Pepsi-Cola

History in the Making...

On May 27 1867, a man by the name of Caleb Davis Bradham was born in North Carolina. He graduated from the University of North Caroline and attended the University of Maryland School of Medicine in 1890. He was forced to drop out of med school due to his fathers business experiencing financial troubles. After moving back home, he decided to become a school teacher for about a year and soon after opened up a drug store in New Bern, NC. In order to keep this drugstore afloat, druggist Bradham knew that he needed to keep customers coming back as the pharmacies with soda fountains were regular meeting places. This small drug store was the birthplace of a drink (1893) which was called "Brad's Drink" and in 1898 Bradham renamed his drink Pepsi-Cola after two main ingredients; pepsin and cola. Pepsi-cola was originally thought be a health drink because it aided in digestion like the pepsin enzyme does. In 1898 Caleb bought the trade name "Pep-Cola" from a competitor for $100. Four years later in 1902, Bradham launched the Pepsi-Cola company out of a small area in the back of his pharmacey and it was officially patented just 6 months later. Pepsi-cola experienced rapid growth over the next 17 years. In 1915, business was booming, demand was growing and Bradham was seeing revenues of over $30000. Unfortunately, due to a bad estimation about how sugar prices would fluctuate during WWI, Bradham was left with a very large and overpriced inventory of sugar, and he went bankrupt and the Pepsi-Cola company was sold to Craven Holding Corporation for $30000 in 1923. Pepsi-Cola would be considered to be in the private sector as there is no government involvement.

Making the "Healthful" Drink and it's Consumers...

Until the 1980's all soda pop and the bottles it went in were created manually right from the blowing of the glass to the mixing of ingredients to the filling of the bottle. Pharmacists experimented in their shops with new spices and syrups and manually mixed ingredients until automated machinery became available over the next few decades. Production was simplified and therefore increased.

Fixed costs would include things such as the pharmacy itself, the soda fountain, and any automated machinery that was used in the production process. Variable costs would clearly be the raw ingredients required and the glass bottles.

Here is a depiction of modern day soda pop production. Bottling of any liquid is now completely automated and happens on a series of conveyers.





Coca-Cola vs. Pepsi-Cola...

As we all know, there have been "soda wars" going on for years, and that way is happening with the soda company who produces a product that is very similar; hence the very public blindfolded taste tests, which by the way, I can always tell the difference. In 1936, Pepsi introduced a 12oz bottle which was twice the size of the rivaling Coca-Cola which came in at 6oz but was selling for the same price. Pepsi made everyone very aware of this with their clever advertising and introduced a very catchy radio slogan;  "Pepsi-Cola hits the spot / Twelve full ounces, that's a lot / Twice as much for a nickel, too / Pepsi-Cola is the drink for you" (Wikipedia). During this period, which was during the Great Depression might I had, many consumers switched from Coca-Cola to Pepsi-Cola and their profits doubled.

During this era in the Pepsi-Cola world I would have to say that their competitive advantage was the fact that you got twice as much for the same price and also their niche marketing. Walter Mack, who was then president of Pepsi-Cola noticed that their advertising ignored African Americans. To put an end to this and possibly expand to a new demographic, he made a very bold move and hired "a Negro from the newspaper field" (Wikipedia) who would lead an all-black sales team. This move resulted in a vast increase in their market share compared to Coca-Cola.


Summary...

Pepsi-Cola had it's difficulties but somehow managed to survive through monumental hardships including WW1, The Great Depression a legal battle (Guft v. Loft) that ended up in the Delaware Supreme Court and yet another World War in 1945, although there are no records of this particular war having any affect on the sugar inventories or prices. Reasons for this great success involve many factors including effective marketing, bold moves, and dedication.

Today Pepsi has lost everything it was originally created for and could no longer be even remotely considered a "health drink", but the soda wars still ensue and revenues continue to climb. If only Mr. Bradham could see it now.

References

Wikipedia. (2012, December 18). Retrieved December 18, 2012, from Pepsi: http://en.wikipedia.org/wiki/Pepsi

Kickler, T. L. (2006, August 20). North Carolina History Project. Retrieved December 18, 2012, from Caleb Bradham: http://www.northcarolinahistory.org/commentary/113/entry

Pepsi Store. (n.d.). Retrieved December 18, 2012, from http://www.pepsistore.com/history.asp