17 Jun 2015 Pepsi in SA: Still out in the cold
The Pepsi brand has operated in SA rather disastrously for decades under several owners, JSE-listed Pioneer Foods being the largest. Pioneer will be ditching the brand come July.
“Black economic empowerment firm New Age Beverages and Bowler Metcalf also had a try [withPepsi]; both failed,” says Vunani Securities analyst Anthony Clark. “Pioneer has spent hundreds of millions of rand putting up plants and has lost untold tens of millions if not north of R100m … it won’t say. And after all these years Pepsi has less than 10% of the retail market — that’s nice, but the key is the informal market.”
Pepsi’s misadventures in SA are largely due to a lack of brand recognition and marketing, and low penetration in the “township economy”. Coca-Cola, on the other hand, is ubiquitous, after decades of marketing.
After sustained losses, Pioneer said last November that its bottling contract with PepsiCo would not be renewed. It had the franchise rights to bottle, sell and distributePepsiand the stable’s other brands, Mirinda, 7Up and Mountain Dew.
The carbonated soft drinks market in SA is worth just under R37bn. In the sugar-sweetened drinks segment, Coca-Cola’s market share over the past three years has hovered between 82,1% and 79,2%. In SA, Coke remains its best-selling sparkling drink, followed by Fanta Orange and then Sprite.
“You see a Coke logo in even the smallest dorpie. When did you last see a Pepsi advert on TV, in the press, or on a shop front?” asks Clark. “Given that Pepsi was the lead sponsor of the soccer World Cup and its market share did pick up in that period in SA, it would be humiliating if it exited SA after a third ‘owner’ of the brand in SA also failed.”
It’s unclear who the next bottler of Pepsi in SA will be. Efforts to reach PepsiCo for comment proved fruitless, its local management and press office as scarce as its blue cans in SA. There is also scant public information on the group’s African expansion plans.
Another analyst, who can’t be named in line with company policy, says Pepsi’s losses in SA are worsened by Coca-Cola’ s deep discounting to maintain its strong position.
“Pepsi does not resonate with SA consumers as well as Coke, mostly because of a differing taste. With Burger King now selling Pepsi, it may yet gain some traction, though,” the analyst adds……