Pepsi Phone: Can it “Change The Game” ?

We have extensively talked about “hardware as a distribution” model (HaaD) on how the “value captured” by hardware suppliers has shifted from hardware to software, services, content and so forth. We are seeing more and more global brands entering the smart devices space from commerce players (Amazon, Tesco, Flipkarts of the world) to content players (LeTV, B&N) to social giants (Facebook) to heavy industries (Sany, CAT) to now FMCG players such as Pepsi wit the Pepsi Phone.

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  •  Pepsi today announced its phone for the high-scale China market adopting the HaaD model partnering with Koobee the Chinese device manufacturer.
  • The Pepsi branded Koobee is being sold through JD.com and through a crowdfunding campaign with sale happening in batches and variable pricing to drive up the demand.
  • The Pepsi phablet itself sports a FULL HD (1080p) 5.5″ display, MediaTek MT6592 processor, 13MP rear & 5MP front cameras with a 3K mAH battery and available in two variants China Mobile (TD-LTE & TD-SCDMA) & China Unicom (+ FDD-LTE & WCDMA radios) all launched at a special price-tags of $78 to $110 depending on the buyer’s participation in the crowdfunding scheme.
  • This is an attractive proposition for “price-conscious” buyers looking to grab a “vale-for-money” smartphone and should drive high interest
  • This is great news for the ODM/OEM partners supplying phones to Pepsi now and in future in different markets

What’s in for Pepsi?

  • The smartphone space is already looking like a FMCG space where the goods are moving faster than ever and has become highly commoditized with value shifting beyond hardware to brand, content, software, commerce and services.
  • This offers a perfect opportunity for Pepsi to find some synergies in leveraging its strong brand to this consumer electronics FMCG segment which is smartphone (a highly personal good) and drive its brand further
  • This could turn out to be a great and disruptive move if Pepsi plays its cards right and strike key partnerships across different markets to promote Pepsi brand via phones
  • As we said, smartphone is “highly personal device” and this could give unique insights about consumers and we believe its the marketing dollars well spent more than Super Bowl commercials to consistently and continuously learn about consumers’ habits on phone as most users now have almost most of their lives use-cases linked to their phones
  • We see “Pepsi Phone” as a great marketing & marketing research tool for Pepsi
  • If this move by Pepsi is successful, it will set precedence for other FMCG and verticals to adopt HaaD model and get closer to its consumers
  • Also, Pepsi will have to work out special deals to drive Pepsi adoption with timely offers and deals over sleuth of branded products under Pepsi umbrella over the “lifetime” of the device to drive the brand value and ensure customer lock-in.

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  • Pepsi though will have to be careful with the target consumers and not disappointing its consumers with a shoddy quality product as this could backfire rather quickly

We forecast Pepsi with such aggressive (subsidized) pricing, effective marketing, with better product quality and focus on customer lifetime value can even capture 2-3% share of China smartphone market by the end of the next year.

This reminds me of a Pepsi slogan from 2012: “Change The Game”