Can Michael Jackson bring PepsiCo back to life?

CEO Indra Nooyi gets desperate.

By Jonathan Berr May 3, 2012 10:22AM

PepsiCo (PEP) CEO Indra Nooyi has been under pressure to jump-start the food and snacks company's lagging North American business. Hoping to breathe new life into the company, she is bringing back the late Michael Jackson as part a $600 million global marketing push.

Of course, Nooyi isn't using a ouija board to resurrect the King of Pop, who first partnered with the company in 1983. But the effort of using his image in an ad campaign seems almost as futile.


By the time Jackson died, in 2009, he was rather eccentric, deep in debt and addicted to drugs. He had fallen from from the zenith of the pop culture zeitgeist that he occupied during the 1980s. Then again, so has PepsiCo.


Terms of the company's deal with Jackson's estate were not disclosed, which is perhaps for the best. The deal is probably costing PepsiCo plenty because of the value of the late singer's catalog.

Shares of PepsiCo have barely budged this year, while Coca-Cola (KO) stock has surged more than 10%. Wall Street remained skeptical that Nooyi's turnaround plan -- which includes a management overhaul, slashing 8,700 jobs and introducing new products in emerging markets -- will work. Coke is so ahead of Pepsi in terms of market share that the term "Cola wars" is almost laughable.

That's why partnering with the Jackson estate is a bad idea. For one thing, it reminds consumers of how good Pepsi used to be and raises the disturbing question of why the brand has fallen on hard times.


Coca-Cola has outflanked PepsiCo for years, gaining market share at its rival's expense. The Atlanta company will score another victory over PepsiCo if it can join forces with Monster Beverage (MNST), a leader in the fast-growing energy-drink category.

PepsiCo and Coca-Cola not only have to battle one another but they have to fight the public's changing tastes. People drink less soda than they used to. Whether this is a reaction to the people's growing health consciousness is hard to say.


Unlike with milk or juice, there is nothing nutritionally redeeming about soda. Americans each drank 44.6 gallons of carbonated soft drinks last year, the lowest level since 1987, according to Beverage Digest, a trade publication.

Nooyi, who divested the company's restaurant business, now called Yum Brands (YUM), oversaw the $3.3 billion Tropicana acquisition in 1998 and the 2001's $13.4 billion deal for Quaker Oats. She is running out of rabbits to pull out of her hat to restore her faded brand.

The Jackson campaign better produce quantifiable results quickly or else Nooyi will be moonwalking her way to another job.

Jonathan Berr is long Coca-Cola.

Tags: KOMNSTPEP
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