PepsiCo Inc. will launch its newest beverage exclusively on Amazon.com Inc., adding a web-only element to its longstanding competition with Coca-Cola Co. and, in the view of one analyst, dealing a blow to one of Amazon’s main rivals, Wal-Mart Stores Inc.
Pepsi True, targeted at health-conscious consumers, comes in a 7.5-ounce can, has 60 calories and no artificial sweeteners or high-fructose corn syrup, a PepsiCo spokesman says. It will make its U.S. debut on Amazon later this month. He provided no details about an international launch or the company’s larger strategy in selling the product initially only through Amazon. Presumably the demand for True on Amazon will let Pepsi gauge potential interest from non-U.S. consumers, as shoppers outside of North America accounted for 39% of Amazon’s sales in the first half of 2014.
Amazon, No. 1 in the Internet Retailer Top 500 Guide, provides consumer goods companies like Pepsi a way to get quick online feedback on new products, an Amazon spokeswoman says. “Our platform provides unique opportunities for vendors, including national distribution, immediate feedback via customer reviews, and access to new and innovative programs such as Prime Pantry,” she says.
Prime Pantry, launched earlier this year, allows members of Amazon’s Prime two-day shipping program to pack and ship a box full of grocery items for a $5.99 shipping fee, plus the cost of the products selected. As a shopper adds an item, Amazon.com indicates how much room remains in the 4-cubic-foot box.
The Pepsi launch follows a similar move last month by Coca-Cola. Surge, a citrus-flavored Mountain Dew knockoff that was discontinued by Coke about 12 years ago, reappeared in limited supply in September, and only on Amazon.com. The reintroduction of the product included a social marketing campaign and represents Coca-Cola’s first ever e-commerce reintroduction. The product quickly sold out on Amazon, though stocks subsequently were replenished.
The success of the Surge promotion likely drove Pepsi to Amazon’s arms, says one analyst. “PepsiCo certainly noticed that it became the No. 1 best seller in the grocery category and sold out twice,” says Ari Wolfe, an analyst with research and consulting firm L2 Inc. “The launch reinforces the fact that the cola wars have returned in full force and are now being fought online.”
That’s not all the Pepsi launch represents, he says. Selling the product via Amazon enables Pepsi to gauge demand for True without having to work with distributors to gain shelf space inside retail stores. “If they move product the same way Coca-Cola did with Surge, it’s a no-brainer to ramp up to the bricks-and-mortar stores. If it does not catch on, they can quietly retire the brand,” he says. Indeed, the Pepsi and Coca-Cola moves come at a time when retailers are pushing suppliers to better monitor the web for signals about consumer demands in an effort to make supply chains more efficient—an issue explored in depth in this month’s issue of Internet Retailer magazine.
Amazon, too, could gain a lot from the soda deals. “It helps Amazon cement their place as the most logical destination for an e-commerce launch of a consumer product good brand,” Wolfe says, noting the investments the e-retailer is putting into not only Prime Panty but also AmazonFresh, the e-retailer’s expanding home delivery service. “If consumers can be trained to go to Amazon for both everyday grocery items like paper towels, as well as specialty products or limited-edition launches like Surge, they will have won the grocery battle that is just starting to heat up.”
Wal-Mart, though, could find itself knocked back a few pegs in the online grocery game, Wolfe adds. The retail chain, No. 4 in the Internet Retailer Top 500 Guide, has been testing the best way to get online grocery orders to consumers. The efforts have included in-store pickup for some shoppers and, just this week, opening its first “Walmart Pickup-Grocery” location in Bentonville, AR, to test if consumers want to have their grocery orders delivered to them the same day via curbside service.
“The Pepsi True launch is another blow for Walmart Grocery, which is also vying for top billing when it comes to online grocery sales,” Wolfe says. “If the product launch is successful, it is sure to inspire additional copycats in both CPG and beyond that will look to Amazon as a logical partner which has the power and influence to build awareness and generate sales, while also dealing with all of the back end logistics.”
A Wal-Mart spokesman declines comment.
A recent Boston Consulting Group study says that online penetration for the grocery industry in the United States stands at a meager 1% but is poised for growth—in part because consumer packaged goods companies will seek closer relationships with online consumers.
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