Pepsi now in third

It's official--Pepsi, long the number two brand in the soft drink category, is now number three having fallen behind not only Coke but also Diet Coke. Beverage Digest reported that Pepsi lost 0.4 share in 2010, falling to a 9.5% share of the category. Diet Coke now controls 9.9% of the market while Coke owns a sizable share lead at 17%.

Share losses like this call into question marketing strategy and that's what is happening at Pepsi. The Refresh Project, launched early last year by Pepsi, saw the soft drink brand move away from traditional celebrity-focused campaigns to a cause marketing focus. This move included de-selecting Super Bowl advertising and ceding that advertising venue to Coke and other beverage brands.

Pepsi maintains that the Refresh Project has been a success, particularly at the local level. And, it plans to expand the program this year.

According to Advertising Age, Pepsi plans to increase ad spending by 30% this year, which will include new advertising for Pepsi, Diet Pepsi and Gatorade. The company is also supporting X Factor, the new music competition created by ex-American Idol judge Simon Cowell.

When considering Pepsi's plans to increase spending, bear in mind that Diet Coke is small compared to its competitor. Diet Coke spent $36 million on measured media in 2010 while Pepsi spent around $114 million.

The news about Pepsi's slide continues a bad couple of years or so for PepsiCo's beverage family--Gatorade has stumbled, Tropicana had a well-documented ill-fated brand identity redesign, and other marketing and branding mishaps have occurred across the various brands.

The news of the slide to number three also will impact employee morale at Pepsi given how long it took to achieve the strong second place standing in the category. Said Credit Suisse analyst Carlos Laboy, "It took decades to get Pepsi to number two, and it is risky that PepsiCo cannot avert this slide, while brand Coca-Cola holds it together, Diet Coke rises and Coke Zero continues to play its role well. Sure, a Pepsi Max relaunch looks brilliant, but the core is ailing."