ANALYSIS: Why Pepsi is going direct to youth - Pepsi is targeting UK youth with a DM campaign in a bid to elicit a lifetime’s loyalty, writes Cordelia Brabbs

In the cut-throat world of carbonated soft drinks, there have

always been two front runners - heavyweight market leader Coca-Cola and

youth-friendly Pepsi.

But while Coke’s UK market share has increased from 64.1% to 66.1% over

the past year, Pepsi’s has fallen from 20.6% to 20.2% (AC

Nielsen-MEAL).

Although Pepsi is giving the red giant a close run for its money in the

US, it is finding the UK market tougher to crack.

Pepsi’s problems come largely down to three factors. First, it is

fighting for off-shelf space with a marketing budget which is about

one-fifth of Coke’s.

Second, with little loyalty left in the UK cola market, Pepsi’s

promotions have raised sales for only short periods before levelling

off.

Finally, while Coke is barely credible as a youth brand, with its

low-concept US-led ad campaigns, its mighty brand still appeals to

multiple buyers.

Pepsi believes the next generation could be the key to its revival, and

its use of hot pop names in ads - including Five and the Spice Girls -

has provided it with a formidable database of young consumers.

To make the most of this situation, Pepsi has launched a relationship

marketing scheme. Its Pepsi Stuff catalogue is already a huge success in

the US and is now being mailed to half a million database homes in the

UK in a campaign through Claydon Heeley International (Marketing,

November 11).

The ’collect and get’ deal gives youngsters the opportunity to purchase

cutting-edge goods at cut price in exchange for ring-pulls and labels

from cans and bottles. Pepsi hopes that by engendering loyalty through

this deal, it will be able to hold on to these customers as they age,

thereby securing a future customer base.

Sean Pillot de Chenecey, youth culture specialist at Informa, says the

scheme should have beneficial results: ’Pepsi has managed to get things

right so far in terms of youth culture. It does have fundamental weak

points, such as distribution and competition with Coke, but this

relationship marketing will build its brand in terms of loyalty.’

In a further attempt to attract UK youth on its own terms, Pepsi is

adding a realistic edge to its offering. The Pepsi Stuff catalogue,

rather than featuring branded baseball caps, offers Technics turntables,

minidisc systems and Sony CD car stereos. The catalogue itself is

suffuse with images of Brixton, which add to its ’with-it’ appeal.

But in response, Coca-Cola has refused to be drawn on any issue

regarding a soft drinks war. It even refuses to admit that it competes

directly with Pepsi. Liz Lowe, brand manager for Coca-Cola, says: ’We

don’t operate in the cola market - we define ourselves in the

non-alcoholic beverage market, along with tea and coffee.’

But Andrew Marsden, marketing director of Britvic, Pepsi’s UK

distributor, stresses that the fight will continue against Coca-Cola.

’Coke is not unassailable,’ he says. ’We will probably not become the

number one carbonated soft drink in my lifetime, but in terms of volume,

we’ve tripled sales in a decade. This is a marathon, not a sprint.’

COLA WARS

Company            12 w/e      12 w/e

                18 Oct 98   17 Oct 99

1 Coca-Cola         25.9%       30.6%

2 Pepsi             16.4%       13.4%

3 Virgin Cola        7.9%        7.4%

Household penetration

Source: Taylor Nelson Sofres Superpanel

(Corrected from last week’s issue)

This article was first published on Marketing