Monday, July 9, 2007

Pepsi History


Pepsi-Cola was first made in New Bern, North Carolina in the United States in the early 1890s by pharmacist Caleb Bradham. In 1898, "Brad's drink" was changed to "Pepsi-Cola" and later trademarked on June 16, 1903. There are several theories on the origin of the word "pepsi".

The only two discussed within the current PepsiCo website are the following:

1. Caleb Badham bought the name "Pep Kola" from a local competitor and changed it to Pepsi-Cola.
2. "Pepsi-Cola" is an anagram for "Episcopal" - a large church across the street from Bradham's drugstore. There is a plaque at the site of the original drugstore documenting this, though PepsiCo has denied this theory.

The word Pepsi comes from the Greek word "pepsi" (πέψη), which is a medical term, describing the food dissolving process within one's stomach. It is also a medical term, that describes a problem with one's stomach to dissolve foods properly.

Another theory is that Caleb Badham and his customers simply thought the name sounded good or the fact that the drink had some kind of "pep" in it because it was a carbonated drink, they gave it the name "Pepsi".

As Pepsi was initially intended to cure stomach pains, many believe Bradham coined the name Pepsi from either the condition dyspepsia (stomach ache or indigestion) or the possible one-time use of pepsin root as an ingredient (often used to treat upset stomachs). It was made of carbonated water, sugar, vanilla, rare oils, and kola nuts. Whether the original recipe included the enzyme pepsin is disputed.

In 1903, Bradham moved the bottling of Pepsi-Cola from his drugstore into a rented warehouse. That year, Bradham sold 7,968 gallons of syrup. The next year, Pepsi was sold in six-ounce bottles and sales increased to 19,848 gallons. In 1924, Pepsi received its first logo redesign since the original design of 1905. In 1926, the logo was changed again. In 1929, automobile race pioneer Barney Oldfield endorsed Pepsi-Cola in newspaper ads as "A bully drink...refreshing, invigorating, a fine bracer before a race".

In 1929, the Pepsi-Cola Company went bankrupt during the Great Depression- in large part due financial losses incurred by speculating on wildly fluctuating sugar prices as a result of World War I. Assets were sold and Roy C. Megargel bought the Pepsi trademark. Eight years later, the company went bankrupt again. Pepsi's assets were then purchased by Charles Guth, the President of Loft Inc. Loft was a candy manfuacturer with retail stores that contained soda fountains. He sought to replace Coca-Cola at his stores' fountains after Coke refused to give him a discount on syrup. Guth then had Loft's chemists reformulate the Pepsi-Cola syrup formula.

Rise in popularity

During The Great Depression, Pepsi gained popularity following the introduction in 1934 of a 12-ounce bottle. Initially priced at 10 cents, sales were slow, but when the price was slashed to 5 cents, sales went through the roof. With twelve ounces a bottle instead of the six ounces Coca-Cola sold, Pepsi turned the price difference to its advantage with a slick radio advertising campaign, featuring the jingle "Pepsi cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you,", encouraging price-watching consumers to switch to Pepsi, while obliquely referring to the Coca-Cola standard of six ounces a bottle for the price of five cents (a nickel), instead of the twelve ounces Pepsi sold at the same price. Coming at a time of economic crisis, the campaign succeeded in boosting Pepsi's status. From 1936 to 1938, Pepsi Cola's profits doubled.

Pepsi's success under Guth came while the Loft Candy business was faltering. Since he had initially used Loft's finances and facilities to establish the new Pepsi success, the near-bankrupt Loft Company sued Guth for possession of the Pepsi Cola company. A long legal battle then ensued, with Guth losing. Loft now owned Pepsi, and the two companies did a merger, then immediately spun the Loft company off.

Niche marketing

Walter Mack was named the new President of Pepsi-Cola and guided the company through the 1940s. Mack, who supported progressive causes, noticed that the company's strategy of using advertising for a general audience either ignored African Americans or used ethnic stereotypes in portraying blacks. He realized African Americans were an untapped niche market and that Pepsi stood to gain market share by targeting its advertising directly towards them. To this end, he hired Hennan Smith, an advertising executive "from the Negro newspaper field" to lead an all-black sales team, which had to be cut due to the onset of World War II. In 1947, Mack resumed his efforts, hiring Edward F. Boyd to lead a twelve-man team. They came up with advertising portraying black Americans in a positive light, such as one with a smiling mother holding a six pack of Pepsi while her son (a young Ron Brown, who grew up to be Secretary of Commerce) reaches up for one. Another ad campaign, titled "Leaders in Their Fields", profiled twenty prominent African Americans such as Nobel Peace Prize winner Ralph Bunche and photographer Gordon Parks.

Boyd also led a sales team composed entirely of African Americans around the country to promote Pepsi. Racial segregation and Jim Crow laws were still in place throughout much of the U.S. and Boyd's team encountered a great deal of discrimination as a result. Not only did they have to ride on segregated trains and stay in black-only hotels, but they faced insults from Pepsi co-workers and even endured threats from the Ku Klux Klan. On the other hand, they were able to use racism as a selling point, attacking Coke's reluctance to hire blacks and the support of segregationist Governor of Georgia Herman Talmadge by the chairman of Coke. As a result, Pepsi's market share as compared to Coke's shot up dramatically. After the sales team visited Chicago, Pepsi's share in the city overtook that of Coke for the first time.

Besides racism, the sales team faced obstacles laid down by Coke personnel. Wall Street Journal writer Stephanie Capparell's book The Real Pepsi Challenge details efforts by Coke deliverymen to tear down Pepsi advertising or dirty Pepsi bottles by wiping them with oil rags. They even started a rumor that a black man drowned in one of Pepsi's syrup tanks, leading to a boycott of the cola in North Carolina.

This focus on the African American market caused some consternation within the company and among its affiliates. They did not want to seem focused on black customers for fear that whites would be pushed away. In a meeting at the Waldorf-Astoria Hotel, Mack tried to assuage the 500 bottlers in attendance by pandering to them, saying, "We don't want it to become known as the nigger drink." After Mack left the company in 1950, support for the black sales team faded and it was cut.

New advertising strategy

New President Alfred Steele completely changed direction with the marketing of the product to alter the "econo-brand" image of Pepsi. Postwar inflation put an end to the "Twice as much for a nickel" pricing and marketing strategy anyway, with some bottlers switching to 10 or even 8 ounce bottles at the nickel price, while others kept the 12 ounce bottles but at a higher price, and still others switched to 6 ounce bottles for seven cents. Pepsi's formula was also slightly changed, this time removing some of the sugar content. This was tied into their new image of Pepsi as "The Light Refreshment" and was followed by attempts to market Pepsi as a more affluent beverage. This was the "Be Sociable" campaign and wasn't particularly successful. Pepsi's next strong marketing success didn't occur until they targeted the youth market. First with the "Think Young" campaign in 1961, then more famously with their "Pepsi Generation" advertising two years later.

By the early 1960s, competitor Royal Crown Company was having strong success with their Diet Rite Cola. At that time, The Pepsi-Cola company had branched out into producing other flavors, under their Patio line, and in response to the success of Diet Rite, they added Patio Diet Cola. Success with Patio Diet Cola encouraged them to instead market it as Diet Pepsi in 1964. This was the also the year that Pepsi purchased the Mountain Dew brand from the southeast region Tip Corporation.

In 1965, the Pepsi-Cola Company merged with Frito-Lay, forming PepsiCo.