Pepsi bottlers are using wireless to reinvent the way soda is sold, altering the nature of work and customer relationships. Can smart PDAs help put the pop back in profits?
For PepsiAmericas CIO Ken Johnsen, the new strategy is long overdue. "In the old days, Pepsi used to sell itself; there really were no orders," Johnsen says. "If you didn't have those six cases of Frappuccino on the truck and your customer wanted them, it was just, 'I'll catch you next time, next Wednesday.' It was leading to a tremendous loss of potential sales."
It's also a far more competitive marketplace than it used to be, says Paul Hamilton, supply chain logistics vice president for PBG. Today, there are hundreds of Pepsi product and packaging configurations targeting customers' wallets, compared to less than 50 just several years ago-yet neither Pepsi's trucks nor the stores' shelves are getting any bigger and competition from Coca-Cola Co. and new beverage upstarts remains stiff. In this climate, bottlers must find ways to better sell, price, deliver and promote soft drinks at far less cost, from one market and one store to the next. "It's time to do things differently, to arm a frontline work force with relevant, easy-to-access, real-time information," Hamilton asserts. "It's time," he says, "to pump up the volume."
For Pepsi bottlers and parent PepsiCo, that goal has rarely seemed more urgent. Following years of growth, soft-drink sales in the U.S. are losing fizz as a new generation of consumers takes the dollars that used to go to colas and spreads them around a variety of newfangled flavored sodas, bottled waters and fruit juices with names like Sobe Lizard Lava and Lipton Brisk. Indeed, now it's the non-carbonated stuff that stands to reap the most sales going forward, executives say. Sales of Pepsi's Aquafina water, for example, have grown 28 percent during the past three years, analysts say, while Pepsi's carbonated drink sales have sputtered, up just .2 percent at PBG for the first three months of this year.
The struggling economy and the war in Iraq aren't helping. On March 5, in a conference call with Wall Street analysts, PBG CEO John Cahill lowered his company's earnings forecast, citing U.S. sales volumes that would be down roughly 5 to 6 percent for the first three months of this year. PepsiAmericas expects slightly worse—a 7 to 8 percent volume decline for the first quarter.
For a while now, both Pepsi and its chief rival, Coke., have been losing the cola war to new consumers. According to Beverage Digest, Coke and Pepsi market shares of 44.5 percent and 31.4 percent, respectively, were the same in 1998 and 2002. But the average consumer is drinking fewer servings of carbonated soft drinks in favor of sports drinks and bottled water. Market shares for Coke Classic and Pepsi-Cola have eroded, from 20.6 percent in 1998 to 19.3 percent last year for Coke, and from 14.2 percent to 12.6 percent for Pepsi. "If you're a Pepsi bottler and you want to win against rivals with a broader range of products that will drive profitability, you need sophisticated technology to help you figure out the right mix of prices and products," says Wall Street analyst Carlos Laboy, who tracks PepsiCo and its bottlers for Bear Stearns & Co. With their new wireless strategies, Laboy says, the Pepsi bottlers finally should be able to cash in on their marketing and CRM investments and use them to help stores better stock the most attractive mix of Pepsi products, price them better, and put them in the right spots for maximum sales. "Our people are good," says Pepsi Bottling's CEO Cahill, "but they can be much better in terms of the tools and the information they have at their fingertips."