Pepsi: A Case Study In Marketing Running Amok
Posted by Mike Harris on Tue, Mar 23, 2010 @ 06:09 PM
There appears to be a massive marketing meltdown going on at Pepsi, and the CEO is covering her behind...a bit late.
AdAge published an article today headlined "PepsiCo CEO Vows Company Will Learn From It's Mistakes". The article quoted Indra Nooyi, CEO of parent PepsiCo, as saying the meltdown was "a couple of brand refreshes that didn't work". If it was that casual why did she call PepsiCo's first analyst meeting since 2006 to 'splain the mess?
The article quotes her as saying:
- "some of the stuff I read about I didn't even know about". Hmmm, wonder if she also worked on our brilliant new national healthcare plan.
- "when you have high-profile agencies these things happen". Who's minding the farm at PepsiCo? Sounds like the tail wagging the dog to me.
- "the squeaky wheel [makes] the most noise". Whaaat? Wonder if she took that pesky TOEFL exam?.
What happened at Pepsi is a classic case of marketing running amok. Someone, somewhere convinced the company that "refreshing the brands" of 1,200 SKUs would be a key growth driver.
Nonsense. Once a brand is mature, or anywhere close to it, the business can generally only be grown through new products, price cuts, deeper market penetration and/or launches into new markets. That Ms. Nooyi ever believed rebranding would be a growth driver in this scenario is amazing, in my opinion.
In addition to the huge waste of shareholder money squandered on the failed tactics, she has set up the company for further, substantial losses due to overly complicated marketing. These losses are often very difficult to find because they hide in accounting buckets like manufacturing variance (changeovers, slower lines); inventory (12 flavors of Gatorade? Anyone at Pepsi ever heard of V. Pareto?); and overhead (just how many brand managers does Pepsi have?).
Perhaps the good folks at Pepsi ought to consider reading this white paper...How Overly Complicated Marketing Destroys Profits...And What You Can Do About It.
Apparently that "brand-y, changey" thing isn't working out as planned...or not planned, as the case may be.