Case Study: The Pepsi Challenge - ' Smart Vending '

What's next? PepsiAmericas is experimenting with wireless vending machines that would let people use their credit cards and, someday, their cellphones to buy soft drinks. Both bottlers also are tapping into UCCNet, a nonprofit cross-industry group that aims to synchronize product codes, pricing data and product specs for Web-based business transactions, enabling product data to be stored on Web servers and accessed by anyone in a corporation, from sales to marketing to the CEO.

And like many in the packaged goods industry, both bottlers are experimenting with radio frequency sensors. Working with MIT and other leading corporations across industries to develop the technology, they hope someday to be able to track who's buying what—perhaps all the way down to the individual customer. "RFID and mobile technology will significantly change the way we distribute in the future," Hamilton says.

Can Pepsi pull it all off? While Wall Street analysts applaud the bottlers' willingness to be early adopters, they wonder how valuable the mobile initiative will be to Pepsi over the long term. "It's a good move, but it won't fuel long-term growth," says Mark Swartzberg, a beverage industry analyst at Legg Mason Inc., a financial advisory firm based in Baltimore, Md.

"Only smart brands and good marketing can do that," he says. Besides, he adds, in five years or so, wireless strategies similar to what Pepsi bottlers are spearheading will be more common, as Coke and other rivals race to do similar things. "It doesn't take long for the playing field to get level," Swartzberg says.

The key to success for now, says Stanford's Lee, is making sure that labor disputes won't stall meaningful progress before the strategies have a chance to pay off. The point hasn't been lost on the bottlers. In recent months, both bottlers have attempted to avert bad morale and high turnover, offering, in some places, to give sales jobs back to drivers who meet tough sales and skill requirements, cognizant that their longstanding customer relationships have value to the bottom line. Says Petillo of Teamsters Local 125 in New Jersey, where the pre-sell model first began rolling out in late 2001: "The young, new sales force is also now experiencing some turnover. [Pepsi bottlers] are coming back to us now and offering some of us opportunities to start selling again. It's a tough job, yet some of our people have taken them up on it." The change of heart in some areas doesn't surprise Jacks. He knows most of his customers' first names by heart, as well as "when the manager's gone out to play golf, or when somebody's daughter is getting married." Relationships are important, he says, and can promote customer loyalty. "Will the new people with technology do any better?" he asks.

Still, there's no turning back, says PepsiAmericas' Johnsen. Advances in information technology continue to push companies large and small to the next levels of automation. Johnsen's hope is that the drivers' delivery role will also become more sophisticated as PDAs become more widely used to improve customer service and keep inventories neither overstocked nor underestimated. "We have to change everything now, and the nature of the jobs must change with it," Johnsen acknowledges. (See "Thinking Out Loud CIO Ken Johnson") "Getting management to understand that what we were doing before wasn't selling, it was taking orders, and then getting the organization in the field to feel comfortable with letting go of control of the customer is very, very tough. I don't know that we're there yet."

But don't tell Jacks. "Ten years ago, if you would have told me I'd be selling water, much less only delivering it to my old customers, I'd have thought you were crazy," he says. Indeed, for Jacks and thousands more drivers across the country, the future—for better or worse—is now.

Editor-in-Chief Ellen Pearlman contributed to this report.
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