PepsiCo, Inc.

Author:Candice Mancini, Robert Schnakenberg, Mark Lane, Simone Samano, Rayna Bailey, Judson Knight, Anita Coryell

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700 Anderson Hill Road

Purchase, New York 10577-1444


Telephone: (914) 253-2000

Fax: (914) 253-2070

Web site:


In 2001 PepsiCo's Mountain Dew was the fourth-best-selling soft drink on the U.S. market. Even so, since the 1990s soft-drink sales overall had been seriously declining. While Mountain Dew's sales growth had often been in the double digits since the 1970s, by the turn of the century, growth had trickled to around 2 percent. To revive sales Pepsi introduced a bright-red version of the original called Mountain Dew Code Red. The new cherry-flavored beverage was to be marketed in a different direction than the original Dew. While Mountain Dew's target market had long been young, white males interested in extreme sports, Code Red's market was to be ethnically diverse and urban.

Working with ad agency BBDO New York, Pepsi introduced Code Red slowly, beginning within the target market of the original Dew instead of the new target market. Prior to placing the product onto store shelves, PepsiCo offered samples to extreme-sports enthusiasts at the February 2001 X Games and established a Code Red game on the Mountain Dew website in April 2001. A month later Code Red was finally distributed to stores. A "teaser campaign" accompanying the launch consisted of print ads and radio spots with an urban, multicultural focus. Television commercials were added in October 2001. The initial spots featured NBA stars Tracy McGrady and Chris Webber as well as singer and actress Macy Gray. These spots ran through 2003, when two new television commercials, "Mascot" and "Football Court," were introduced.

By September 2001 Code Red had become the fifth-best-selling soft drink in convenience stores. PepsiCo's overall third-quarter 2001 net income jumped an astonishing 22 percent, largely because of Code Red. Advertising awards for the campaign included a Gold EFFIE Award, one of the most prestigious honors in the ad industry. But the success did not last. By 2002 Code Red sales numbers had begun to dwindle, and in 2003 its sales volume dropped 37 percent. The problem was that sales of soft drinks were declining as consumers chose healthier beverages such as bottled water and juice.


Tennessee's Tri-City Beverage became the first Mountain Dew franchise in 1954, and by 1958 it had adorned the bottle with Mountain Dew's first logo. The old red-and-white labels featured a hillbilly shooting at a government agent fleeing an outhouse. The agent represented a revenuer, one whose job was to stop bootlegging. Slang for moonshine, and invented in the Tennessee hills in the 1940s, Mountain Dew was originally used as a mixer with whiskey. The label, as well as the drink itself, embodied the moonshiner days of 1920 through 1933, when Prohibition made the use of alcohol illegal in the United States.

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In 1964 PepsiCo bought the franchise, bringing Mountain Dew into the national marketplace. Two years later Pepsi introduced its first nationwide Mountain Dew advertising campaign, "Ya-Hoo, Mountain Dew!" The catchy phrase helped Pepsi establish recognition of its new soft drink. In 1973, when advertising agency BBDO took over the Mountain Dew account, advertising for the brand began to focus on a target market of young, active people who enjoyed the outdoors. It also emphasized Mountain Dew's high caffeine content. The 1973 and 1974 advertising campaigns, "Put a Little Ya-Hoo in Your Life" and "Hello, Sunshine, Hello, Mountain Dew," represented early shifts toward this focus. By the 1980s, although Mountain Dew sales were climbing, a trend toward healthier eating and drinking habits was emerging. In response PepsiCo introduced Diet Mountain Dew in 1986. By this time Mountain Dew had become the industry's sixth-biggest brand, and the growth continued. From 1984 through 1993 Mountain Dew's volume doubled, bringing in $2.2 billion in sales in 1993. But meanwhile the healthy-eating trend had spread. Mountain Dew's reaction was aggressive.

The 1993 "Do the Dew" campaign was enormous, accounting for a 44 percent increase in ad spending from 1992 to 1993. The "Do the Dew" debut included 28 TV spots, which appeared on nine television networks. During the campaign's launch the ad schedule involved an astonishing 14 minutes of advertising per night. With "Do the Dew" Mountain Dew's sales continued to grow, even when soft-drink sales were in serious decline. In 1999 Mountain Dew's sales, while not matching the double-digit growth of the past, grew by 7.1 percent. In an attempt to reclaim the huge sales growth of years prior, PepsiCo created a new product in 2001: Mountain Dew Code Red.


When ad agency BBDO took over the Mountain Dew account in 1973, the brand's target market was defined as the young and active. Since then the focus had zeroed in on extreme sports. With the "Do the Dew" campaign that began in 1993, this focus was obvious. The commercials featured four adventurous young men performing such thrilling stunts as jumping from a cliff and boogie-board waterfall diving. As noted in a 1993 PR Newswire article, Mountain Dew's focus was on young, energetic males. In particular, Mountain Dew sought 20-somethings who represented a "vibrant, adventure-seeking group that is 40 million strong and spends $125 billion each year." Mountain Dew's well-known high caffeine content helped to retain these customers.

Code Red's target market differed in two ways from the original drink. The target age was younger, and the target socioeconomic group was more diverse. Code Red, with the same 55 mg of caffeine as its predecessor, targeted teens. Still, this teen was similar to the 20-something targeted by the original Mountain Dew. He was a male, thrill-seeking adrenaline addict. As Gary Rodkin, then PepsiCo CEO, told the New York Times, the target consumer was "a kid with his hair on end, his eyes bugging out. He's a little bit on edge." Next, while Mountain Dew appealed most directly to nonurban white males, Code Red was marketed to urban, minority populations. In its research Mountain Dew concluded that a large percentage of people from minority groups had historically chosen soft drinks with sweet, fruity flavors. Code Red, with its red color and cherry flavor, fit the bill.


Pepsi and other soft-drink distributors long claimed that the caffeine added to soft drinks provided a bitter taste that was needed to balance the predominant sweetness. But in a study conducted by Johns Hopkins University in 2001, four out of five tasters could not tell the difference between a cola with an average amount of caffeine (35 mg) and one without any caffeine. When the researchers doubled the amount to 70 mg, however, more than half the tasters could detect it. A 20-ounce bottle of Mountain Dew (containing 55 mg of caffeine) contained about the same amount of caffeine as a strong cup of brewed coffee.


In response to Pepsi's success with Mountain Dew, top Pepsi competitor Coca-Cola introduced citrus-flavored Mello Yello in 1964. Like Mountain Dew, Mello Yello boasted higher than normal caffeine amounts, 53 mg per serving. In marketing the product Coke first connected the drink with urbane jazz, thus portraying its "mellowness." But once Mountain Dew became the drink for extreme-sports enthusiasts, Mello Yello followed suit, introducing the tagline "There is nothing mellow about it." To reinforce the point, Coke plastered Mello Yello packaging with images of people engaging in extreme sports. Nevertheless, by the 1990s Mello Yello was still far behind Mountain Dew in sales and popularity. While Mountain Dew had climbed to the number four spot in total U.S. soft-drink...

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