by: Jonathan Salem Baskin

No, not its inane brand image campaign and logo nonsense. I'm talking about its announced intention to spend $6 billion to take control of its bottling and distribution operations. I think it is the smartest branding move the company has made in recent memory.

PepsiHowdy_SB.jpg

I think it's nuts that the company is wasting millions on the above-referenced brand communications campaign. It's a tax (or sacrifice) in service of an imagined abstraction of branding, and it's proof that its marketers have only doubled-down on their habits...in spite of the changes in the world that render those efforts laughable.

Going beyond this easy slam on branding, though, there's a deeper, more substantive issue worth talking about: the traditions of distribution have changed, too.

The outdated perspective on operations is that it's purely functional. In the soft drinks business, companies wanted to keep these businesses (assets and liabilities) "off the books," so they could focus on the real business of developing and marketing stuff. It was also the source of lots of financial ledgermain that contributed to the bottom-line.

Chairman and CEO Indra Nooyi knew the gig was up on Pepsi's old-fashioned distribution model last year when she announced that it needed to be "reconceptualized." The company had changed...now selling lots of products that don’t quite fit the "fill and ship" model that worked for a long time (and made lots of bottlers very rich). 

I suspect Ms. Nooyi saw also that the definitions of branding and distribution are interrelated.

Marketing tells people about products, and awareness is far preferable to non-awareness. Sales promotions work, and digital marketing campaigns can be lots of fun. Creative ads get headlines and even win awards at Cannes. But very little of what Pepsi's inventive brand marketers can propagate into the Universe will do anything to support long-term, repeat cola sales (or sports drinks, or water, or whatever). It'll do even less for profits, as branding is an expense no matter how many people will swear their lives to the pretense that it's an investment

Tomorrow's real branding magic is going to come from conceptualizing all business activities as branding: ingredients, mixtures, containers, manufacturing, distribution, display, replenishment, and support all commingled to provide uniqueness, competitive advantage, and behavioral prompts for purchase.

So bottling isn't after or outside Pepsi’s brand, but rather is the brand. Or at least a core part of it. Bringing it into the company’s fold isn’t some exercise in cost-reduction, as noted by the financial press this week, but rather a brilliant, strategic branding move.

Think about it. New packages and formulations, available at new and different locations, priced and supported in novel ways...all thanks to a holistic approach to the brand, vs. some archaic top-down application that sees it only as image and words. It's these actions, and real investments, that will build sustainable, long-term brand growth. 

So Pepsi can run all the nonsense ads it wants, and do nothing for its business other than help its agency folks put their kids through college (I'm all for it). But I suspect Nooyi's bottler strategy is a brilliant move toward redefining that what, and not just the how, of Pepsi's brand. 

If she's successful, I bet we'll see billboards that say something more meaningful and compelling than "Howdy."

Original Post: http://dimbulb.typepad.com/my_weblog/2009/04/pepsis-brilliant-branding.html

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