Injunction decision reveals Pepsi tactics

A federal judge on Wednesday denied PepsiCo’s request for an injunction against a Powerade advertising campaign from The Coca-Cola Co., both because the campaign had already ceased in May and because PepsiCo had previously experimented with a very similar marketing strategy itself.

In the process of explaining his opinion, U.S. District Court Judge John Koeltl offered an unusual glimpse into the strategies that the country’s two largest beverage firms use against each other – struggling with science, marketing, lawyers and supply chains.

PepsiCo’s injunction asked Coca-Cola to cease an advertising campaign that painted its recently-released Powerade ION4 as a more complete sports drink than Gatorade because it contained calcium and magnesium – two ingredients PepsiCo-unit Stokely-Van Camp had already experimented with when it introduced Gatorade Performance Formula in 2004. Stokely created the product in response to studies showing that these elements are lost in sweat. PepsiCo marketed Endurance Formula at serious athletes and claimed that calcium and magnesium were “vital for proper nerve transmission and muscle contraction.”

The company shifted gears when Stokely discovered that Coca-Cola was working on Powerade ION4, developing a product called Gatorade ION+, which would contain a cocktail of electrolytes similar to that in ION4, according to Koeltl’s opinion. PepsiCo planned to introduce the product ahead of ION4, boast its history of using calcium and magnesium, and blunt any share gains Powerade might enjoy from the product introduction.

But PepsiCo lacked proper access to the calcium required for the formulation. The company had already struggled to source enough calcium for one of its Propel varieties, and required far more to roll out Gatorade ION+. Finding a new source of calcium would delay the project by two to four weeks, according to the opinion, which would bring ION+ onto the market after ION4 debuted.

So, Stokely scrapped the product, and the campaign.

“On the direction of SVC’s lawyers, SVC also began to purge its advertising -including its website – of positive references to calcium and magnesium,” Koeltl wrote.

Later, when Coca-Cola launched its campaign comparing Powerade ION4 to Gatorade, labeling the larger competitor as “incomplete,” PepsiCo filed suit against Coca-Cola and requested the injunction.

So far, PepsiCo’s complaints have not met a receptive ear in U.S. District Court.

“SVC (PepsiCo) cannot, having jumped on the bandwagon of calcium and magnesium first, now jump off and claim that Coca-Cola must get off too,” Judge Koeltl wrote.

With the ultimate lawsuit still pending, at some point, PepsiCo could still prove that Coca-Cola’s claims, while not factually inaccurate, have or will create confusion in the marketplace. But the company’s arguments were not strong enough to win this early round.