Food Theory: The End of Pepsi?

Key Points

• Dr. Pepper Overtakes Pepsi

  • Dr. Pepper is now the second best-selling soda in the US, surpassing Pepsi for the first time in 30 years.
  • This shift is measured by market share percentage of soft drinks sold in the US.
  • Keurig Dr. Pepper Company has not yet surpassed PepsiCo in overall company standings.

• Decline of Pepsi

  • Pepsi's market share has decreased from 13% to just over 8%.
  • While Coke, Diet Coke, and other top brands have lost about 1%, Pepsi's significant decline is notable.

Pepsi’s Struggle

• Historical Blunders

  • Numerous marketing failures including Crystal Pepsi, the Kendall Jenner ad, and negative publicity from the Michael Jackson incident.
  • Attempts to rejuvenate the brand have frequently fallen short.

• Flavor Failures

  • Released 42 different varieties, many of which were poorly received (e.g., s’mores collection, salted caramel, Pepsi Blue).
  • Lack of alignment with consumer preferences.

Success of Dr. Pepper

• Effective Marketing Strategies
  • Early adoption of social media trends and real-time marketing adaptations.
  • Use of an ad agency for quick and effective brand communication.
  • Strategic collaborations and flavor innovations that resonate with younger audiences (e.g., Young Gravy collab).

Broader Implications

• PepsiCo’s Shift in Focus

  • PepsiCo’s food division, Frito-Lay, is highly profitable, overshadowing its struggling beverage segment.
  • Focus on growing the food and snack industry, possibly leading to less investment in beverages.

• Overall Industry Trends

  • General decline in soda consumption over the past 20 years.
  • Competition ramping up in other beverage categories (e.g., Prime competing with Gatorade).

Conclusion

• The shift in rankings indicates a larger trend of PepsiCo potentially de-emphasizing its beverage lines in favor of its food products.
• The long-term outlook may see Pepsi playing a smaller role in the cola wars, focusing more on its dominant food segment.