How Cutting Ad Spending Helped Pepsi Lose Fizz in Soft Drink Market

Media companies like to warn marketers about the perils of cutting their ad spending, and they may have a cautionary tale in Pepsi, which slid into third place in the soft-drink market behind Coca-Cola and Dr Pepper.

According to figures from MediaRadar , which tracks ad spending, Pepsi — long famous for commercials using themes like The Pepsi Challenge and featuring stars like Michael Jackson — made the biggest ad budget cuts among the top 3 brands, reducing spending in the first four months of 2024 by 46% to $23 million.

Coke, the category leader, and Dr Pepper, which had been in third place, also made cuts, but they were smaller. Coke’s spending was down 18% to $78 million while Dr Pepper trimmed just 5%, leaving spending at $32 million, MediaRadar said.

A big difference among the brands was in how much of their ad budgets went to TV.

Dr Pepper cut its spending on TV by 1%, but that meant it was spending 92% of its ad budget on TV. Coke reduced TV’s share of its budget to 52% and Pepsi reduced TV’s share of its budget to 72%.

TV spending by Dr Pepper was $29%, topping Pepsi’s $17 million.

Dr Pepper has been gaining share in the soft-drink market for years, according to Beverage Digest, which this month declared that while both Dr Pepper and Pepsi have an 8.3% share, Dr Pepper was No. 2.

Coke remained the top drink with a 19.2%.

“There have been notable TV ad campaigns for soda over the years, from Coca-Cola’s polar bears to Pepsi’s star-studded commercials,” said Todd Krizelman, CEO and founder of MediaRadar.

“There is a reason why these brands choose to spend more heavily on TV compared to any other format, because TV provides wide visibility for them,“ Krizelman said. “Over the past two years we’ve seen Dr Pepper contribute the most to TV advertising relative to its spend, with memorable campaigns such as ‘Fansville’ ads .

“As Dr Pepper prioritizes TV for 2024, which may have been a factor in beating Pepsi to become the second-most popular soda. It will be interesting to see if this strategy holds going forward — if Dr Pepper chooses to double down to keep that spot, or if they’ll ease back.”