What's Going Wrong at Pepsi? Everything.

Last Updated Aug 5, 2009 5:46 PM EDT

PepsiCo's marketing -- and specifically its drinks unit -- is looking increasingly like a basket case under PepsiCo Americas Beverages CEO Massimo D'Amore. Since D'Amore ascended to the throne in November 2007, Pepsi's strategy has been difficult to figure out, to put it mildly. The business has been marked by musical chairs, high-profile failures, and constant change both at the client and its agencies.

Last week, D'Amore thanked North American CMO Dave Burwick for his services and told him not to let the door hit his ass on the way out to "general management." D'Amore even hinted in his statement that Burwick should carry the can (pun!) for some of the turmoil, even though everyone knows it is D'Amore who calls the marketing shots:
"As CMO of North American Beverages, Dave shepherded the re-launch and re-branding of the entire Pepsi trademark while ushering in the 'Refresh Everything' campaign," Massimo d'Amore, PepsiCo Americas Beverages CEO, said in a statement. "We regret to see him go, but we respect his desire to fulfill his career aspirations in general management elsewhere."
Translation: Burwick should be associated with the logic-free Arnell Group redesign of the Pepsi logo, not me.

But is Burwick to blame for Pepsi's try-one-thing-then-another approach of the last two years? Consider the timeline:
  • November 2007: Massimo D'Amore becomes CEO of PepsiCo Americas Beverages. He has ambitions to replace Indra Nooyi as PepsiCo CEO.
  • July 2008: SVP/CMO Cie Nicholson leaves.
  • August 2008: Dave Burwick moves from president of PepsiCo Canada to North American CMO.
  • September 2008: VP marketing Russell Wiener leaves to join Domino's.
  • October 2008: Arnell Group unveils new Pepsi logo; project is immediately ridiculed when internal documents leak describing the logo as a "Golden Ratio."
  • November 2008: Pepsi brand account is moved from BBDO to TBWA/Chiat/Day.
  • December 2008: BBDO publishes and then withdraws the infamous "Pepsi Max suicide ad" in Germany. (D'Amore does not have responsibility for international advertising, but the incident didn't help perceptions that the tiller lacked a strong hand.)
  • December 2008: Jill Beraud made global CMO; she comes from Limited Brands.
  • February 2009: PepsiCo drops Arnell's redesign of its Tropicana package after customers revolt.
  • August 2009: North American CMO Burwick resigns; is replaced by Beraud.
Everything that's gone wrong -- or at least not gone right -- seems to have happened since D'Amore got the seat at the head of the conference table.

PepsiCo's Q2 2009 earnings report shows the "total net revenue" for the beverage segment down 12 percent for the year. The decline squarely follows the Pepsi and Tropicana reduxes. Pepsi and other soda brands did the best, only seeing a 5 percent decline since January. The company blamed in part "consumer shifts to lower-priced options," for the decline.

That's huge for Pepsi -- the whole point of a brand is that you're able to maintain a price premium when everyone around you relies on discounts to generate sales. If Pepsi can't do that on its various brands, it is screwed.

The recession has placed enormous pressure on consumers to switch to discounts. The company has avoided discounts in its drinks portfolio but has nonetheless failed to offer any other kind of value to its consumers. Where is the rewards promotion? Where are the tie-ins with pop-culture retailers such as Netflix, Ticketmaster, iTunes etc, for free product for loyal Pepsi drinkers? The company needs to at least attempt to show gratitude to drinkers who have stuck with it.

Instead of leaning more heavily on its existing brand, Pepsi decided to "Refresh Everything" with an antisceptic new look and a pollyanna-ish new set of ads.

The phrase "Refresh Everything" seems to say more about the client's marketing management than it does about the product itself.

UPDATE: Ad Age agrees!

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