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Pepsi Refresh, You Fooled Me

February 03, 2011

Pepsi_refresh Over the past twelve months, the nonprofit sector has watched Pepsi hand out hundreds of thousands of dollars each month as part of its Refresh Project, which was launched with the $20 million it would have spent on advertising during last year's Super Bowl.

Some bloggers have commended Pepsi for its contest innovations, while others have been less enthusiastic.

Recently, Pepsi announced that it would stage the competition again in 2011 and would also introduce it in China and parts of Latin America. At the same time, a Wall Street Journal article over the weekend revealed that the company is revamping the project in light a number "of complaints of vote-rigging and other irregularities," including the formation of "informal alliances" by community organizers, health interest groups, and religious organizations. In response to the complaints, the company plans to eliminate the $250,000 grant category, which seemed to generate the largest share of irregularities; reduce from ten to five the number of causes for which people can vote in a twenty-four hour period; eliminate the environment and health categories; and implement a lottery system to select the charities that will compete each month.

Pepsi -- which has seen declining beverage sales for a decade -- plans to promote the new-and-improved project on Pepsi bottles and cans, and will run a bottle-cap promotion that rewards an undisclosed number of winners with up to a hundred votes.

In a recent New York Times article, Shiv Singh, head of digital for PepsiCo Americas Beverages, said that the Refresh Project was "not a corporate philanthropy effort. This was using brand dollars with the belief that when you use these brand dollars to have consumers share ideas to change the world, the consumers will win, the brand will win, and the community will win...."

I don't buy it.

I understand that for-profit companies are in the business of selling. Let's face it, without a net profit, there would be no money for a company's charitable efforts. I also understand that, because of their size and the absence of a formal application process, the grants being awarded through the Refresh Project are different from traditional corporate philanthropy efforts. But now that everyone has witnessed its powerful appeal, isn't it time to treat the $20 million project more like a CSR effort and less like a branding initiative? And that would include, as Rachel Bellow and Suzanne Muchin of ROI Ventures suggested in a PhilanTopic post earlier this week, "meaningful, 'custom designed' metrics for success that are specifically meaningful to the company, its actions, and its scale of investment."

What do you think? Should the food and beverage giant be doing more to align the project with its own CSR goals? Or is that asking too much of these kinds of crowdsourced popularity contests?

-- Regina Mahone

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Posted by DJ  |   February 03, 2011 at 04:39 PM

What do you think? Should the food and beverage giant be doing more to align the project with its own CSR goals?

>>> Regina, you're very right. Just treating this as a branding effort is really very small-time (or misguided) thinking on Pepsi's part. I mean look at the quote from Shiv Singh - the way they look at it, you'd think this was just another social media vehicle for people to share ideas.

They're giving away millions of dollars. Even the smallest taste of that is game-changing money for lots of deserving ideas or organizations. To ignore that aspect seems such a waste. Just a little tweaking could really make Referesh have even more impact.

Posted by Ed Gibeau  |   February 03, 2011 at 04:54 PM

Quote: "....This was using brand dollars with the belief that when you use these brand dollars to have consumers share ideas to change the world, the consumers will win, the brand will win, and the community will win...." Shiv Singh, head of digital for PepsiCo Americas Beverages.

How would anyone know who "wins" (company, consumers, or community) - or if anyone wins - if there are no metrics? It would seem that if PepsiCo could show the impact of their program on societal needs it would greatly enhance its PR efforts and thus sell more product. What am I missing?

Posted by Regina Mahone  |   February 03, 2011 at 06:03 PM

DJ, I couldn’t agree more. Not to align the project with its CSR goals would be a disservice to stakeholders.

Posted by John Q. Public  |   February 04, 2011 at 08:50 AM

The brand new USDA dietary guidelines say to drink water instead of sugary drinks. http://www.cnpp.usda.gov/Publications/DietaryGuidelines/2010/PolicyDoc/SelectedMessages.pdf

Elephant in the room, that didn't get picked up by this blogger or by WSJ:
Pepsi, a $60+ billion dollar company, will continue to do things like put a fraction of a percent of their revenue up for grabs (but you gotta fight other good causes to get it) in order to make us forget that they are selling what is essentially making Americans (and increasingly the whole world) sick.

And to call this voting and equate it with democracy? In true democracy, one vote per person. You can't get more votes under a bottle cap. And you don't need to get your friends and your friends friends etc etc to vote every single freaking day to even stand a chance.

CSR is a hoax, especially when it comes to this kind of product that provides no social benefit.

Posted by John Q. Public  |   February 04, 2011 at 08:52 AM

The WSJ was taken down but here it is:

Pepsi Hits 'Refresh' on Donor Project --- Company Will Give More Small Grants, Eliminate Controversial Health and Environment Categories
By Valerie Bauerlein
January 31 2011
The Wall Street Journal

PepsiCo Inc. is revamping a charitable-giving program created to boost its corporate image and sales of its flagship cola but marred by complaints of vote-rigging and other irregularities.

With a promise of $20 million in donations for "refreshing ideas that change the world," Pepsi's Refresh Project drew rabid competition for the prize money -- perhaps too rabid.

Community organizers, health interest groups and religious organizations quickly formed alliances that dominated voting. Those alliances picked nominees each month and asked supporters to vote as many times as the contest rules would allow. And when they won, some small groups and grass-roots organizations howled with objections, saying the alliances went against the spirit of the competition.

Pepsi will get rid of the Refresh Project's biggest $250,000 grant category -- the main draw for large organizations and many alliances. It will also limit to five (down from 10) the number of causes for which voters could cast ballots each day. Starting in May, it will award nearly twice as many smaller grants of $50,000 or less, which tend to be sought by smaller groups.

Pepsi is eliminating the categories of environment and health, which attracted health-advocacy groups that formed alliances, and whose causes Pepsi says didn't always reflect the lighthearted nature of its brand.

Pepsi also is implementing a lottery system to select charities each month to eliminate the first-come, first-served practice that rewards savvy applicants who submit ideas within seconds of the registration opening.

Groups such as the Progressive Slate won $500,000 out of $1.3 million awarded by Pepsi in both September and November and is on track to win a quarter of the $1.3 million doled out in January. That group had muscled out several grass-roots organizations.

The changes are meant to make the second year of the Refresh Project more democratic and in keeping with the "optimistic and fun" spirit of Pepsi-Cola, said Jill Beraud, chief marketing officer for PepsiCo Beverages America.

"Were there a couple of people that wished they won?" said Ms. Beraud. "Sure. But, frankly, we were very satisfied with how smooth the program went."

Early grant winners included cheerleading squads for disabled students and a project to make school bus windshields more aerodynamic. Bruce Springsteen and pop star Rihanna asked fans to vote for their pet causes, and charities cheered the emergence of a new source of funding in a tight economy.

Ms. Beraud said the Refresh Project is already the best-known online charitable giving program, recognized by a third of consumers. "The whole notion of allowing consumers to have a voice is really the wave of the future," she said.

The changes are also more squarely aimed at boosting sales, which have been declining for a decade and slid 9.8% in the first nine months of last year, according to Beverage Digest, an industry publication and data service. That's a poor showing even against the backdrop of a troubled economy and increased focus on health. The Refresh Project will be advertised on bottles and cans of Pepsi-Cola, with bottle cap promotions that offer up to 100 votes.

Independent bottlers say they hope the changes will help sell more soda. "People feel good about [Refresh] and I think it's neat, but it doesn't translate to, 'I'm going to buy Pepsi,'" said Brian Charneski, who leads a cooperative of 16 independent Pepsi bottlers in the Pacific Northwest.

Indeed, many voters and grant winners say they don't generally buy soda. Don Evans, who runs a Vancouver homeless shelter that won a $25,000 grant in October, said his clients would have had no place to store their belongings were it not for the Refresh Project. But the shelter doesn't serve soda, and Mr. Evans says he doesn't even drink it.

Ms. Beraud said the Refresh Project is exceeding Pepsi's goals for engaging consumers. More than 76 million votes have been cast and the program has been featured in thousands of local newspapers and television stories which praised Pepsi for creating an innovative social-media program.

Pepsi is so enamored of the Refresh Project that it plans to expand it to China and parts of Latin America this year. Chairman and Chief Executive Indra K. Nooyi sees it as a model for how corporations should differentiate their brands. "It's a matter of, 'What does this brand stand for in terms of doing something positive in the world,'" she said at a Beverage Digest industry conference in December.

Some analysts fret that Pepsi is spending more effort promoting its socially responsible image than on selling more Pepsi-Cola, Diet Pepsi and Pepsi Max, among its most profitable brands. The Refresh Project in its initial year was "an absolute failure" whose premise was laudable but too distant from the product it's meant to promote, said beverage analyst Caroline Levy of CLSA.

PepsiCo shares are up 8% in the past year, but have been outpaced by shares of rivals Coca-Cola Co., up 15%, and Dr Pepper Snapple Group Inc., whose stock is up 26%.

Pepsi believes that the Refresh Project will help it sell more soda. "We always expected that sales would come over the long term," Ms. Beraud said.


Charitable Numbers

Pepsi's Refresh Project launched in February 2010.

Votes cast: 76 million

Ideas submitted online: 12,642

Health grants: $5.2 million

Arts grants: $1.2 million

Playgrounds improved: 26

Organizations started: 47

Total Donated in 2010: $20 million

-- Pepsi Refresh Project

Posted by Regina Mahone  |   February 04, 2011 at 09:22 AM

Hi Ed--thanks for stopping by. I just came across this Fast Company blog post from Alice Korngold on crowdsourcing corporate philanthropy campaigns. In the post, Korngold writes:

Old corporate giving, 10 – 20 years ago: Decisions were made behind closed doors, among a small, select, close-knit group of people. New corporate philanthropy, often part of the CSR strategy: Decisions draw on the collective wisdom of diverse groups of people of all generations and backgrounds....The value: Good for business, and better funding decisions to improve communities and the world.

As Korngold's entire post makes clear, you're not missing anything.

Posted by Grant Garrison  |   February 04, 2011 at 12:22 PM

Suggesting Pepsi Refresh become just another CSR program is missing the reason it is such an exciting development - Pepsi doesn't have an extra $20 million available for CSR beyond the impressive work they already do in that area (a terrific corporate foundation and many other initiatives related to its Performance with Purpose platform). The innovation of PRP is that brands can do well by doing good - precisely what GOOD Projects (www.good-projects.com), my company and a partner of Pepsi's in the Refresh Project, hopes to spread. In this way, we can expand the pie of resources available for great ideas by aligning social impact and business strategy.

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