Theories of Advertisement | PepsiCo Study

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Introduction:
Advertisements are one the most important components of the integrated marketing
communication strategies which business organisations adopt to attract customers to purchase
their products. Camilleri (2018) in his article titled, ‘Integrated marketing communications.
In Travel marketing, tourism economics and the airline product’ define advertisement as a ‘a
mass-marketing communication tool that is designed to inform and persuade a large
number of people.’ Tuchman, Nair and Gardete (2018) strengthen the discussion by mentioning
that companies advertising the products have control on the content of their advertisements of
their respective products. Kirti et al. (2017) mention that companies today in order to gain to an
immense consumer base, incorporate both traditional advertisement platforms like newspapers
and television and digital platforms like social media platforms. Thus, it is evident that these
companies spend immense advertisement expenditure to advertise their respective products in
the market to generate immense revenue. Today companies align their advertisements with their
respective business strategies. Thus, in other words, review of advertisements enable revealing
several salient facts about the business strategies of the respective companies. Advertisements
enable companies to strengthen their market position by attract large numbers of new customers
(Tuchman, Nair & Gardete, 2018). Trendel, Mazodier & Vohs (2018) mention that faulty and
misleading advertisements on the other hand cause severe damage to the business of the
concerned companies to the extent of attracting legal actions against them, thus escalating
operational costs. Even the global companies are not immune to the damage caused by faulty
advertisements. The aim of the paper would be review of a recent advertisement of one such
global company available on two different media. The advertisement which would be analysed
would be, ‘Full Pepsi Commercial Starring Kendal Jenner’ which was launched on Youtube on

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April 6, 2017 by PepsiCo Inc, the owner of the brand Pepsi (YouTube.com, 2017). The second
medium which the researcher would take into account to conduct the research is newspapers
which is a traditional medium of advertisement. The analysis would heavily draw strength from
the different aspects of the theory of advertisement.
Analysis:
The company owning the advertisement under study featuring Kendall Jenner is PepsiCo
Inc., the second largest marketer of beverage in the world. The company is based in the United
States of America and operates in the global market under the leadership of Mr. Ramon
Laguarta, the present chairman and chief executive officer. The company financially extremely
strong and earns a high revenue. The annual report published by the company for the period
2018 reveals that it generated a net profit of $mn 64,661 compared to $mn 63,525 in 2017 and
$mn 62,799 in 2016 (Appendix 1) (Pepsico.com, 2020). This means that the company enjoys a
strong presence in the global beverage market. PepsiCo Inc. is listed on NASDAQ, one of the
world’s largest in the world. The historical trend of stock prices on the NASDAQ clearly shows
that the company enjoys a strong position in the stock market which has in fact surged towards
2020 (Appendix 2) (Nasdaq.com, 2020). The company owns some of the iconic brands in the
food and beverage industry in the world. For example, the aerated soft drink brand owned by
PepsiCo namely, Pepsi holds a brand value of whopping $bn 18.8 as per the Forbes as on May
22, 2019 (Forbes,com, 2019). PepsiCo operates in the more than a hundred countries in the
world including its home country namely, the US and consequently have to comply with the laws
in power in both its country of domicile as well as host countries like Australia. For example, the
company while marketing and advertising products in Australia has to comply with norms set by
Australian Competition & Consumer Commission (ACCC.gov.au, 2020). Thus, it transpires

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from the above discussion that PepsiCo while advertising products in the market has to comply
with the expectations of external stakeholders like customers to generate revenue, investors to
generate capital and government bodies by complying with the consumer laws. Thus, in other
words faulty advertisements can breach the interests of one or several groups of stakeholders,
thus inflicting damage to the financial and market position of the company (Lund, 2016).
The chosen advertisement of PepsiCo which would be analysed is the commercial which
the company launched on April 6, 2017 featuring Kendall Jenner to promote its signature brand,
Pepsi. The advertisement opens with Jenner shooting in a certain location when she is distracted
by a mob of protestors. She picks up a can of Pepsi and walks towards one of policemen about to
confront the advancing mob. The policemen and participants in the mob rejoice after the
incident. The advertisement ends with the catch lines ‘Live Bolder’ and ‘Live For Now’. As far
as the reviews the advertisement received online as concerned, they are mixed. Some of the
viewers described the advertisement as innovative, some found the advertisement annoying with
others viewed it as a failure on the part of the company to outshine its biggest competitor, Coca
Cola (YouTube.com, 2017). One can point out from the review available on the digital media
platform that the advertisement as not received well. The NBCNews mentions that the critics
reviewed the advertisement negatively. They opined that the company has attempted to belittle
the torture which the police meted out to the African Americans. A spokesperson of company
however tried to establish Pepsi in a lighter ground by stating, "Pepsi was trying to project a
global message of unity, peace and understanding. Clearly we missed the mark, and we
apologize," but failed (Smith, 2017). The British newspaper, The Telegraph, in one of its 2017
article published around the same time opined that Pepsi was trying the exploit the exploitation
faced by the African Americans to promote its products and described a advertisement as a

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‘joke’. The resentment scaled to the extent of demanding the global company respond to
controversy (Sanghani, 2017).
A review of the controversial advertisement in the light theories of advertisement brings
into the light several aspects which include flaws as well. Kaul (2019) mentions in terms of
marketing communication that, ‘It is a process that leads to brand value through customer
relationships management.’ Advertisement is a very important component of marketing
communication. Thus, in other words, the faulty advertisement launched by PepsiCo featuring
Jenner succeeded in gaining attention but created a negative impact on the consumers and the
Australian society as a whole. The advertisement targeted the right consumer base but created
resentment among them by hurting their sentiments. In other words, the advertisement failed to
create relevance among the consumers and ultimately to the company. It was not accepted
positively and the company was forced to withdraw it. One can also point out from the review on
the controversial advertisement that it did not only damage the market image of PepsiCo in
Australia but also in the country of domicile namely, the United States of America. This is
evident from the publication of news of the controversy the advertisement created in the
Hollywood Reporter, which is a fashion magazine based in the USA (Bale, 2017). Thus, in other
words, the advertisement did not only damage the goodwill of PepsiCo in the market but also led
to the consumers developing growing preference for its strongest competitor, Coca Cola which is
evident from the reviews available below the YouTube video (YouTube.com, 2017).
The controversial advertisement had several impacts of the advertisement on the
company. The first impact which is evident from the very reviews expressed by the viewers of
the video is weakening of the position of PepsiCo compared to Coca Cola. Several viewers
viewed the advertisement as the signs of failing marketing strategies of PepsiCo against Coca

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Cola. In other words, the market image of PepsiCo was weakening against Coca Cola which
means that the former would lose customers to the latter (Camilleri, 2018). This means that the
controversial advertisement did not result in generation of lower revenue by PepsiCo. The
second impact which the controversial advertisement had on PepsiCo was a fall in the capital
generation, however, in a unexpected way. The share price of PepsiCo in the share market surged
by as high as 7% owing to the controversy. However, the company recalled the advertisement,
the share of the company plummeted, thus leading to fall in capital generation (Sozzi, 2017).
Thus, in other words, though the controversy pushed up the share price of the company on a
temporary basis, it ultimately led to fall in its share price.
The above analysis and review of the controversy advertised launched and subsequently
recalled by PepsiCo featuring Kendall Jenner has led to uncovering several findings. The first
finding is that the multinational companies while launching advertisements to promote their
products, should adapt the advertisements with the market conditions of the target markets which
also includes social conditions. Advertisements ill-suited to the market conditions both in the
home country and host countries would have devastating impacts on the companies concerned.
Secondly, faulty advertisements reveals weaknesses in the marketing strategies of the companies
and damage their market goodwill. Thirdly, faulty advertisements often result in weakening of
the position of companies concerned against their competitors.
A number of future recommendations could be presented before the management of
PepsiCo and its subsidiaries, collectively referred to hereby as PepsiCo and/or the company for
future advertisement campaigns. The first recommendation which could be put forward before
the management of PepsiCo is that it should conduct thorough market analysis prior to making
advertisement strategies. In fact, the local subsidiaries of the company should conduct market

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analyses in the markets under their supervision and submit reports on the market conditions. For
example, the subsidiary management bodies of PepsiCo overseeing markets like China, India and
the United Kingdom should conduct market analyses in China, India and the UK respectively.
They should then submit reports to the apex management of PepsiCo seated in the United States
of America.
The second recommendation could be presented before the management of Pepsi is that
management should conduct an analyses of the changing preferences and sentiments of the
customers residing in particular markets prior to strategizing advertisement for the particular
market. For example, in order to form advertisement strategies targeting Australia, the company
should conduct an analysis of the preferences and sentiments of the Australians. The company
can use methods like surveys, questionnaire and interviews of customers to gain information
regarding their preferences. The company should also use its chain of distributors, wholesalers,
retailers and ecommerce platforms like Amazon to gain customer information. It should collate
the findings from these researches to form advertisement strategies. This would ensure that the
advertisements launched in particular markets do not hurt the sentiments and feelings of the
customers living in those markets. This would enable the company avoid controversies and
advertisement recalls in different markets to a great extent.
The third finding which can be presented before the management of PepsiCo is that the
company should avoid showing politically controversial subjects in its advertisements. This
means that the company should use the findings from the market analysis to identify contexts
which may give rise to political controversies in certain market. For example, its advertisements
should not contain subjects like Brexit, the trade war going between the US and China, racism

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and terrorism. Abstaining from showing these politically sensitive issues would enable the
company to keep controversy and its impacts at bay a great extent.
The fourth recommendation which transpires from the discussion that the PepsiCo
should maintain separate reserves of contingent resources to tackle business losses owing to
controversial advertisements. It has been already recommended that staying away from featuring
socially and politically sensitive subjects would enable the company to keep away from
controversies. However, it can also be pointed out that unexpected shifts and occurrences in the
market conditions may lead to controversies revolving around advertisements launched by Pepsi
as well. For example, if a brand ambassador of PepsiCo featuring in its advertisements is caught
to have committed illegal actions, the very advertisements of the company featuring the brand
ambassador becomes controversial. In this case, PepsiCo has to suffer losses and recall the
advertisements due to not fault of its own. The company should set aside contingency reserves of
resources like financial resources which would to some extent lower the loss it would suffer
owing to advertisement recalls. The company should strengthen the promotion of the other goods
in order to generate higher revenue over which would be able to diversify the losses it has
suffered by advertisement recall of one product. For example, in this case, the company suffered
loss owing to fall in the sale of Pepsi. The company should promote its other products like
Mountain Dew and Tropicana. This would enable the company to generate revenue over which it
would be able to diversify the losses it has suffered owing to fall in sales of Pepsi.
The fifth recommendation which could be presented before PepsiCo is that the company
should strengthen its corporate social responsibility operations. For example, the company
should emphasise on recycling water and extracting less water from the natural resources like
rivers. This would enable the company establish itself as a socially responsible company. This

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would to a great extent strengthen the market goodwill of the company which would boost its
sale of products. Thus, the company would be able to lower its advertisement expenses. This
would also enable the company lower its expenditures it would incur to fight legal cases
pertaining to controversial advertisements. The company would be on the other hand be able to
boost its revenue generation owing to increased sales of goods and lowering of associated
advertisement expenses.
Conclusion:
One can conclude several facts upon analysis of the above discussion. First of all, the
controversial advertisement launched by PepsiCo featuring Kendall Jenner created an immense
controversy among the black population residing in the country. The second finding which
transpires from the analysis that the advertisement had devastating impact on the business
outcomes of the company. The controversial advertisement, instead of strengthening the position
of PepsiCo among its consumers, strengthened the position of Coca Cola among its customers.
This means that the faulty advertisement of PepsiCo actually strengthened the sale of Coca Cola
products to a great extent. The third finding which comes to the forefront from the review is that
the controversial advertisement though led to increase in the share prices of PepsiCo in the initial
stage, led to fall in the share prices subsequently, ultimately hitting the capital generation of the
company. The fourth finding which transpires from the analysis that the company should take
serious steps to future recurrences of controversies owing to faulty advertisements and losses
which follow. The company should ensure that its advertisements do not contain matters of
either social or political controversies. The company should also strengthen its corporate social
responsibility strategies to strengthen its social image. However, it can also be pointed out that
PepsiCo can avoid controversy regarding its advertisements to the feasible extent but not

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completely. The company should for contingency reserves to lower losses it would suffer due to
unavoidable controversies.

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References:
ACCC.gov.au. (2020). Retrieved 5 January 2020, from
https://www.accc.gov.au/consumers/advertising-promotions/false-or-misleading-claims
Camilleri, M. A. (2018). Integrated marketing communications. In Travel marketing, tourism
economics and the airline product (pp. 85-103). Springer, Cham.
Camilleri, M. A. (2018). Market segmentation, targeting and positioning. In Travel Marketing,
tourism economics and the airline product (pp. 69-83). Springer, Cham.
Forbes,com. (2019). Retrieved 5 January 2020, from
https://www.forbes.com/companies/pepsi/#55f5d733bc31
Kaul, D. (2019). Segmenting and Targeting in Indian Market. ANVESHAK-International Journal
of Management, 8(1), 121-125.
Bale, M. (2017). Hollywoodreporter.com. Retrieved 6 January 2020, from
https://www.hollywoodreporter.com/news/critics-notebook-real-problem-kendall-jenners-pepsi-
ad-991932
Kirti, R., Cho, L. R., Oren, Y. I., & Qin, Y. (2017). U.S. Patent Application No. 14/983,432.
Lund, A. B. (2016). A stakeholder approach to media governance. In Managing media firms and
industries (pp. 103-120). Springer, Cham.
Nasdaq.com. (2020). Retrieved 5 January 2020, from
https://www.nasdaq.com/market-activity/stocks/pep

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Pepsico.com. (2020). Retrieved 5 January 2020, from
https://www.pepsico.com/docs/album/annual-reports/2018-annual-report.pdf?
sfvrsn=35d1d2bc_2
Sanghani, R. (2017). Telegraph.co.uk. Retrieved 6 January 2020, from
https://www.telegraph.co.uk/women/life/pepsi-ad-everything-wrong-kendall-jenner-video/
Smith, A. (2017). NBCNews.com. Retrieved 6 January 2020, from
https://www.nbcnews.com/news/nbcblk/pepsi-ad-kendall-jenner-echoes-black-lives-matter-
sparks-anger-n742811
Sozzi, B. (2017). Thestreet.com. Retrieved 6 January 2020, from
https://www.thestreet.com/investing/kendall-jenner-pepsi-commercial-made-me-look-at-the-
stock-i-was-surprised-14074263
Trendel, O., Mazodier, M., & Vohs, K. D. (2018). Making warnings about misleading
advertising and product recalls more effective: An implicit attitude perspective. Journal of
Marketing Research, 55(2), 265-276.
Tuchman, A. E., Nair, H. S., & Gardete, P. M. (2018). Television ad-skipping, consumption
complementarities and the consumer demand for advertising. Quantitative Marketing and
Economics, 16(2), 111-174.
Tuchman, A. E., Nair, H. S., & Gardete, P. M. (2018). Television ad-skipping, consumption
complementarities and the consumer demand for advertising. Quantitative Marketing and
Economics, 16(2), 111-174.

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YouTube.com. (2017). Retrieved 5 January 2020, from https://www.youtube.com/watch?
v=uwvAgDCOdU4

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Appendix:
Appendix 1. Summary of last 5 years financial performances of Pepsi
Appendix 2. Historical stock prices of PepsiCo on NASDAQ