The Pepsi Challenge, Rusia

Essay by MalacusUniversity, Bachelor'sA+, April 2005

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The Pepsi Corporation began in 1893 when pharmacist Caleb Bradham formulated the drink. The first few decades for Pepsi were difficult due to the fact that Pepsi almost went bankrupt three times. The strategy of under pricing Coke in the 1930's paid off huge dividends for the Pepsi Corporation, and they were able to catch up some lost ground. Through the Second World War, Pepsi was struggling to compete with Coke because of the contract Coke had with the U.S. military.

After World War II, Pepsi made tremendous strides in regaining market share over Coke. Fueled by a new CEO, Alfred Steele, and a "Beat Coke" strategy, Pepsi's sales grew 300 percent between 1950 and 1958. This was due in large part to the twenty-four ounce bottles for families.

Pepsi was renamed PepsiCo in 1963 by Donald Kendall, who also acquired Frito-Lay and Pizza Hut. The 1960's and 1970's saw an increase in unit sales higher than Coke's.

In 1974, Pepsi embarked on its most ambitious advertising campaign ever, "The Pepsi Challenge". The "Pepsi Challenge" pitted Pepsi versus Coke in blind taste tests. The final result was that more consumers liked the taste of Pepsi than Coke. As a result of the campaign, Pepsi became the leader in U.S. supermarket sales. Pepsi was doing fine in the United States but only 20 percent of their market was international.

Internationalizing Pepsi had huge profit potentials for PepsiCo. Originally, Pepsi's international operations merely consisted of repeating their national growth strategies. They used a franchising technique that banked on local successful business leaders. PepsiCo would assist these business leaders by setting up their operations such as the plants in which to make Pepsi and the trade routes. Pepsi would then make their money by selling the concentrate to these local...