E-Consumer-Marketing and the Old World

• Case 1: Fast moving traditionalist, Pepsi Cola
  
• Case 2: Traditionalist and innovator, McDonald's
  
• Struggle between Old and New Economy
  
• Many took the lessons: Online allure grows for traditional companies
  
• No future for stand alone E-tail?
  
• Emerging alliances between the old and new
  
• The fight in the supply chain
  
• The great opportunities for brands
  
• From the 4 P's to "focused client share"
  
• One-to-one marketing
  
• Conclusions
  
• Summary: the first lessons of E-marketing

Case 1: Fast moving traditionalist, Pepsi Cola

PepsiCo spent $3.3 billion in 1998 to acquire Tropicana, the leading U.S. orange juice brand and surpassed Campbell as the third largest U.S. grocery brand in late January 2000. Pepsi owns the snack brand Frito-Lay and by just accounting for a quarter of sales from this activity, they now control two-fifth of the world market for salty snacks and in the fourth quarter of 1999, they generated more than 71% of PepsiCos profit. For the first time in history, PepsiCo boasts two of the three top-selling U.S. soft drinks on store shelves, Pepsi and &Mountain Dew. In addition, Pepsis Aquafina bottled water is the no. 1 brand in that fast growing category, while its Liptons Iced tea brand boasts a 16 % point share lead over Coca Colas Nestea.

Pepsi spun off the companys capital-intensive bottling operations into an independent public company and sold in 1997 their fast food activities. By almost every financial measure, Pepsi is now in better shape then when CEO Roger Enrico took over the helm in 1996. Although its $20.4 billion in sales is now one-third lower, the companys net is higher by more than $100 million compared to its $2.1 billion net from last year. Operating margins have risen to 15% from 10%, while the return on capital has jumped to 20% from 15%. If only Wall Street would notice, the company shares are still in the thirties just as they were a few years ago. (Source BW April 4)

Case 2: Traditionalist and innovator, McDonald's

McDonalds took an interest in the 56 outlets of Chipotle Mexican Grill, the Denver-based chain, in 1998, and bought the 23 upscale London coffee and sandwich shops comprising Aroma Café, in 1999. They also acquired Donatos Pizzas 148 Columbus Ohio chain later in 1999. Recently, they announced their interest in Boston Market, a chain of 751 restaurants, which may become part of the Donato's, Chipotle and Mickey Ds family. CEO Jack M. Greenberg might now be able to bring the much-needed diversity to McDonalds menu after previous experiments to broaden fell flat. There seems to be a good chance for them to achieve that goal in the coming years.

McDonalds also acquired a small equity stake in food.com , the online takeout venture. Investment bankers took it from there and on March 8, the fast food giant led a group of companies, including Kraft Foods Inc. and Blockbuster Inc, to invest $800 million in the venture. This is a typical example of incubatorship. A giant uses its powerful network to collect complementary partners and to finance with them a new dot.com. If it is successful, it will create enormous value and will change the competitive structure in the explored market. (Source BW April 4)

Struggle between Old and New Economy

Very clearly, McDonalds approach makes more sense then PepsiCos because the company is not only relying on concepts of the old economy but also separately launching business with all the key elements of the new economy. For example, working through portals for a clear affinity group/vertical market, co-branding, partnerships, and E-Finance with a good balance between little invested money, limited risk for the company and huge growth opportunities is a win-win solution in modern marketing. And we are further reminded that Forrester Research predicts that Web spending will soar from $20 billion in 1999 to $184 billion in 2004, thats everything except peanuts.