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Sweet on Sierra Mist

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Since its introduction in 2000, Sierra Mist has been positioned as a "shockingly refreshing" lemon-lime soda. A year after a national rollout last January, the brand has posted results that show it has made a significant impact in the category—a refreshing turn of events for the Pepsi Bottlers Group, which released its fourth-quarter and full-year earnings last week.

In a year that saw PBG's worldwide case volume rise just 1 percent, excluding acquisitions, PBG's Sierra Mist was up 11 percent over its total lemon-lime volume (which consisted of Sierra Mist and 7Up) in 2002. (In the fourth quarter, the lemon-lime brand climbed 8 percent.) PBG CEO John Cahill cited Sierra Mist as "a true standout throughout the year."

"Sierra Mist is here to stay and then some— Pepsi has finally cracked the lemon-lime category," said John Sicher, publisher of Beverage Digest in Bedford Hills, N.Y. "[Its success] has to do primarily with the Pepsi bottling system getting behind it. But the excellent ad support was certainly a major factor. For Sprite and 7Up, Sierra Mist makes excellent execution and marketing even more imperative."

Overall, PBG's fourth-quarter earnings rose 21 percent to $69 million, or 26 cents a share, on a 9.7 percent rise in revenue to $3.05 billion. (Results include a noncash charge of 4 cents a share related to a tax-law change in Canada.) For full-year 2003, net income dropped 2.8 percent to $416 million, or $1.50 a share; an accounting-rule change lowered earnings by 2 cents a share. Revenue increased 11 percent to $10.27 billion. PBG is the largest bottler and distributor of PepsiCo beverages, which include Lipton iced teas, Aquafina water and Mountain Dew.

Sierra Mist (with a 1.2 market share in supermarkets) is No. 3 behind Sprite (a 4.2 share) and 7Up (a 1.7 share), but Pepsi's media spend on the brand was almost triple that of its competitors from January-November, according to Nielsen Monitor-Plus. Pepsi put $60 million behind Sierra Mist, while The Coca-Cola Co. and Cadbury Schweppes each spent about $20 million on Sprite and 7Up, respectively.

"We are serious about Sierra Mist, and that's why there were two ads in the Super Bowl this year," said PepsiCo rep Dave DeCecco. Omnicom Group's BBDO in New York, which has worked with PepsiCo since 1960, handles Sierra Mist's advertising. (WPP Group's Ogilvy & Mather in New York handles Sprite, while its corporate sibling Young & Rubicam handles 7Up.)

Continuing the themeline "Yeah, it's something like that," which refers to how drinking a Sierra Mist can cool people off, one of the new Super Bowl spots brought back the man-and-his-dog story line from last year's Big Game. In the ad, the two are on a fire escape, looking to the hot street below. The man spies a pitcher of cold water on a restaurant's table. He dives into the pitcher, and the dog follows, landing in a glass. In the other spot, a member of a marching bagpipe band stands on a breezy grate à la Marilyn Monroe.

"BBDO has done a tremendous job communicating the essence of this brand as an alternative to the others," DeCecco said. He would not comment on 2004 media spending.

PepsiCo had tried to compete in the category with Lemon Lime Slice, introduced in 1984, but the brand languished and was dropped by 2000. The company debuted caffeinated lemon-lime soda Storm in 1998, but that also did not last.