PepsiCo Pours on Vanilla in Cola War With Coke

Wednesday April 9, 1:36 pm ET
By Christina Cheddar Berk

NEW YORK — PepsiCo Inc. (NYSE:PEP – News) is hoping to turn up the heat this summer in its rivalry with Coca-Cola Co. (NYSE:KO – News) by launching its own vanilla-flavored cola.

The Purchase, N.Y., food and beverage company ended speculation Wednesday about the new drink by confirming it will introduce Pepsi Vanilla late this summer. No specific launch date was announced.

PepsiCo also unveiled a number of other product promotions it hopes will drive soft-drink sales this summer.

Coca-Cola, Pepsi’s Atlanta-based rival, has had much success with Vanilla Coke, which has sold 90 million cases since its May 2002 launch, according to Beverage Digest, the industry trade publication that first reported on Pepsi’s plan to challenge Coke in the vanilla category.

Also, on tap for the warm-weathered months is Mountain Dew LiveWire, an orange-flavored Dew; new packaging, which mimics Coca-Cola’s “Fridge Pack”; and a Mountain Dew tie-in with Universal Pictures’ “The Hulk.” Universal Pictures is a unit of Vivendi Universal .

Pepsi also plans to offer 1,000 consumers a chance to compete for $1 billion live on AOL Time Warner Inc.’s the WB Network. The show, which will air in September, will guarantee a $1 million winner selected through a game of chance. The winner will then have a chance to up the ante to $1 billion without forfeiting the $1 million prize.

Diplomatic Productions’ Matti Leshem and Michael Davies, best known as the producers of “Who Wants To Be A Millionaire” will produce the show.

Although Pepsi wouldn’t reveal the details of the game show, the company said it is sure to be marked by building suspense as the pool of contestants gets winnowed down to the final winner.

“The billion-dollar promotion is going to attract a lot of attention,” said John Sicher, editor and publisher of Beverage Digest. “One billion dollars is a pretty powerful marketing symbol.”

Not only will Pepsi run television advertising produced by Omnicom Group Inc.’s BBDO New York to support the promotion, but AOL Time Warner also will use its television, publishing and online assets to advertise the two-hour show, “Pepsi Play For A Billion.”

“This is unprecedented,” said a PepsiCo spokesman. “We are creating content based on a national contest and the grand prize is a billion dollars.”

Also as part of the AOL Time Warner-Pepsi partnership, the companies will air a six-week run of “Pepsi Smash.” The show, which will be produced by Joel Gallen of Tenth Planet Productions, will feature live musical performances and music news.

Debuting as well is previously unreleased music from Sony Corp.’s Sony Music in its radio advertisements.

Pepsi expects the chance for consumers to hear the unreleased music will be a hit with teens who make up its target audience.

“What we try to do as Pepsi is be cool and relevant and hip,” the spokesman said.

Although it is difficult to gauge how well a promotional plan will drive sales growth, it is clear “Pepsi is trying to create excitement and growth around the company’s core brands,” and that’s exactly what the company needs to do, Mr. Sicher said.

Deutsche Banc analyst Marc Greenberg, however, called the plan ” underwhelming.”

“It’s blocking and tackling,” Mr. Greenberg said. According to Greenberg, Pepsi’s past innovative efforts were leading the curve, but this summer’s plan helps to “bring them up the curve,” he said.

PepsiCo’s share of the $62.9 billion U.S. soda market fell last year as its Pepsi Blue, a berry-flavored cola, failed to increase sales as Pepsi hoped it would.

Mr. Greenberg doesn’t own shares of Pepsi. Deutsche Bank, Mr. Greenberg’s employer, has an investment-banking relationship with the company, and owns 1% or more of the company’s shares.