Pepsi’s latest foray into the digital music world has created some criticism from some traditional brick and mortar retailers, who sell both the soft drink, as well as, on-line digital downloads.
This past February, Pepsi began offering 1 billion free MP3s through Amazon’s new downloadable music service.
Pepsi placed song codes on 5 billion bottles that were then shipped out to retail outlets; each free download requires five codes. Pepsi’s promotion with Amazon was launched with a high-profile Super Bowl ad featuring pop-star Justin Timberlake.
According to Tom Ryan of RetailWire, “The deal represented Amazon’s biggest-ever marketing partnership with another brand.”
According to The Financial Times, however, “critics of the deal note that Pepsi’s traditional retail partners like Wal-Mart and Target are increasingly selling more and more Pepsi through their expanding Supercenters. At the same time, both sell CDs and Wal-Mart, which accounts for 18 percent of Pepsi’s sales, recently launched its own MP3 download service. Amazon doesn’t sell any soda.”
“You have to ask yourself why Pepsi would team up with a company that doesn’t sell its products, and risk antagonizing all the people that do sell its products,” said a source at one retailer.
Jeff Smith, retail consultant at Accenture, said Pepsi and other brands are being challenged in adapting the traditional way they communicate with retailers to accommodate new digital selling and marketing channels.
At the same time, one has to wonder to what extent the balance of power has shifted to favor large retailers. Will brands have to retreat from utilizing nontraditional communication mediums (and perhaps those ultimately more effective at connecting with audiences) because their efforts are interpreted as favoring their largest customers competitor?
As retailers continue to extend their reach beyond the walls of the store, diplomacy between brands and their largest retail customers becomes more critical.