Pepsico’s portfolio focus puts a gun to PJs
Last year I posted on Pepsico's launch of Tropicana Smoothies and simultaneous price cut on PJ Smoothies, in an attempt to take the latter more "mainstream" (a polite word for downmarket). The post predicted: "PJ's will die, as being taken downmarket means it
will be too close to own label." And indeed, a few weeks ago Pepsi put the gun to PJs, after a vertiginous 70% drop in sales from £1.3million to £396,000 in the 24 weeks to 7 September.
What a sorry state of affairs. When PJs was launched in 1994 as Pete & Johnny's it was the first smoothie in the UK; and probably in Europe. However, another post showed how a lack of innovation and brand development allowed innocent, launched 4 years later, to take over and grow to a 72% share, leaving PJs with a lowly 13%.
Pepsi bought PJs in 2005, and far from being able to revive it, they seem to have pushed it over the edge into brand oblivion. A few take-outs from this story:
1. It hard to buy a brand and add value
Seems that Pepsi were unable to use their marketing power and distribution muscle to revive PJs. If anything, they diluted the brand's quirky personality, as David Haseler, planning director at Smith & Milton, explained on brandrepublic.com:
"PepsiCo didn't understand what it was buying. It
didn't recognise that clearly a very
important part of the Pete & Johnny brand was its personality. For PepsiCo, it's not about developing the brand personality, but
much more about trading and distribution."
2. Chop and change leads to the chop
PJs went through a series of re-designs that left the consumer confused, and made it hard to find the brand. In contrast, innocent was consistent and stuck to its guns. In today's busy and over-crowded shelves, changing design is a risky business and needs careful management.
3. Recession needs ruthless focus
OK, say Pepsico failed to add value to its PJ's aquisition. However, at least they have been bold in focusing their portfoio and putting all their investment behind Tropicana Smoothies. Once they had launched smoothies under Tropicana, a global priority brand, I guess PJs days were numbered.
4. Go downmarket at your peril
The move downmarket was the final nail in the coffin for PJs. First, it meant they were competing head on with and offering no added value vs.own label. Second, the cut in price meant less money to invest in marketing to differtiate, leading to less sales, leading to less funds. The death spiral.
Expect other companies to follow the suit of Pepsico in 2009 as they take a ruthless look at their portfolios an start pruning them.