What if Pepsi and Coke stop advertising?

April 26, 2005 11:50 AM

What would happen if either Pepsi or Coca-Cola stopped advertising (in America) for their regular Pepsi and regular Coke products?

I assume they write off a large portion of the advertising, but there must be a good reason to spend that much dough on products that the majority of us have already made our decisions on.

posted by sharksandwich to society & culture (20 comments total)

We'd start drinking Sam's Cola. And nobody wants that to happen.

You have to consider, that in many places coke is the drink of choice over that dastardly Water brand, so they have to keep it going.

But I admit, Dr. Thunder is delicious.
posted by Stan Chin at 12:26 PM on April 26, 2005

You might not be aware of how fickle many consumers (including myself) are. I have no significant preferences in cola products, drinking perhaps Diet Pepsi more than Diet Coke, but Coca Cola more than Pepsi.. but advertising definitely reinforces the image of a certain drink/brand. I find that Coca Cola is significantly more effective in this regard, particularly around Christmas time.

If they both stopped advertising, I think their competitors would be more noticed, and likely to pick up market share. Virgin Coke (which I also quite like, but doesn't seem to be sold anywhere I generally go) could come in as a solid third contender. So I'd say the advertising also works to reinforce the 'big two' image, and to water down anyone else's attempts.

However, I'd say the effect would be, at first, minimal, and then only become significant over a long time span (say, 10 years+). Coca Cola and Pepsi have both sewn up their key markets (Coca Cola has McDonald's, Pepsi has KFC, etc), and most retailers are reluctant to push other brands as forcefully. Perhaps a reduction in advertising would also provide some long-term signal to retailers and merchants as to a weakening brand, meaning they'd be likely to try pushing stuff like Virgin Cola instead.
posted by wackybrit at 12:31 PM on April 26, 2005

I have three anecdotal stories, related to the comments above -

1) A friend once worked for the Busch family in St. Louis. He related a story that years ago, the family decided that too much of its profit was going into advertising and that it already had the best-selling beer. So why keep spending the money. As the story goes, they froze advertising spending for a year. At the end of the year they had made more money (their sales were still good and they saved by not advertising). However, Miller's market share had increased. So the following year they returned to advertising to preserve market share.

2) Another friend told me that Coke spends so much on advertising to make the cost of advertising itself prohibitive. This discourages new competitors and makes it harder on Pepsi apparently. He had seen figures that suggested Coke's spending had raised the advertising economy in general.

3) I have read contrarian business wisdom (as a former advertising employee) that companies should spend more during bust periods - their competitors will tighten up their advertising budgets and if the company can survive, they can significantly increase market share.
posted by Slothrop at 12:52 PM on April 26, 2005

I think it has a lot to do with the new consumers. Young people have the most years ahead in which to purchase soda so marketing to youths is a priority for major brands like C/P. It may also have to do with appealing to consumers in order to affect their subconscious decision-making process when they purchase a beverage.
posted by dfowler at 12:56 PM on April 26, 2005

If they stopped advertising they would become RC Cola.
posted by caddis at 1:01 PM on April 26, 2005

Many decades ago, I read a book written by one of the founders of operations research, who was hired (with some colleagues) to assist in marketing analysis for one of the large beer companies (which was named in the book). By testing different amounts of advertising in different regional markets, they found (if I remember correctly) that periodic "reinforcement" advertising campaigns were needed to protect market share, but that continuous advertising was unnecessarily expensive. I've always wondered why this relatively scientific approach to advertising (that is, try different things in different markets, and measure the impact) never became the default norm. Instead, companies do national campaigns, and remain relatively clueless as to the optimum amount of advertising.
posted by WestCoaster at 1:06 PM on April 26, 2005

I'm not sure this addresses the question, but if both Coke and Pepsi stopped advertising in the US, I think cola consumption as a whole would go down (rather than causing a mass defection to, say, RC Cola).

Even stronger than the ads' power to make us pick one brand over another is their power to make it seem like cola is the default/most-regular kind of soda. (This, coming from someone who doesn't really like cola especially much).

I think it's possible that this would also happen in the absence of just one of the two companies' ads, especially if it were Coke that left the market. The Cola Wars were always a little cold-war'ish. The very idea of the Cold War was most certainly a Russian/American conspiracy to keep both populations in check.
posted by nobody at 1:06 PM on April 26, 2005

A lot of dentists would be a lot poorer?
posted by DelusionsofGrandeur at 1:11 PM on April 26, 2005

Don't forget, it's not only the end consumer that has to choose to buy a product, it is the supermarket, bodega, restaurant, deli, etc. Perhaps if Coke stopped advertising as much supermarkets would be less likely (maybe by only a small degree) to stock their product as they may perceive a decreased demand based on the product not being pushed at them as aggressively. This may make the product less available to the end consumer and thus perhaps reduce profit. I mean, how easy is it to find RC Cola?? Is that because RC doesn't want supermarkets to sell RC or is it because they spend so little on advertising that supermarkets don't see it as a real contender for their shelf space??
posted by spicynuts at 1:18 PM on April 26, 2005

You know how in "Alice in Wonderland" the Red Queen has to run as fast as she can just to stay in the same place. I imagine this is yet another place this analogy applies.
posted by Dr_Octavius at 1:29 PM on April 26, 2005

Jeff Manning, executive director of the California Milk Processor Board (from 1999):

"When the Board hired me, milk consumption was declining by about two to three percent per year due to the proliferation of beverage products on the market and a tremendous surge of out-of-home eating. The GOT MILK?® advertising campaigned kicked into gear in 1994 and, as expected, the rate of consumption leveled off. If it had continued to decrease at two to three percent per year, demand would have gone down cumulatively by hundreds of millions of gallons. So, we didn't drive sales up. What we did was stop the hemorrhaging in the face of competition from Coke, Pepsi, Snapple, Gatorade, Evian - a whole slew of competitors with deeper pockets."

All that money ($100 million+) just to stop decreased consumption. Wow.
posted by sharksandwich at 1:39 PM on April 26, 2005

As others have said, if they stopped advertising, that would open a niche for someone else. You may think they're 'established' enough not to need it, but they would seem quaint and old-fashioned after a few years if they stopped advertising altogether, and the new contender(s) would become central. I remember when Dewar's started advertising (mid 90s?), because before that whiskey was really an "old man" drink. After that, it was suddenly hip (I mean, it was still sometimes called an old man drink, but it became hip to try the old-man drinks). I'm not saying ad campaigns are the only things that push trends around, but they definitely have an impact.
posted by mdn at 1:52 PM on April 26, 2005

What would happen to coke and pepsi? Or what would happen to the world around them? Both interesting questions.

An example for outside effects might be to look at the ban on tobacco advertising in Canada. The Benson & Hedge's Symphony of Fire, an international fireworks competition, went away in Toronto, because there wasn't another title sponsor available. Also, I've read that the most popular television is scheduled for Thursday nights, because that's when the movie companies want to spend their advertising dollars for the Friday new releases. Cutting back on film advertising might rework the TV landscape, and possibly cause shifts in how people schedule their lives.

Cutting back their advertising would, no doubt, affect Pepsi and Coke, but I think it would affect a hell of a pile of other things, as well.
posted by jacquilynne at 2:21 PM on April 26, 2005

Because they're not just selling a product, they are selling an image to go with the product. Same for Nike, Benetton, etc...

Read No Logo (or at least the chapters associated with brand image) to gain further insight.
posted by furtive at 2:30 PM on April 26, 2005

...and part of the image they're selling is "we're a brand that can afford to advertize." Non-advertizing brands (RC, Sam's Choice, etc.) get looked down as budget items.

If Pepsi stopped advertizing, I suspect within a few years we'd start seeing it as a cheap Coke knock-off. If that happened, they'd have to lower their prices to compete with the other cheap knock-offs, and they could well wind up losing money.
posted by nebulawindphone at 3:51 PM on April 26, 2005

(looked down on, rather)
posted by nebulawindphone at 3:52 PM on April 26, 2005

A thought (from a perspective of a total lack of expertise) - first, what is bottom-line important to a multinational public company is the shareholder perception of value. This is one of the reasons I think that business can be so mired in doing things the way they've always been done/the way everybody else does it: sure, the approach Westcoaster talks about may be the most profitable, but what if it makes the shareholders freak out and sell out?
posted by nanojath at 8:01 PM on April 26, 2005

Great "What if?" question.

I'm inclined to believe that the advertising budgets of Coke and Pepsi serve the entire cola industry. Every advertising dollar spent by either company purchases consumer mindshare of cola - your awareness of cola vs. other beverages - rather than a particular brand. The cola aficionados have already decided on Coke or Pepsi and consume it with regularity. The profit opportunity is in people like me who seldom consume carbonated drinks and instead drink water, juices, or alcohol. Bombard me with advertising and I may buy/order Coke or Pepsi next time I'm at the supermarket/restaurant. If I'm convinced, Coke and Pepsi (and to a lesser degree other cola manufacturers) win.

Thus if say Pepsi reduced its ad budget, the undecided would consume less cola as a group and over time, both companies lose money with Pepsi at a slightly greater rate.

The cola wars are long over. Coke is established as the classic, original cola while Pepsi is the hip, trendy cola. While the Pepsi Challenge may have been marketed as a differentiation campaign and polarized those with existing preferences, for the undecided it just showed that Coke and Pepsi are interchangeable and put Pepsi on equal ground.
posted by junesix at 8:01 PM on April 26, 2005

This happened over 100 years ago, but consumer character is fate:

1. Moxie, that poison-tasting soda that only a few New Englanders like and that you pretty much can't find west of Albany or south of Newport, used to be the most popular soft drink in the country.

2. Then the price of sugar went up.

3. Moxie's decision makers decided that their brand was an institution and they could use their ad budget to pay for sugar.

4. Moxie's market share decreased to the point that most people reading this are saying "What the hell is 'Moxie'"?

The moral of the story is that nothing which depends on consumer preference is too much of an institution to not remind us that it exists.
posted by Mayor Curley at 8:58 PM on April 26, 2005

The cola market is ridiculously price sensitive. Promotions such as 99 cent 2 liters and buy one, get one free are huge drivers of sales. Your assertion that people have "made up their mind" is false.

Here's where it gets interesting: what is good for Coke and Pepsi isn't good for their bottlers. (C/P sell formula to the bottlers, who chip into the ad budgets but don't control them.) The bottlers want lots of branding ads, and the C/P bigshots just wanna sell syrup. What you get in the real world is some sort of detente between these two forces with lots of supermarket price promotions and lots of ads on the telly.

I think Sergio Zyman actually goes into your question in his book, The End of Marketing As We Know It, but I read that years ago and my only real takeaway was that New Coke was a good thing(!) because it refocused Americans on their latent emotional connection with Coke that had atrophied over time.
posted by sachinag at 10:35 PM on April 26, 2005