Pepsi launches brand exclusively on Amazon

Discussion
Oct 06, 2014

PepsiCo Inc. announced last week an unusual move to launch Pepsi True, the fifth brand to carry the company’s name, exclusively on Amazon.com.

Simon Lowden, chief marketing officer at PepsiCo North America, told USA Today the Amazon rollout "lets PepsiCo use a high-profile channel to gauge initial response. It also allows the product to get some scale and awareness before it goes into the bottler system."

A Pepsi spokesman further told Reuters the decision follows online successes for Pepsi’s other products. Starbucks Double Shot Light, sold through a joint venture with Starbucks, is Pepsi’s top-selling online item year-to-date.

The Amazon launch, set for mid-October, comes amid a near decade long declining sales trend for carbonated soft drinks. The beverage giants have been experimenting with launch strategies.

"The bottling systems do better with more established products," John Sicher, editor and publisher of Beverage Digest, told The Wall Street Journal. "If they [Coke and Pepsi] launch a product and build scale with Amazon before expanding to retail presence and it works, that’s a good move."

Pepsi True

Pepsi True’s distinction is that it is made with sugar and stevia, a natural sweetener, and containing about 30 percent fewer calories than regular Pepsi. It includes no high-fructose corn syrup or artificial sweeteners.

In a similar introduction, Coca Cola in September brought back Surge, a soda discontinued 12 years ago, exclusively through Amazon and has seen continued sell outs. It plans to eventually return Surge to its regular distribution channels.

For Coca-Cola Life, a mid-calorie cola similar to Pepsi True, however, Coke chose to test the line in some stores in the Southern United States before planning national rollout for November.

What are the pros and cons of using Amazon.com to launch products? Should traditional stores be irked by the way Pepsi True is being rolled out?

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13 Comments on "Pepsi launches brand exclusively on Amazon"

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Keith Anderson
Guest
3 years 2 months ago

Online retail (and Amazon especially) is a powerful proving ground for “long tail” products that have limited brick-and-mortar distribution. Dormant brands, new products or niche flavors can all find their audience in the “endless aisle,” and those that get traction use their success to leverage physical distribution space.

This strategy has proven particularly effective for small, emerging manufacturers that don’t yet have influence or full-fledged brick-and-mortar retailer engagement models.

Investing in sampling programs (like Amazon Vine) that drive customer ratings and reviews can also help influence offline sales.

That said, getting found can be a challenge unless new products are responding to already-trending consumer preferences. It’s harder to buy digital display space, so winning search is key—and you can’t really win search if your product isn’t relevant.

Traditional retailers will likely question moves like this, but few of them have the physical shelf space or risk tolerance for experiments like this.

Don Uselmann
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Don Uselmann
3 years 2 months ago

I think it’s a good way to get some sense of consumer response and demand before going through the expense of filling their normal distribution channels. However, if I owned a traditional store I would be annoyed by the loss of the traffic that might be driven by the hype around a new product. Just as interesting may be the pricing strategy when it gets to regular stores as it seems the both Pepsi and Coke are utilized as loss leaders in alternate weeks by many retailers. The can is 7.5 ounces vs. the normal 12 ounces so even at the same pricing per 12 pack they get some margin increase, but will the smaller size impact consumer purchasing? It will certainly be interesting to watch.

Ed Dunn
Guest
3 years 2 months ago

I remember a music artist releasing their album on iTunes weeks before the physical CD release and Target and other big boxes refused to sell the album out of retaliation. Will these same big boxes retaliate against PepsiCo?

Herb Sorensen
Guest
3 years 2 months ago

Traditional stores are in for some further massive irking, as online retail becomes more integrated in the TOTAL RETAIL picture. Several years ago I referred to the phenomena of the Convergence of Online, Mobile and Brick-and-mortar (COMB) retail. With recent advances in BOPIS, I didn’t see any questions about “online retailers becoming irked” by brick-and-mortar stores moving into the online space!

Get OVER it. Shoppers are “unitary,” ONE phenomena. Whether you address them online or in stores is strictly a matter of shifting modalities across the singular “shopper” phenomena. I’ve also long predicted the demise of the brick-and-mortar proprietary walls, as “owning” the shoppers inside them. Tsk, tsk! The “no cameras” policy based on proprietary control of the in-store experience died a justified death of the “stupid,” as soon as shoppers, in droves, began carrying them. Brick-and-mortar stores do not “OWN” the shoppers. On an existential basis, it is just the opposite.

Gordon Arnold
Guest
3 years 2 months ago

One of the best ways to build an e-commerce business is to mimic the biggest and/or the best. Companies like Pepsi have a long track record in the retail business and have seen much adversity from both the economy and healthier living trends within the market. This discussion is an excellent demonstration of how thinking outside of the box and making new technologies an asset to the business works to better the business. I am sure Pepsi will use this experience to increase sales, overcome market trends and to build a new e-commerce business of their own. Whether it is a new and improved Pepsi site or a marketing arm designed to work with established e-tailers is most likely still to be determined, but the progress is forward and in tune with the 21st century.

David Livingston
Guest
3 years 2 months ago

I’ve been to the World of Coke in Atlanta more than I care to admit. I’ve tried soft drinks from all over the world. I have yet to find one so great I’d order it special online. I will buy Mexican Coke when its on sale for 4/$1.

The pros are that using Amazon has simply made this news story. The cons are that it’s still Pepsi, so just how good could it be? In the end the novelty fades away. Krispy Kreme is just a donut. Chik-fil-A is just a chicken sandwich. Pepsi is just another soft drink, not the Harley-Davidson of soft drinks. At our local casino you can drink all the Pepsi you want for free 24/7.

Gib Bassett
Guest
3 years 2 months ago

Amazon and online channels in general appear to be a growth opportunity for CPG overall. It allows you to target a particular buyer, who may be less price-sensitive than a mass-merchandise store shopper, with possibly higher margin/lower volume or more personalized products. Deloitte’s research on this topic seems to support this idea. Over time the product’s demand may merit higher-volume sales in brick-and-mortar stores, but you could argue that certain new products like this need to launch via a channel like Amazon in order to recapture as much of the investment as possible, lest you risk a large scale roll out that fails to materialize successfully.

Gene Hoffman
Guest
Gene Hoffman
3 years 2 months ago

Pro: Pepsi’s roll-out of Pepsi True via Amazon helps familiarize that product to a great many potential future users.

Con: Pepsi has now added another partner to its product roll-out list. Its retail partners do not appreciate Pepsi adding new partners when soft drinks are ebbing. Maybe retailers are just busy recalculating how much space they should be giving to soda, cereal and other formerly-dynamically growing categories.

Peter Charness
Guest
3 years 2 months ago

For market sampling it’s a pretty good test vehicle, and so much simpler than trying to get shelf space in enough stores to do a test of this breadth. I don’t think it will ever be cost-effective to do a full product roll-out online-only though. That online customer, though, may not be a true representation of the in-store demand.

David Zahn
Guest
3 years 2 months ago

Can you just hear the space management analysts redoing their planograms across stores now to readjust the space given to Pepsi?

Ed Dennis
Guest
Ed Dennis
3 years 2 months ago
The pros for PepsiCo are: 1.) Limit liability for a product launch. 2.) Ability to launch a product without doing any real consumer research. 3.) Allow Pepsi to gain some free media exposure with a very small investment. Pepsi is using Amazon to reduce their financial investment in a new product launch. This will not require the Pepsi bottling system to adopt this product until some demand parameters have been established. The real question is what happens if this product is successful? I cannot imagine Amazon continuing to be an exclusive supplier as the bottling system will begin production of this product in standard sizes. Traditional stores should be relieved as they are the proverbial wall upon which new products are thrown to determine market acceptance. They will not be penalized by the volume loss to Amazon. The primary con for PepsiCo is that they have again been out maneuvered by the Coca-Cola system who’s number two brand, Diet Coke, outsells the PepsiCo flagship brand. I understand Coca-Cola is introducing a Stevia product through their… Read more »
Dave Wendland
Guest
3 years 2 months ago

Is Amazon a good testing ground in general? Yes. But it should be done with full disclosure and knowledge of traditional retail formats that it is only a consumer test to gauge interest before a broader, ubiquitous launch.

Pros: Online market reach and lots of buzz.

Cons: Perhaps only the sizzle without the steak. Pepsi True will likely not cause Pepsi faithfuls to converge on Amazon for this all-new carbonated beverage. And brick-and-mortar may be initially irked but will experience no long-lasting harm because Pepsi True may fall flat.

Verlin Youd
Guest
3 years 2 months ago

Seems like a very good way to get some initial idea of interest, feedback, and preliminary demand. However, good point made by Peter in that online consumers may not yet be statistically representative of total target market.

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