History of Pepsi-Cola
Advertising as Weaponry
Pepsi has marked more than the Hundred Years War with no decisive victory in sight. But then, perhaps victory would spoil all the fun -- not to mention the price wars that frequently let thirsty consumers load up at grocery chains for less than 17 cents a can. If it were just a matter of stuffing cola into an endless procession of cans, the days at Purchase and Somers, N.Y. (home of the Pepsi division) would hold no intrigue. (Ellis, 1979).
For decades Pepsi has defined itself through the wizardry of the slogan, the jingle and the storyboard and all that a succession of four ad agencies has spun from them. One hundred years after New Bern, N.C., druggist Caleb Bradham called it Pepsi-Cola (actually, Caleb Cola would have had a nice ring and spared Mr. Bradham the necessity of buying out an existing trademark, Pep-Kola, for the princely sum of $100), this worldly and sophisticated company still succumbs to the temptation to see itself as the ``feisty newcomer'' struggling in the shadow of tradition and Americana cast by ``the competitor.'' (Martin, 1962)
Selling In Bottles
The demand, it turned out, was already there. The race was how to make enough Pepsi without going broke in the process. Spritzing it out of fountain dispensers didn't begin to do the job. So Mr. Bradham turned to selling it in bottles. Unfortunately, this required bottles, which were only beginning their evolution from hand-blown delicacies to mass-produced containers. It also required bottlers willing to invest capital in Mr. Bradham's beverage. With the fundamentals of manufacturing still untamed, building additional demand through advertising probably was the least of anyone's concerns. (Martin, 1962)
Indeed, it was a crisis of manufacturing, not marketing, that would swallow Pepsi up in the first of a series of bankruptcies. Sugar shortages during World War I and a cartel-induced price surge after that war convinced Caleb Bradham to buy up as much sugar as he could before prices got worse.
Unfortunately, prices soon got better, making everything else worse for Mr. Bradham, who found himself buried under a stockpile of overpriced sugar and debt. Facing bankruptcy, he prevailed upon Wall Street investor Roy Megargel to reorganize. But it came to nothing. In 1923, Mr. Bradham sold out for $35,000 to the Craven Holding Co., went back to the drugstore business and died 11 years later. Craven transplanted Pepsi to Richmond, Va.; while Mr. Megargel, now the largest stockholder, sat on the board and watched his company ekes out a modest growth record through the 1920s. It was reorganized again in 1928 as the National Pepsi-Cola Co., just in time for the the Depression and bankruptcy. Exit Roy Megargel, enter Charles Guth, president of the Loft Candy Store chain and a man with a score to settle against Coca-Cola Co., which had refused to supply Loft stores with syrup at a price Mr. Guth considered reasonable. With Pepsi on the block in 1931, he saw a source of supply that would be his to control. So he picked it up for $150,000, as much to avoid dickering with Coke as for any future he might have seen in Pepsi. (Mulchand, 2003)
An Approach to Coke
When a humiliated Charles Guth sent quiet feelers to Coca-Cola about buying out the company, Coke wasn't interested. It preferred to let Pepsi die a natural death, and the quicker the better. The year was 1934. Then, with nothing left to lose, Mr. Guth had a final idea, one shimmering with the glow of common sense. That March, something astonishing began appearing in Baltimore grocery stores -- 12-oz. bottles of Pepsi selling for 5 cents each. Without raising the price, Mr. Guth had taken Pepsi off the gold standard of the soft drink business, the 6-oz. sales unit. In the midst of the Great Depression, he offered customers a bargain. The result was a...