--:-- [Theme music fades out]
--:-- Host: Alison Pohle: Welcome to The Journal, our show about money, business, and power. I'm Alison Pohle, and it's Friday, April 11th.
--:-- Host: Alison Pohle: Enjoy. You don't want me to open my Pepsi on here? I can do it. You want to hear it? Wait, yes. Oh my God, it's exploding. I'm covered in Pepsi over here. Oh my God.
--:-- Host: Alison Pohle: I recently sat down with my colleague, Laura Cooper, who covers soda pop. So, importantly, do you say soda or pop?
--:-- Laura Cooper: Soda.
--:-- Host: Alison Pohle: I'm from New York. It's all soda to me.
--:-- Laura Cooper: I say pop. Where are you from?
--:-- Host: Alison Pohle: I'm from Cleveland. I was a big pop drinker growing up.
--:-- Laura Cooper: If you're from the Midwest, I'm going to assume probably Pepsi.
--:-- Host: Alison Pohle: Yeah, there are a lot of Pepsi products and placements in the Midwest for sure.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: When would you say Pepsi was at its coolest? I mean, I look back and think that they were the coolest when Britney Spears was selling it back in the early 2000s.
--:-- 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.
--:-- Host: Alison Pohle: And now, PepsiCo is reckoning with the fact that Pepsi might not be as cool anymore.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: So PepsiCo needs to save Pepsi. Yes. And they're working on it.
--:-- Host: Alison Pohle: Welcome back to The Journal. I'm Alison Pohle. Coming up on the show, Pepsi lost its way. Can it get back on track?
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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?
--:-- Host: Alison Pohle: Of course, Coca and Pepsi right If you were to walk into any fast food restaurant, you either see Pepsi or Coke Right And you see Pepsi or Coke with Dr Pepper because Dr Pepper is neutral and can be with either
--:-- Laura Cooper: Okay. Pepsi has a longstanding rivalry with Coke, and Coke has always been the top cola in the country.
--:-- Host: Alison Pohle: 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.
--:-- Laura Cooper: The company launched a new campaign it called Pepsi Generation. You're in the Pepsi Generation.
--:-- Host: Alison Pohle: They were positioning Coke as being really old-fashioned, and Pepsi was the hip, cool soda for young people. Dry, young taste. Come alive.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: All across this country, people took the Pepsi Challenge and Pepsi won.
--:-- Laura Cooper: Yeah, my mom told me about the Pepsi Challenge when I was younger, and so I had her do it for me.
--:-- Host: Alison Pohle: 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.
--:-- Laura Cooper: Meanwhile, PepsiCo was signing million-dollar collaborations with stars like Michael Jackson.
--:-- Host: Alison Pohle: 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 U.S. soda sales peaked in the late 80s and got close to unseating Coke from the number one spot.
--:-- Host: Alison Pohle: While PepsiCo was chasing Coke, the company was also looking at ways to expand its business.
--:-- Laura Cooper: It wanted to be more than just a soda company. And so it acquired other brands, first snacks and then fast food.
--:-- Host: Alison Pohle: So over the years, Pepsi had already begun accumulating food. They purchased Frito-Lay. They purchased a bunch of restaurants like KFC and Taco Bell and Pizza Hut.
--:-- Laura Cooper: They also bought things like Quaker Oats, which owned Gatorade, which is a huge beverage.
--:-- Host: Alison Pohle: PepsiCo kept going. In the 2000s, when consumers started to become more health-conscious, the company saw an opportunity.
--:-- Laura Cooper: It bought a juice brand, a kombucha brand, and formed a joint venture to sell Sabra hummus.
--:-- Host: Alison Pohle: The company even added energy drinks to its offerings. So like, for instance, Rockstar Energy Drink was purchased by PepsiCo.
--:-- Laura Cooper: Okay. It took a stake in Celsius, which I see people drinking as an alternative to coffee on the subway every day.
--:-- Host: Alison Pohle: 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.
--:-- Host: Alison Pohle: And then last year, Pepsi actually slipped even further down. And now the company needs to do something about it.
--:-- Laura Cooper: That's after the break.
--:-- Host: Alison Pohle: This episode is brought to you by Walmart.
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--:-- Laura Cooper: It wasn't just Pepsi sales that were dropping. As of last year, beverage sales across PepsiCo's U.S. business were down.
--:-- Host: Alison Pohle: With their most prestigious soda in the number three slot, the company told me that maybe they'd lost their focus.
--:-- Laura Cooper: The man hired to turn those numbers around, for Pepsi and for all beverage sales, was Ram Krishnan, PepsiCo's new head of beverages in the U.S.
--:-- Host: Alison Pohle: Ram joined and he really had a big job to do.
--:-- Laura Cooper: He's told me that his marching orders were to regain share for Gatorade and Mountain Dew and Pepsi.
--:-- Host: Alison Pohle: And he set out to do that.
--:-- Laura Cooper: Here's Krishnan speaking at a conference.
--:-- Ram Krishnan: The consumer's expectation is every time I interact with a retailer or brand, you know me and you know me well.
--:-- Host: Alison Pohle: He's been on the road trying to talk to people, trying to look at shelves in places like 7-Eleven and really understand the consumer and where the brand is.
--:-- Laura Cooper: He spends time with local sales teams. He goes and meets managers. and these were stores we all know, like Walmart or Dollar General.
--:-- Host: Alison Pohle: 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.
--:-- Laura Cooper: You know, he's an extremely high-up executive and he's traveling four days a week across the country doing this.
--:-- Ram Krishnan: 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.
--:-- Host: Alison Pohle: 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.
--:-- Host: Alison Pohle: Krishnan also wanted to bring more attention back to the company's core product, Pepsi.
--:-- Laura Cooper: So he launched a new marketing campaign. So in advertising, the company has really positioned to only really market it as Pepsi goes better with food.
--:-- Host: Alison Pohle: Food deserves Pepsi. And the positioning is like Pepsi is better than Coke or any other beverages for pairing with food.
--:-- Laura Cooper: Because of a unique mix of spices, the level of carbonation, and the sweetness in Pepsi, it actually goes well with most foods.
--:-- Host: Alison Pohle: So they've had, you know, a bunch 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.
--:-- Laura Cooper: We help people sneak Pepsi into places that don't serve it. What if they catch us?
--:-- Ram Krishnan: Krishnan is trying to bring Pepsi back into the mainstream by advertising on TikTok and Instagram.
--:-- Host: Alison Pohle: He's also dusted off the Pepsi challenge, this time pitting Pepsi Zero Sugar against Coca-Cola Zero Sugar.
--:-- Laura Cooper: So get ready for a new Pepsi challenge in 2025, coming soon to a city near you.
--:-- Ram Krishnan: Krishnan says store sales of classic blue can Pepsi have started to inch up.
--:-- Host: Alison Pohle: And that's not all. He says the company has also reversed the decline in Gatorade's market share.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: But soda feels like a lot of sugar right now. And these other drinks, too much buzz, no flavor.
--:-- Laura Cooper: What if there were a better soda? Why did PepsiCo buy Poppy?
--:-- Host: Alison Pohle: Well, Poppy is considered to be a healthier soda and that is important to bringing in Gen Z and a bunch of new consumers.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: But PepsiCo still has an uphill road ahead.
--:-- Laura Cooper: I think that the soda category in general has some challenges ahead.
--:-- Host: Alison Pohle: I think in a time when, you know, RFK has come out and referred to sugar-recarbonated drinks as poison, that just the category as a whole is having a harder time in the Maha movement era.
--:-- Laura Cooper: So it's just across the board for soda, it's a difficult time.
--:-- Host: Alison Pohle: And people have already, you know, started to drink things like energy drinks, like Poppy and, you know, seltzer instead of soda.
--:-- Laura Cooper: So like soda overall is having a tough time.
--:-- Host: Alison Pohle: But Coke has always been number one, right? So how has it stayed so successful?
--:-- Laura Cooper: Coca-Cola is a pure beverage company. They do not have food.
--:-- Host: Alison Pohle: And when I spoke to their CEO, he believes that their focus on this core area of beverage helped them win.
--:-- Laura Cooper: When you think about Red Can Coke also, they have continued their marketing strategy.
--:-- Host: Alison Pohle: You always will still see, especially around Christmas time, tons of- The polar bears.
--:-- Laura Cooper: Yes, the polar bears. It's just like, it's kind of everywhere.
--:-- Host: Alison Pohle: Whereas Pepsi was for a while, but the marketing just shifted away.
--:-- Laura Cooper: And even some of Pepsi's most stalwart champions have fallen away, like Britney Spears.
--:-- Host: Alison Pohle: 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?
--:-- Host: Alison Pohle: But I did see that and think, wow, what?
--:-- Laura Cooper: Do you think this pivot will work for PepsiCo?
--:-- Host: Alison Pohle: I think that PepsiCo definitely has an opportunity here and that they are doing everything they can to regain market share.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: 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.
--:-- Laura Cooper: 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.
--:-- Host: Alison Pohle: That's all for today, Friday, April 11th.
--:-- Host: Alison Pohle: The Journal is a co-production of Spotify and The Wall Street Journal.
--:-- Host: Alison Pohle: Thanks to Alison Pohle for hosting today's episode.
--:-- Host: Alison Pohle: The show is made by Catherine Brewer, Pia Godkari, Rachel Humphreys, Sophie Codner, Ryan Knudsen, Matt Kwong, Colin McNulty, Jessica Mendoza, Annie Minoff, Laura Morris, Enrique Perez de la Rosa, Sarah Platt Alan Rodriguez Espinosa Heather Rogers Pierce Singhi Jivika Verma Lisa Wang Catherine Whalen Tatiana Zamis and me, Kate Leinbaugh with help from Trina Menino.
--:-- Host: Alison Pohle: A big thank you and shout out to Alessandra Rizzo who's been our amazing intern for the past six months.
--:-- Host: Alison Pohle: Ali, we're rooting for you and wish you the best Thanks for everything.
--:-- Host: Alison Pohle: Our engineers are Griffin Tanner Nathan Singapak and Peter Leonard.
--:-- Host: Alison Pohle: Our theme music is by So Wiley.
--:-- Host: Alison Pohle: Additional music this week from Katherine Anderson, Peter Leonard, Nathan Singapok, Griffin Tanner, and Blue Dot Sessions.
--:-- Host: Alison Pohle: Fact-checking this week by Mary Mathis.
--:-- Host: Alison Pohle: Thanks for listening. See you Monday.
