Case Study: The Pepsi Challenge - ' Bumps in the Road '

Yet as promising as Pepsi bottlers' new wireless sales strategies are—the cost of selling a case of beverages is already falling for PepsiAmericas in test markets, says CIO Johnsen—wireless is no sure bet. The cultural challenges have been enormous, calling into question how fast Pepsi bottlers will be able to finish rolling out the changes.

In Ohio, Illinois, Iowa, New Jersey and elsewhere, unionized drivers for both bottlers, who represent about half of those behind the wheel, have vehemently protested the bottlers' move to the "pre-sell" strategy, and lawsuits alleging labor contract violations have been filed in some areas, says Tom Kapp, vice president of Teamsters Local 744 in Chicago. According to Kapp, some drivers have been hit with pay cuts of 20 percent or more as they've been moved off sales commissions to hourly salaries, with no overtime. Says Tony Petillo, secretary-treasurer for Teamsters Local 125 in Totowa, N.J., "The average wage before they stopped commission was $75,000, and the average wage now is probably $55,000." The result? High job turnover rates. "It used to be rare that someone would change a job," Kapp says. Now, "there is quite a bit of turnover"—between 25 to 30 percent, Kapp says. The numbers don't surprise Jacks, who estimates the switch to pre-sell means "you're looking at having to handle almost twice as many cases to make the same amount of money—roughly about 140,000 to make about the same amount of money you get now running 90,000."

As big an issue for some drivers is the change in their relationships to their customers. Drivers, many of whom have years of experience and history with their customers, aren't happy about giving up those relationships, says Petillo, a former Pepsi route salesman.

Johnsen acknowledges the challenges. "The move to the new sales model is influencing our union negotiations," he says, not to mention slowing down the rollouts in some markets. Jacks, for example, was to have given up the sales part of his job in March, but now his union, Teamsters Local 364 in South Bend, Ind., says PepsiAmericas won't be making the switchover on his route and some others until fall, a decision made, in part, to avoid upsetting the bottlers' lucrative summer selling season.

But labor woes aren't Pepsi's only headaches. Bottling executives also worry about technology problems cropping up during the rollouts. For one, wireless coverage outages continue to be a problem in some of the bottlers' rural markets in pilot tests of the new sales and delivery PDAs: Some PepsiAmericas agents using the new wireless devices in Iowa have had to resort to transmitting orders via their customers' fax machines or telephones. "Let's face it," says CIO Johnsen, "there are markets out there that don't have wireless data coverage. Your sales teams can be as wireless as anyone, but if you're out there in Iowa and you can't transmit an order, you've got a problem."

Indeed, the bottlers have shied away from setting any specific deadlines for going national, except to express hope that all will be complete by the end of 2004 or early 2005. PBG's Hamilton won't even discuss timetables. PBG's Dallas pilot of its new super-smart sales-force handhelds with full-motion video and regression analysis capabilities is going very slowly, he says, with training and detailed comparisons to the old system being conducted simultaneously—just to make sure all the kinks have been worked out first. Says Raymond Brown, PBG's director of supply chain technologies: "We want to make sure the salespeople go through Drivers' Ed before we give them the keys to the Porsche."