general has some challenges ahead. I think in a time when, you know, RFK has come out and referred to sugary carbonated drinks as poison, that just the category as a whole is having a harder time in the Maha movement era. So it's just across the board for soda. It's a difficult time and people have already, you know, started to drink things like energy drinks like Poppy and, you know, seltzer instead of soda. So, like Soda overall is having a tough time.

[Laura Cooper]

But Coke has always been number one. Right. So how has it stayed so successful?

[Allison Poley]

Coca Cola is a pure beverage company. They do not have food. And when I spoke to their CEO, he believes that their focus on this core area of beverage helped them win. When you think about Red can Coke also, they have continued their marketing strategy. You always will still see, especially around Christmas time, tons of the polar bears. Yes, the polar bears. It's just like it's kind of everywhere. Whereas Pepsi was for a while. But the marketing just shifted away and.

[Laura Cooper]

Even some of Pepsi's most stalwart champions have fallen away. Like Britney Spears.

[Allison Poley]

I was scrolling through Instagram and I saw she had a post and it was about how much she loved the tiny cans of Coke.

[Laura Cooper]

So even Britney's done with Pepsi, who knows?

[Allison Poley]

But I did see that and think, wow, what.

[Laura Cooper]

Do you think this pivot will work for PepsiCo?

[Allison Poley]

I think the PepsiCo definitely has an opportunity here and that they are doing everything they can to regain market share. I also think buying Poppy was another way that even if like Blue Can, Pepsi can't regain its number two spot, that they will still have growth in overall carbonated soft drinks. I do think that we will have to wait and see if these pivots work because it's not like when Michael Jackson and Britney Spears sold this to us. And I would say that, you know, I spoke to a lot of people who really love the company and are still not sure if PepsiCo can save Pepsi.

[Kate Limebaugh]

That's all for today. Friday, April 11 the Journal is a co production of Spotify and the Wall Street Journal. Thanks to Allison Poley for hosting today's episode. The show is made by Katherine Brewer, Pia Godkari, Rachel Humphries, Sophie Codner, Ryan Knudson, Matt Kwong, Colin McNulty, Jessica Mendoza, Annie Minoff, Laura Morris, Enrique Perez De la Rosa, Sarah Platt, Allen Rodriguez Espinosa, Heather Rogers, Pierce Singhi, Jeevika Verma, Lisa Wang, Catherine Whalen, Tatiana Zamis and me, Kate Limebaugh, with help from Trina Menino. A big thank you and shout out to Alessandra Rizzo, who's been our amazing intern for the past six months. Ali, we're rooting for you and wish you the best. Thanks for everything. Our engineers are Griffin Tanner, Nathan Singapak and Peter Leonard. Our theme music is by so Wiley. Additional music this week from Kathryn Anderson, Peter Leonard, Nathan Singapak, Griffin Tanner and Blue Dot Sessions. Fact checking this week by Mary Mathis. Thanks for listening. See you Monday.