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June 28, 2024
How Did Dr Pepper Catch Up to Pepsi?
After decades as a distant contender, Dr Pepper shocked many by recently tying Pepsi as the second-most-popular soda in the U.S., prompting discussions around the drivers of Dr Pepper’s success.
According to data shared with the Wall Street Journal, classic Coke dominates the category with a 19.2% share of the soda market in the U.S. by sales volume, followed by Dr Pepper and Pepsi, both at 8.3%, although Dr Pepper is ahead slightly.
Dr Pepper was founded in Waco in 1885, with Coca-Cola arriving in 1886 and Pepsi in 1898. Coke was the first to take off on a national basis, and its battle with Pepsi erupted into the “Cola Wars” in the 1980s.
Dr Pepper’s first break was winning a lawsuit in the 1960s that concluded Dr Pepper wasn’t a cola. For decades, bottler contracts with either Coke or Pepsi prevented distributors from selling a brand similar to cola. With Dr Pepper proven not to be a cola, the drink began showing up on both Coke and Pepsi soda fountains at fast-food chains across the nation, provoking trial as an alternative.
Innovative marketing, including its “I’m a Pepper” jingle, elevated brand awareness in the 1970s to help Dr Pepper land as the third-largest soda seller by 1981. The brand’s unique flavor, blending 23 flavors and often described as “sweet and spicy,” also has long helped Dr Pepper stand out against the cola brands.
In the following decades, Dr Pepper lost ground due in part to the arrival of new sodas, including Diet Coke, and the brand was sold a few times. It’s now owned by Keurig Dr Pepper Inc., which also counts 7UP, Crush, and Canada Dry among its soda brands.
In recent years, Dr Pepper’s flavor is seen giving the brand a bigger edge as America’s palette has become more receptive to spices. Also helping Dr Pepper in recent years is heavy investments in digital marketing and advertising positioned around college football.
The brand has also benefited from introducing new flavors, such as 2022’s limited-edition Dr Pepper Bourbon Flavored Fansville Reserve and 2023’s Dr Pepper Strawberries & Cream, which the company added to its permanent lineup. The flavors helped some testers become more frequent drinkers of regular Dr Pepper while also reaching new customers.
“Dr Pepper has capitalized on the growing consumer desire for flavored soft drinks,” Duane Stanford, editor and publisher of Beverage Digest, told the Guardian. “That’s especially true for young and Hispanic customers.”
Relatedly, Dr Pepper has garnered online attention due to a phenomenon that has seen TikTokers experimenting with new flavor concoctions with Dr Pepper as a base, including a post in May that went viral of someone mixing Dr Pepper with pickles at a Sonic. A just-released flavor, Dr Pepper Creamy Coconut, was inspired by the “dirty soda” trend (mixing soda with milk or cream and other flavors).
Some articles called out the shortcomings of Pepsi, whose market share was as high as 14.99% in 1995. Pepsi has said that across its Pepsi lineup, which includes Diet Pepsi and Pepsi Zero Sugar, it remains the No. 2 soda trademark in the country, and its focus is currently on Pepsi Zero Sugar and energy drinks as people overall are drinking less soda.
Discussion Questions
What factors are likely most responsible for Dr Pepper’s ascension to tie with Pepsi as the second-largest soda brand in the U.S.?
What steps should Dr Pepper take to build on its momentum?
Is Pepsi smart in reducing investments in its flagship Pepsi product in favor of sugarless sodas and energy drinks?
Poll
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Shelley E. Kohan
Associate Professor, Fashion Institute of Technology
James Tenser
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
Albert Thompson
Director, Brand Strategy (President), Transient Identiti
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Pepsi has not been helped by the fact that all traditional soda is in decline as consumers switch to healthier alternatives. Coke has been impacted by this trend too, but because of its leading position it has managed to hold on better than Pepsi. Dr Pepper, which no longer seems quite so misunderstood, has done relatively well because it has a more interesting flavor profile – complex flavors, including spicy beverages, are more in demand, especially among young consumers. Dr Pepper has also been aided by some weird things, like the TikTok challenge of drinking it with a pickle.
Because it’s delicious. Duh. The brand should lean into its rising success and continue to branch out. There is a rise in soda merch licensing, including mini-fridges which could do well to bolster its positioning as a lifestyle. At the recent Vegas licensing show Coca-Cola had a large booth. The Doc should start to look into these areas.
Dr Pepper has been consistent in their marketing efforts to drive home their core value proposition and key messages…something that most marketers simply don’t have the patience for. Their youth recruitment efforts are focused and relevant to convert the next generation.
For me the playbook was very simple. Dr Pepper started to realize that all commerce decisions start with your place in CULTURE. Everything is rooted in culture; it’s how people identify with ourselves, the world around us (and brands). It’s how we discern what’s BS. And yes, it informs what to buy and why. It’s one of the single most powerful drivers of consumption. CULTURE OVER EVERYTHING.
Yes!!!! I teach International Business. My students must understand the Culture Eats Strategy for Breakfast, Lunch, and Dinner. The same goes for looking at every aspect of a population.
Dr Pepper has always had an alternative cult-like following as a love it or not spiced soda. Now a youthful base is propelling it’s resurgence, not only via TikTok’s platform, but also because it’s off the beaten path from the mainstream, away from older crowds of the Coke and Pepsi everywhere generation. Bottomline, GenZers are fueling this, happily embracing nostalgic sodas along with an increasing wave of sales cold blended and boba drinks at independents, Starbucks, Dunkin, Dutch Brothers, CosMc’s and more.
For decades Dr Pepper has encouraged youthful fans to engage and co- create with the brand. Be it flavors, contests or content. I would call Dr Pepper a “ People- powered Brand” with a participatory following. They’ve done a great job harnessing digital for this.
Exactly. The creation of Fansville was a genius marketing promotion for the brand, I know millennials, gen z’ers, etc that were really tuned into the brand because if it. That is what Pepsi used to be long ago but they haven’t really done anything marketing-wise in the recent past except introduce a few flavors which were questionable.
I’m a little questioning of the spin given here: no disrespect intended to Dr. Pepper, but it seems that Pepsi fell into this virtual tie as much as the former rose into it. That having been said, for those curious about the rising part who’ve never had one, well….do: you’ll understand product differentiation with the first sip.
Traditional soft drink brands such as Coca-Cola, Pepsi, and Dr Pepper have been affected by the shift to healthier alternatives. Does Dr. Pepper now rank second over Pepsi?
Perhaps, but based on data I read, Pepsi’s market share has declined a bit while Dr Pepper has gained ground. There is, however, a possibility that any of the current numbers might be misleading.
It is currently difficult to access the deep and wide unstructured, independent retail data in real time. It is because of this that it is impossible to gain a complete understanding of market dynamics, particularly in multicultural dine-in and retail locations. Db
Dr. Pepper is not your mom and dad’s soda and has purposely focused on the younger generations. Social media and crazy concoctions are two specific ways that Dr. Pepper is engaging directly with Gen Z and Alpha. Innovative marketing, including personalization (name your Coke) and social media, is what captivates the young market and Dr. Pepper should take a few pages from the Coke playbook and build on this momentum. The new general market and rise of the multicultural consumer in the U.S. market will support the more dynamic palate of Dr. Pepper.
The question for Pepsi is how they never were able to get ahead of Coke and it comes down to taste. More Coke drinkers will not drink Pepsi than Pepsi drinkers who do not drink Coke. Coke’s unique taste differentiates the product which resonates with the broader market. That coupled with Pepsi’s lack of innovative marketing (compared to Coke) has left the brand in second and slipping to third place. Perhaps focusing on energy drinks is the way to go. Investing in unique alcoholic seltzer formulations may be a different path for Pepsi although that space is crowded too. Currently, Pepsi licenses out alcoholic distribution and plans to expand into more international markets (Hard Mtn Dew and Lipton Hard Iced Tea, Rockstar, and 7-Up).
How did Dr. Pepper become so popular? One customer at a time! Seriously, there are more players in the soft drink/soda category. More choices mean a spread of market share. The top brands may stay at the top, but new players are pulling customers from. Dr. Pepper has continued to grow year after year. As mentioned, they have become one of the top soda brands, one customer at a time.
(Disclaimer: We Texans love Dr Pep, so humor me on my somewhat random knowledge of Dr Pepper facts. Note: No period after Dr)
Dr Pepper, originally called Waco because of its birthplace, has thrived because of continual innovation. In the early 2000s, Dr Pepper introduced spinoff Red Fusion, which fizzled, but then turned that experiment into Cherry Vanilla Dr Pepper, which was a hit. It’s still around and spawned a diet version, but they didn’t stop there. A Berries & Cream was also an early aughts entry. But they pivoted and now we have Strawberries & Cream. The line extensions continue…Dr Pepper Chocolate, Dr Pepper Vanilla Float, Dr Pepper Dark Berry, Dr Pepper Cherry, and Dr Pepper Cream Soda are all in the current lineup. As a nod to the move away from artificial sweeteners, you can also find Dr Pepper Heritage, made with cane sugar and sold in retro cans.
Not only does Dr Pepper play in the beverage space, but there are line extensions galore: Dr Pepper Jelly Beans from Jelly Belly, Slurppees, Freezies, hard candies, cotton candy, Peeps, and barbecue sauce. Sadly, the Dr Pepper Lip Smackers by Bonne Bell, a favorite among us 80’s kids, was discontinued in 2020 after 5(!) decades on the shelf. Plus, they also have a lot of plush, clothing, etc. in the marketplace. They have truly ingratiated themselves into the culture and kept putting out products that charmed the masses, not just Texans.
And for my last Dr Pep fun fact, have you ever tried it hot? Not kidding.OK one more: there’s a Dr Pepper museum in Waco, Texas, that used to be the original bottling plant. Yes, you get free Dr Pepper as part of the tour.
Great education, Also- Blue Bell’s Dr. Pepper float ice cream flavor.
You probably don’t remember 10/2/4, but I do.
You will have to explain it someday. I never heard of it.
Two things Dr. Pepper brand has done super well over the decades:
1) Memorable advertising campaigns
2) Great fountain distribution
Not every cola lover likes the hint-of-sassafras taste that I associate with the Dr. But successful trials make loyal customers, and Dr. Pepper’s presence on very many fast-food soft-drink dispensers creates millions of opportunities for new customers to try a sip.
Interestingly, I have noted many instances where Dr. Pepper is dispensed alongside both Coca-Cola or Pepsi products. Yet is is super rare to see both Coke and Pepsi on the same fast-food menu, due to exclusive deals. Shrewd playing, Dr. P!
As for PepsiCo – I wonder if it focuses on measuring its total beverage business more than worrying about its status in the cola wars these days. It owns Gatorade, Lipton tea, Rockstar and Aquafina, after all. Along with its Frito-Lay Snacks business, it controls the most powerful store distribution system in the world. That’s not to say the company doesn’t want to win in every sub-category it plays in.
Continued share growth is the result of Dr. Pepper’s unique taste profile and smart marketing that has resonated with sports fans, a la Dr. Pepper’s “Fansville” college football marketing campaigns. These have been highly entertaining and have captured the attention of many consumers at home and in the store. Another growth driver has been Dr. Pepper’s presence ‘at the valve’ with the award-winning flavor on nearly every fountain machine in C-stores, restaurants and grocery deli’s. This has been a decades long strategy that has been foundational for Dr. Pepper’s ascendance.
Dr Pepper tastes great. Bottom line. But I see some other factors in play here:
Pepsi has been pursuing a strategy of being an alternative to Coke. I will be skewed by saying this but the two colas are almost identical. (did I just open a can of worms?) Both companies have pursued the strategy of controlling local distribution, jockeying with each other to control exclusivity at restaurants and other outlets. In the meantime, Kureug Dr Pepper has had to pursue an independent strategy that has their proudct in Coke coolers and Pepsi cooler in many markets. They are also able to legitamtely claim to be truely different from their competition, not just a different version of the market leader.
I have five grandchildren, aged 14 to 20. All would order Dr. Pepper first. The taste, yes. It’s not a cola, yes.
Cola still leads the flavor chase, but, Dr. P gives us an alternative.