Thursday, August 25, 2016

The Other Guy Blinked

The Other Guy Blinked is written by Pepsi USA CEO Roger Enrico about a brief period in the 1980s when Pepsi was winning the Cola wars. After a few great moves by Pepsi followed by a huge mishap by Coke, Pepsi Cola's sales where consumers had a choice (e.g. grocery stores, and not vending machines or restaurants that only sell one of them) were higher than Coke's, which prompted him to write the book.

The book was great. Enrico takes the reader through the Pepsi management meetings where big spending decisions were made in order to best Coke. Enrico took advantage of Coke's incumbent, stodgy, unwilling-to-take-risks culture. He paid millions of dollars to celebrities (the biggest being Michael Jackson) in order to wow the consumer. It worked, as Coke responded in a very unfortunate way (for them) by canceling production of their highly successful product in order to force New Coke into the market. Pepsi made huge market share gains at the time, but following the publication of the book, Coke did gain much of it back.

What completely blew me away was how little attention was paid to profitability in Enrico's decision-making. Inputs to decisions seemed heavily weighted towards revenue growth and market share, with little attention paid to net results. Enrico may as well have been marketing director of the company, as that's where the major focus of his energies appeared to lie. I'd expect to find this kind of behaviour at a firm with poor corporate governance and a diverse shareholder group; it felt to me like the company was basically run for and at the whim of its managers. Pride at being #1 was more important than shareholder value, of that I have no doubt.

I would love to see what Pepsi and Coke's financials looked like through this period, but I couldn't find anything in a brief online search. My suspicions would be that Pepsi's high marketing spend forced Coke's hand in that respect, and that they were both less profitable than they were in previous and future years as a result of the war. But I have no idea, as financials appeared to be the least of Enrico's concerns and so he did not discuss them.

I recommend the book to anyone interested in marketing, as that's what the book was about and it was full value for that subject.

No comments:

Follow by Email