Pepsi: The Code Red Stealth Launch

In the long-waged cola wars between market giants PepsiCo and Coca-Cola, Pepsi used stealth in 2001 to introduce its Mountain Dew Code Red soft drink to its target market while camouflaging its intentions from its rivals.

Carbonated beverages were losing ground to a growing field of teas, coffees, and sports drinks. Pepsi, led by CEO Steve Reinemund, a former Marine captain and 1970 U.S. Naval Academy graduate, sought to respond by developing a drink that would increase consumption by capitalizing on the Mountain Dew brand, the long-standing number-one noncola carbonated drink. Pepsi strategists went to the war room with the goal of creating an edgy, high-energy, bold drink to target a younger , largely urban crowd . The result of these sessions was Mountain Dew Code Red ”a caffeine -laden, cherry-flavored brand extension.

Typically, soda launches at Coke and Pepsi are multiyear, multimillion-dollar events with big-splash national media coverage. The downside of these carefully staged, highly visible efforts is that they signal the intentions of the launching company and allow competitors sufficient time to counter. But to reach a mass market, you have to mass-advertise, conduct national taste tests, and systematically build wide-scale public awareness, right? Not so. In launching Code Red, Pepsi went underground and, with overwhelming success, managed to reach a large, diverse customer base.

Pepsi deliberately kept the details of the launch hushed, leaving consumers and competitors to speculate. Initially, Pepsi hit the streets to advertise in stealth mode and promoted at alternative venues such as the Winter X Games. At the games , Pepsi deployed an ambush patrol, which gave out gifts and promotional material but not the drink itself. Said Bart Casabona, Pepsi spokesperson for the launch, People might have thought it was something related to Mountain Dew but couldn t be exactly sure. Additionally, Pepsi street teams infiltrated urban teen hangouts, shopping malls, skate parks, and city basketball courts with similarly stealthy tactics. Pepsi also built a slick website with teaser ads that didn t divulge many details about the drink but provided sufficient information to pique consumers interest: the site included a challenging interactive game called Mission Code Red High Score, where the fifteen hundred highest scorers could win cases of Code Red several weeks before the official product launch.

Pepsi adhered to a short ten-month product launch campaign. The product was conceived in July 2000, launched in May 2001, and sold only in single-serve sizes in convenience stores, where kids and teens, not parents, bought soft drinks. Despite the limited size and channel offerings, Code Red saw tremendous growth: Pepsi achieved its seventeen-million case goal within five weeks instead of thirty-four weeks, and by July Code Red was already the fifth-best-selling twenty-ounce soft drink. ^[8] Stores couldn t keep enough in stock, and soda machines were reported to sell out in minutes ”in some cases consumers were following trucks to the stores just to get their hands on the drink. ^[9] A pleasing by-product of this grass-roots effort was big savings: Pepsi delayed running otherwise -costly TV ads until October 2001, long after the product was already flying out of convenience store coolers . In 2001, Pepsi sold seventy-five million cases of the drink. ^[10] And in 2002, its first full sales year, it sold a hundred million cases. ^[11]

Coke and the rest of the competition were taken by surprise. According to Casabona, Typically Coke would have at least put up road blocks to challenge Pepsi s launch, but in this case it appeared Coke didn t see it coming because no blocks were put in Pepsi s way . . . the competition likely didn t realize something big was coming until it was too late. ^[12] Moreover, Coke didn t have any product to immediately counter Code Red. A few follow-the-leader flavored carbonated beverages eventually pursued Pepsi, including Cadbury Schweppes s Dr Pepper Red Fusion and Coke s cherry-flavored Mello Yello, but none penetrated the market significantly. In early 2003, Coke announced the upcoming launch of a fruity version of Sprite, in which it is using underground tactics similar to those used by Pepsi.

Leadership Lessons

The primary motivation behind Pepsi s stealth marketing tactics was to appeal to a select teen customer base, but the by-product of keeping Code Red off competitors radar screens proved to be an enormous additional benefit. Stealth enabled Pepsi to reach its target audience without overtly revealing its future moves to competitors. It also enabled Pepsi to build a sizable customer base before competitors could mount an effective response. And Pepsi s short time-to-market campaign helped it maintain a greater level of secrecy before Code Red hit store shelves , a difficult task when attempting to introduce a product to a national market.

^[8] Chura, Hillary, Code Red Soft Drink Sales Explode, Advertising Age (AdAge.com), August 27, 2001.

^[9] Interview with Bart Casabona, spokesperson for Pepsi North America, May 20, 2003.

^[10] Theodore, Sarah, Code Red s Stealth Attack, Beverage Industry , January 2003, 28.

^[11] Interview with Bart Casabona, May 20, 2003.

^[12] Ibid.