Why is Pepsi building a phone?


Quick, name the first smartphone brands that come to mind.

Most people would mention Apple, Samsung, HTC, LG or Sony. If you’re more familiar with the industry, you might add Lenovo, Xiaomi, and/or Huawei to the above list. You’re very unlikely to mention Pepsi, however.

Yet a recent leak indicates that the beverage manufacturer will indeed release an Android phone. According to Sina.com, seemingly the source of those leaks, the phone is to be called the Pepsi P1. The device will feature a 5,5-inch screen with 1080p resolution, a 1,7GHz processor and 2GB of RAM. The rest of the technical specifications include: 16GB of storage, 3000mAh of battery capacity, and a 13 megapixel main camera along with a 5 megapixel front-facing one. The phone is expected to retail for CNY 1.299 – approximately € 180. Pepsi will reportedly announce the device on October 20th, and it appears to be a China exclusive.

Pepsi is not the first unexpected company to get involved in selling smartphones: Facebook attempted it in 2013 with the HTC First, and Kodak has released the IM5 this summer. The former was a dramatic flop with only 15.000 units sold across the US. There are no sales results available for the latter but it’s not likely to have done well, with only 4 stores in the Netherlands still stocking it.

But at least Facebook and Kodak had somewhat sensible reasons to try their hand at smartphones. For Facebook, the phone was intended to promote their ill-fated Android homescreen replacement. Kodak counted on their brand recognition amongst the older crowd, targeting consumers that are shopping for their first smartphone.

Pepsi’s core business however, has nothing to do with consumer technology. It’s entirely unclear why they would enter the highly competitive Chinese smartphone market, what value they could add, or who their target customers would be. A spokesman told the Daily Mail that “Pepsi has always moved at the speed of culture, and today technology is a key cultural pillar at the heart of consumer interaction”, which doesn’t seem to actually mean anything. Do you know of a better reason for Pepsi to release a phone? Feel free to let us know in the comments.

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7 responses to “Why is Pepsi building a phone?”

  1. 371764ak says :

    If I were Pepsi, I would not release the smartphone under Pepsi’s name, but rather follow Facebook’s method (HTC First, using a successful company to launch a new product). However, since HTC First but also the Kodak phone have been a failure, I would be turned off to even launch the phone.

  2. geertkriek says :

    Very interesting move by Pepsi. The reason of the Pepsi spokesman, moving at the speed of culture, seems a little abstract to me, and definitely wouldn’t answer the question why Pepsi would enter the mobile phone market, if they plan on doing so at all of course.

    However remarkable a potential move to the tech sector may sound, i really think that in the near future soda companies like PepsiCo need to, and also will, start such ventures. According to Digital Trends, Soda companies are looking for ways to position for sharp declines in soda popularity due to increased health awareness. Indeed CNBC reported earlier this year that global soda sales have decreased last year for the tenth year in a row. A big company like PepsiCo, which probably doesn’t lack any financial reserves to try something every now and then, probably isn’t just going to sit and wait.

    Following this line of reasoning, maybe we can even expect these kinds of moves from companies like McDonalds, who is also facing declining sales. What do you think?

    References
    Is the World Ready for a Pepsi Phone? | Digital Trends. (n.d.). Retrieved October 12, 2015, from http://www.digitaltrends.com/mobile/is-the-world-ready-for-a-pepsi-phone/

    Soft drink sales hit a decade of decline. (n.d.). Retrieved October 12, 2015, from http://www.cnbc.com/2015/03/26/soft-drink-sales-hit-a-decade-of-decline.html

  3. denniswijtman says :

    Indeed an interesting move, but I think it is going to fail. The Pepsi phone is just another (Android) smartphone targeting the low-end market. The specs are moderate and the design is not unique in any way.

    You mentioned that Pepsi will release this phone in China only. At first this looks like a smart move, because 30% of all smartphones are sold in China. However, this market reaches saturation (Telegraph.co.uk, 2015). For the first time ever there was a decline in sales. The only differentiation Pepsi offers is not the product, is its name. They rely solely on their cultural pillar. I think it’s not enough to penetrate the market, based on the experience of Kodak and ESPN.

    It is fun to compare Pepsi’s move with ESPN. In 2006, ESPN released a cell-phone in the United States. This was not a smartphone, it was just an ordinary flip-phone. They invested around 150 million dollars into this project (Bloomberg.com, 2015). The phone was not that special, but ESPN differentiated from their competitors by offering premium content. Only downside was, the premium content was too expensive (between 65 dollar and 225 dollar). After nine months, ESPN pulled the plug to prevent more losses.

    So yes, it is an interesting move but likely to fail. However, it’s a fun experiment Pepsi is doing and I will definitely follow the news around it. If it’s going to be a success than other companies (who are looking for new revenue streams) are going to follow.

    References
    Smartphone sales in china fall says gartner, retrieved at 13-10-2015 at: http://www.telegraph.co.uk/technology/mobile-phones/11812322/smartphone-sales-in-china-fall-says-gartner.html

    ESPN’s Cell-phone fumble, retrieved at 13-10-2015 at: http://www.bloomberg.com/bw/stories/2006-10-29/espns-cell-phone-fumble

  4. 437685la says :

    Pepsi could be trying to experiment with things to diversify their business, but looking at their situation in China I think that it may also have to do with them trying to boost their beverage sales. Coca-Cola has twice the market share of Pepsi in China, and maybe the release of a smartphone is a way for them to increase awareness and to establish Pepsi not just as the regular soft drink company that we know here in the west, but as something more? Maybe they are trying to differentiate themselves from Coca-Cola, in the hope that it will positively affect their sales.

    I think that perhaps the most interesting thing is that, as you mentioned, Pepsi is not the only company to make an unusual move like that. I was very surprised to hear that Marshall, the British company that is famous for making guitar amplifiers, did the same thing, they released the ‘Marshall London’. Visually, the design is great in my opinion and it just screams Marshall, using the characteristic leather and gold their amplifiers are so well known for. They tried to cater it to the musicians and audiophiles of this world. As far as pure specs go, it cannot compete with the smartphones in the same price range (the phone cost just under 600 dollars at release). Marshall tries to justify the price by providing functions that musicians would really like, like multiple headphone jacks, a premium soundcard and apps that let you record your riffs and mix existing music. It is really almost like a premium music player with a telephone function.

    I browsed the news about this phone some more, and as I kept reading, I started to understand it better. Marketing-wise the Marshall phone is very clever. Every smartphone nowadays is pretty similar, and almost everyone has the same Samsung or iPhone. When you present people with a phone from a cool rock and roll brand like Marshall however, that will really get them talking. Will we see more companies try to use this strategy?

    Freifielder, J. (2015). Beverage battle in China goes beyond colas – China Daily USA. Retrieved 13 October 2015, from http://usa.chinadaily.com.cn/epaper/2015-05/12/content_20692838.htm

    Wiggers, K. (2015). The Marshall London is the smartphone that audiophiles’ dreams are made of – Digital Trends. Retrieved 13 October 2015, from http://www.digitaltrends.com/android/marshall-announces-the-london-an-android-phone-made-for-rocking-out/

    Margolis, J. (2015). Marshall’s leap from amps to phones is not as odd as it seems – Financial Times. Retrieved 13 October 2015, from http://www.ft.com/cms/s/0/49f30a4e-376f-11e5-bdbb-35e55cbae175.html#axzz3oSWFzMu1

  5. 439505lz says :

    Pepsi is not making a phone, but just licenses its brand to the phone manufacture. Pepsi, together with the authorized partner, plans to launch the phone and accessories exclusive in China, and this move is not so different from its recent launch of licensed clothing and accessories worldwide.

    Pepsi would not enter mobile phone manufacturing industry, according to a company statement. As for the “cultural pillar” reason, I believe it’s an misinterpretation or poor translation. I would translate Pepsi’s words from Chinese for you. “Today technology is one of the key cultural pillar at the heart of consumer interaction. At the internet age, Pepsi devotes to keep close touch with Chinese consumers in this way and promote our brand in innovative ways.”

    Pepsi’s launch of P1 phone does not have much to do with their products but rather Pepsi brand. P1 phone targets young people at their 20s and 30s and Pepsi aims to improve brand awareness and appeal to emerging consumers by offering diverse products. Pepsi had partnership with Danish luxury producer Stereo, TV manufacturer Bang & Oloufsen and Italian shoes producer Del Toro before to launch related products. There will be a press conference about the Pepsi phone next Tuesday and we will see then 🙂

    References:

    http://tech.sina.com.cn/t/2015-10-14/doc-ifxirmra0120018.shtml
    http://news.xinhuanet.com/fortune/2015-10/14/c_128315679.htm

  6. robbertcornelisse says :

    I can understand it. They have an immense customer base. Everybody knows their name. It somewhat funny (and I think also quite tempting) to have a soda branded phone, it makes it all a little less serious. The software is easy to produce (just and android software with a little pepsi interface). All in all, quite some reasons to believe that this can become a (small) success on short term.

    Why short term? Because I think after a while the fun factor of having a soda phone will be gone, and people will really look at their value for money. Since android software is currently relatively cheap to (re)produce and hardware has also decreased in price, more and more player entered the smartphone market. And this has made it a though market to be in. If pepsi want to have long term success, they should make a phone which really stands out above their competitors in value for money. And I don’t think they will achieve that.

  7. colinvanlieshout says :

    Very interesting indeed, such an unexpected move from a company which is basically settled in its own specialty, Food & Beverage (PepsiCo). I think it is more of a prestige thing, and therewith looking at the long term. The company is now settled in the F&B industry, but this is a highly competitive market without much to gain in terms of innovation. The technology industry on the other hand, does have much to improve. What if Pepsi is slowly moving to hardware and software instead of only focusing on food and beverage, I think it would be quite a brilliant move if it all works out. They have the assets; if start-up can do it, why not a Billion dollar company such as PepsiCo?

    http://abcnews.go.com/Technology/pepsi-releasing-smartphone/story?id=34471608

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