Decaffeinated Pepsi Free heads for US marketplace
Pepsi's first new cola in six years has graduated with honors from the test-marketing stage. This week, bottles and cans of Pepsi Free - decaffeinated Pepsi - are being pushed into the real world of competition for shelf space.
The new products, 100 percent caffeine-free in the sugar-free version and 99. 7 percent caffeine-free in the regular, ''did twice as well in the test market as we were projecting,'' said Joseph Block, vice-president of consumer marketing for Pepsi Cola Company. ''To call it a success is an understatement.''
Pepsi Free will begin to show up at retailers this week in Boston, Salt Lake City, Pittsburgh, and Chicago. Sunday is advertising-blitz day in Boston, when television and radio stations will all air Pepsi Free commercials at 9 p.m. The ads are geared toward women, aged 18 to 49, who are heads of households. The mothers in the commercials emphasize there is no trade-off in taste when you drink a Pepsi Free - it's still ''positively Pepsi.''
Pepsi Free marches onto store shelves - for the time being it will not be available in dispensing machines or at restaurants - at a time of heightened consumer concern over caffeinated drinks. ''In our research we have noticed that 88 percent of soft-drink consumers are aware of caffeine in soft drinks,'' Mr. Block said in an interview here. ''Sixty-eight percent said, if they didn't have to compromise on taste, they would try a caffeine-free soft drink.''
According to the US Food and Drug Administration, caffeine is a stimulant, and it is considered a drug. Consumers seem especially concerned about caffeine in colas and other soft drinks guzzled by children.
While Pepsi Free may be positively Pepsi, this is not positively the first company to pick up the caffeine-free idea.
In 1980, Royal Crown Cola came out with RC100, a caffeine-free, sugar-free cola. Arnold Belasco, a spokesman for RC, calls it ''the national product of the year.'' In 1980, the company sold 3 million cases; in '81 it sold 18 million; and in '82 it is expected to sell 40 million cases.
''For a small company, that's doing very well,'' says William Wise, a beverage analyst for Value Line Investment Survey. This year, RC introduced sugar-based RC100.
In March of this year, 7-Up in St. Louis began a heavy campaign for its product, which ''never had'' caffeine and ''never will.'' About a month later, it introduced decaffeinated Like cola - its first venture into colas. Analysts say that 7-Up is now testing a sugar-free Like cola.
So Pepsi Free is not alone on the shelves. RC100 and Like cola are keeping it company. And other drinks, such as Fresca, Fanta, Teem, Canada Dry Ginger Ale, and Hire's Root Beer don't contain caffeine either. But not being first doesn't really matter, Mr. Block says. ''We don't have to invent the product. Our strength is in marketing.''
RC hopes to turn Pepsi's marketing strength to its advantage. ''Pepsi will enlarge the caffeine-free market through their advertising, and we'll get a good share of that market,'' Mr. Belasco says.
The caffeine-free market ''will contribute more to the cola producers' growth than to the whole soft-drink industry's growth,'' says Allan Kaplan, a Merrill Lynch analyst.
At a meeting with analysts in New York this week, Pepsi senior vice-president John Sculley said he hoped Pepsi Free would gain the company a net 1.5 percent market share in the total soft-drink market. One percentage point of market share represents 60 million cases sold.
According to Mr. Kaplan, who attended the meeting, Pepsi expects this gain to be at the expense of other colamakers - primarily Coca-Cola. Coca-Cola has concentrated on its new diet Coke product, and it has not yet entered the caffeine-free market. But ''Coke will go in if the (caffeine-free) market looks important,'' Mr. Kaplan said. He also suspects Dr. Pepper and Shasta may eventually enter the market.
Pepsi holds about a 25 percent share of the total soft-drink market, while Coke has its hands on 35 percent. The cola market accounts for nearly 63 percent of total soft-drink sales.
Value Line's William Wise says that, in a market that's becoming ''more and more segmented, . . . I can't get too excited about what this will mean to Pepsi's bottom line, . . . especially since its biggest profitmaker is its snack-food business.''
However, every little bit helps. ''Pepsi says its earnings will be hard hit in the fourth quarter,'' Mr. Kaplan explained. ''And Pepsi would love to get that 5 to 6 percent growth'' because of Pepsi Free.