The Marketing Mistake That Made Pepsi Go on a Full-Fledged War With a Country
A case study of one of the most infamous marketing strategies gone wrong.
You are working laboriously at your shop which you managed to build after years of hard work. Though you know it is a low-paying job, it provides for the means of survival in a slowly developing country. Your attention is then caught by a television advertisement announcing that you could be the lucky winner of one million pesos. All you need to do is purchase a bottle of Pepsi and hope that the number printed under the bottle’s cap matches the number being announced on television in the evening. Eager to earn more than your normal meager income, you give in to the temptation to buy a couple of bottles of the soft drink. In the evening, you are served amazement with two ounces of excitement on seeing the announcer on television revealing the number printed under the cap of the bottle you had purchased — ‘349’.
You’re jumping with joy, but it does not take long for this emotion to be replaced with fury as reality dawns upon you. 800,000 other people are waiting for the prize money alongside you, and before you realize it, riots are taking place on the streets, and offices are being attacked. Your country has just declared war on Pepsi.
The Problem
It’s common knowledge for brands to undertake aggressive marketing strategies in order to stay relevant and capture a larger audience than their competitors. However, there are no clear strategies or protocols to follow when your marketing strategies lead to mass riots and instability in a foreign country. This is what Pepsi learned the hard way when the situation in the Philippines erupted into a full-fledged war against the company.
It all started in 1992 when Pepsi decided to launch a new marketing campaign in the Philippines. It was the 12th largest market for soft drinks in the world, with a population that loved carbonated drinks. However, Pepsi was a distant second to Coca-Cola in terms of reach to consumers. Coca-Cola had a 75% market share while Pepsi had only 17%.
Pepsi had always been brainstorming on new ideas to market the brand, albeit with lesser efficiency than they would have hoped. 1989 had seen the launch of Pepsi A.M. which was marketed as an alternative to coffee but it did not go as well as they had planned. So in an attempt to try something bigger and better, they targeted a more populous country with a more ambitious project. This gave birth to the ‘Number Fever’ in the Philippines which was revolutionary, just not in the sense of the word that Pepsi would have liked.
The idea was simple. Every bottle of Pepsi and its affiliate brands like Mountain Dew and 7-Up had a 3 digit number printed on the back of the cap. It was similar to a lottery system in which the winning number was announced on national television and prizes were given to people starting from 100 Indonesian Pesos (about $5). The grand prize was 1 million pesos, which was a huge attraction for a large number of common citizens in the developing country.
Pepsi witnessed a whopping 40% increase in their sales over the course of the 2 weeks since the start of the campaign, and a huge spike in their customer base, with their promotion spreading like wildfire. The success of their strategy did not go unnoticed by the management, and they ramped up the budget, increasing the number of prizes to ensure that more people were reached. It is estimated that around 31 million people in the Philippines engaged with their campaign, which is approximately half the population of the country at that time.
The Cause
So how did this seemingly simple idea of driving up sales backfire for the soda giant?
The answer to this question lies in the computer of Pepsi’s vendor which was responsible for printing the numbers on the bottle caps. The entire campaign functioned on the basic plan of having two winners who would get the grand prize of $40,000 each. The winning number was pre-decided to be ‘349’ and these two bottles of Pepsi would be shipped to the Philippines by the company itself. But the entire plan went haywire when a glitch caused the vendors in the Philippines to manufacture 800,000 bottles with the winning number printed on their cap.
Unbeknownst to this error, Pepsi continued pushing the campaign and on the ill-fated day of the announcement of the grand prize, there were 490,116 Filipinos who claimed the prize, armed with their bottles bearing the number ‘349’.
Pepsi’s original budget for the Number Fever was $2 million, but with this costly mistake, they were now in a fix, owing $32 billion to their customers. Consequently, the company refused to pay all the claimants, citing a glitch in their supply management, and instead, offered to pay all of them $18 each. This would have also increased their budget to $8.7 million, but it was not acceptable to the people, eager as they were, to win the huge prize in return for consuming all the carbonated drinks over the past months.
This is how Pepsi found itself right in the middle of a nation-wide protest.
The Repercussions
A ‘349 Alliance group’ was formed and people stormed the streets of Manila, outside government offices and the Pepsi headquarters, demanding justice. It led to a full-blown riot across the country, with police being deployed to control the mobs of people. In the process, 5 people died, dozens were wounded and around 40 company trucks were burnt. Grenades were thrown, blasts were witnessed in major cities, and many company officials were forced to flee out of the country to save themselves.
There were thousands of court cases against Pepsi and the company had to battle through all of them in the coming years. In 2006, the Philippines Supreme Court stated that Pepsi could not be held liable and cleared it of the criminal charges. Due to the entire campaign, the brand ended up with losses of $20 million, including physical, brand equity, and legal costs.
In this manner, a company famous for its aerated drinks, and for relieving stress through a fresh sip of soda, ended up causing a major riot in a country due to one number, ‘349’.
