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Pepsi Determined to Recapture Former Second-Best Status

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After watching its flagship product fall to third place in market share while competitor Coca-Cola took the top two spots, PepsiCo has developed a plan to increase advertising spending for beverages this year by around 30%.

From now on,  "Summertime is Pepsi Time," according to the only new advertising campaign for Pepsi-Cola in three years.

Sales of Pepsi-Cola and Diet Pepsi fell 4.8% and 5.2% in 2010 respectively. The company's Q1 net profit fell to $1.14 billion in  2011, down from $1.43 billion for the same period in 2010. Some blame the company's decision to forgo the traditional celebrity-laden advertisements to promote its altruistic ‘Refresh Project.’

Judging by this new commercial, altruism is no longer top of mind:

Pepsi's increase in its advertising budget marks a movement away from PepsiCo’s new-media campaigns of yesteryear. The soda giant spent $32.3 million on ads for Regular Pepsi in 2010, $20 million of which went towards the online Refresh Project. And while Coca-Cola maintained traditional advertising tactics, Pepsi-Cola was absent in Super Bowl ads for the first time in 24 years.

According to Coke spokesman Dan Schafer, Coke’s advertising has had a “focus on sustained marketing behind assets like the Academy Awards” -- an approach which has garnered its products 26.9% of the total market. As one commentator on Adage put it, “There is still strength in message consistency and ‘traditional media’ tactics. Get too far ahead of the new media trends and watch your brand share go south.”

Within the new budget, Pepsi is spending $60 million on product placement in Simon Cowell’s music competition X Factor, and creating new ads for Pepsi, Diet Pepsi, and Gatorade.

While the increased focus on beverages has already seen a 2% rise in Q1 beverage sales volume, not everyone is optimistic: Credit Suisse analyst Carlos Laboy recently downgraded PepsiCo, noting that “It took decades to get [Pepsi] to No. 2, and it is risky that PepsiCo cannot avert this slide, while brand Coca-Cola holds it together, Diet Coke rises and Coke Zero continues to play its role well… a Pepsi Max relaunch looks brilliant, but the core is ailing."

As for me, I’m not drinking Pepsi until they do something about the taste.

Also see:

How the Egyptian Revolution is Stoking the Cola Wars

PepsiCo Goes Biotech, Cuts Sugar With "S2383"

Pepsi Honors Women by Launching Skinny Cans

Top-Selling Sodas: Then Vs. Now
POSITION:  No positions in stocks mentioned.