Saturday, October 17, 2009

Pepsi's Web-Smart Thrust into China

Its promotions have made it the No. 1 cola in the mainland

Shanghai - On a stage built in a disused Shanghai factory, a young bassist paces nervously, a stainless steel bicycle chain dangling from his belt. As his group prepares to perform for a standing-room-only crowd, a bandmate tilts his hat over one eye, doing his best to look like Justin Timberlake.

Welcome to Pepsi's (PEP) Battle of the Bands. The American Idol-style television show is a big component of the company's brand-building efforts in China. Some 6,000 bands tried out for 10 spots on the show, which was broadcast nationwide and streamed to Pepsi's Web site. The winner, a five-piece combo from Tianjin called Focus Point, got $30,000, a trip to a Los Angeles recording studio, a car, and a role in a Pepsi TV ad.

Worldwide, of course, Pepsi (No. 23 on BusinessWeek 's Best Global Brands survey) remains far behind Coca-Cola (KO) (No. 1). But by at least one important measure, Pepsi is beating its archrival in China. It's the No. 1 cola, with 23% of the soda market, vs. Coke's 22%, according to researcher Euromonitor International. The country "represents our single biggest opportunity today outside the U.S.," says CEO Indra K. Nooyi, who spent 12 days in China this summer.

Pepsi thinks the Internet is key to unlocking that opportunity. In August the company launched the "Pepsi Creative Challenge," soliciting online birthday wishes marking the 60th anniversary of the founding of the People's Republic. Last year a promotion called "Go China," before the Beijing Olympics, encouraged people to send in patriotic slogans and pictures of themselves. Pepsi got 28 million submissions and more than 122 million votes to decide the winners, whose photos and slogans were printed on soda cans. And in 2006, some 28,000 Internet users submitted scripts for a Pepsi TV ad. "Pepsi [in China] is one of the best digital marketers anywhere," says Tom Doctoroff, North Asia director for ad agency JWT.

The promotions are the brainchild of Harry Hui, Pepsi's chief marketing officer for China. The former head of Greater China for Universal Music, Hui is serving as producer of Battle of the Bands and is one of its three judges. "Consumers in China are bombarded with messages, so merely telling them what they should drink or eat might not resonate," Hui says. "Giving them a platform where they can talk back fosters a deeper relationship with the brand."


Web campaigns are growing in importance for most foreign companies in the mainland. With more Chinese than Americans online, social media and blogs are "a must-have component of marketing in China," says Sam Flemming, chief of CIC, a research firm in Shanghai that works with Pepsi.

Coke, meanwhile, is no stranger to the Net, and it's turning up the heat in China, too. Pepsi may be the No. 1 cola, but it's behind Coke's Sprite, the top soda in the country. Coke's Minute Maid leads the juice segment, with 10.3% of the market, vs. just 1.4% for Pepsi's Tropicana. Coke also sponsors an American Idol-style competition of its own, and its iCoke Web site is a popular portal for gamers in China. "Everyone knows about iCoke," says Tony Ip, China managing director for G2, Grey Group's digital-marketing arm. Though Pepsi's big campaigns create a lot of buzz, it's short-lived, he says. "I don't see them building equity," says Ip.

Pepsi executives counter that the efforts will pay off as they move into juices and other noncarbonated drinks. But they acknowledge that marketing can get you only so far in China and that plans to boost distribution are equally important. To really succeed, says Ken Newell, Pepsi's beverage chief for the country, "we must build plants further into China."