|
“We gave him two or three caps,” said David Dzanis,
vice president of client services for Pepsi’s sports
agency, Genesco Sports Enterprises. “Obviously, there
was a lot of work between then and signing Junior. But
that was probably when we first got his attention. We’re
all thinking, ‘Here’s a guy driving for Bud and he wants
Mountain Dew hats?’ But we knew then that he drank our
product.”
More than a year later, the cap giveaway paid off.
Pepsi ended up paying a share of the estimated $25
million to $30 million per year to put its Mountain Dew
Amp brand on the Hendrick Motorsports No. 88 Chevy. The
sponsorship and personal services contract with
Earnhardt makes him the highest-paid endorser in Pepsi’s
long history of celebrity spokespeople, according to
company executives. It’s a history that has included
sports icons as varied as Alex Rodriguez and David
Beckham, and pop stars as diverse as Madonna and U2. Ray
Charles is part of the Pepsi generation, and so are Joan
Crawford and Regis Philbin.
Junior’s multiyear deal with Amp is more than Michael
Jackson was paid to moonwalk for Pepsi at the top of his
game and more than fellow driver Jeff Gordon gets from
Pepsi after 12 years. And it all started with a couple
of caps.
Stars aligned
All of the executives involved in bringing NASCAR’s
top attraction into the Pepsi fold and interviewed for
this story say that in addition to signing a big check,
the stars had to align — independent of resources that
the $39 billion soft drink and snack food giant could
bring to bear. And they did.
“No one would describe anything this big as easy,”
said Ralph Santana, Pepsi’s vice president of sports
media and interactive marketing, “but the planets just
seemed to line up for us. Nine months ago, this really
wasn’t on our radar screen and it happened so quickly
and so easily, it’s almost scary.”
The first of those constellations in motion was that
Junior grew up drinking Mountain Dew, a Pepsi-owned
brand since 1964. In addition, Pepsi had a successful
relationship with Junior’s new team, Hendrick
Motorsports. One of its star drivers, Gordon, has been
sponsored by Pepsi since 1996.
For Pepsi, getting Gordon’s buy-in was key. Given its
longtime relationship with him, Pepsi approached the
four-time NASCAR champion before it ever spoke to
Earnhardt directly, seeking Gordon’s blessing, if not
his permission, to sign the driver who had raced under
the Bud flag for nearly a decade.
“It’s kind of like A-Rod and Jeter,” Genesco CEO John
Tatum said. “You don’t want to ruin the dynamics in your
locker room, even if you are adding a superstar. But
Gordon was behind this from the start; (he) figured it
was just another teammate for him in the race.”
But the impetus for Pepsi to empty its wallet for
America’s top motorsports attraction derived from a
different race. While full-calorie sodas have been
bubbling out of fashion over the past decade, energy
drinks, most notably Red Bull, have become a $6.5
billion market — and one with considerably better
margins than carbonated soft drinks.
Pepsi is accustomed to being first or second within
beverage categories. But within energy drinks, it has a
somewhat haphazard portfolio: SoBe’s No Fear, some
Starbucks-branded beverages and Amp, which has a market
share of around 6 percent depending on the data source
(see chart).
Unaccustomed and tired of riding the fifth horse in a
five-horse energy drink race, Pepsi’s senior management
decided early last year that it would spend against this
growing market and it knew that to challenge
competitors, it would have to ramp up Amp.
Every energy drink has action sports endorsers and
many have motorsports ties of some kind. But none had a
driver near Earnhardt’s stature. Before Earnhardt’s
defection from DEI became public last May, Pepsi
executives knew that was where they wanted to spend
behind Amp.
“It’s a big bet,” said Santana, a 13-year Pepsi
marketing veteran, who helped engineer the company’s
largest individual endorsement deal in just his second
year running Pepsi’s sports marketing. “Anyone in the
business will tell you that it (the energy drink
category) is still growing, that it’s still highly
profitable and there is no real sign of it slowing. So
for us, it was about figuring out which brand to focus
on. When you look at market dynamics, where consumers
are headed and where the real growth is, clearly this is
it.”
Looking for a sponsorship that would bridge the gap
with its energy-drink competitors, Pepsi decided early
in 2007 that a motorsports play was the answer.
Earnhardt was a better solution than they could have
imagined. “We felt all along that if we could find the
right equity in racing, we could immediately tap into a
larger fan base for Amp. Dale’s got the most fans, so he
was nirvana for us,” said Lance Bloomberg, racing
manager in Pepsi’s sport marketing group. “If you do it
the right way, we’ll have a base to start with and you
can reach out with your creative to try and broaden it.”
Earnhardt’s legacy, both as a fan favorite and one of
NASCAR’s “regular guys,” dovetailed nicely with the
repositioning Pepsi was planning for Amp.
While Red Bull and its clones have successfully
marketed their beverages as frenetic energy, best used
to stay up in the nightclub and later if needed, the
“new” Amp is about energy that lends focus to daily
tasks, even if they are as complex as driving at 200
mph.
Pepsi felt Earnhardt would deliver a different and
more diverse consumer, as well as lend a sense of
maturity to the category.
For Earnhardt, it was a step away — although not too
far away — from the party-boy image he had cultivated
with Budweiser, while maintaining a sense of
authenticity with Mountain Dew. He might occasionally
wear neatly pressed white shirts to Hendrick Motorsports
functions, but no one is confusing Junior with a choir
boy just yet.
“Adding Dale makes Amp the working man’s coffee,”
said Tom McGovern, director of sports marketing at
longtime Pepsi agency, OMD. “That should really separate
Amp from Red Bull and the rest of that market.”
The chase
Genesco’s Dzanis, a former employee at International
Speedway Corp., recalls having passing thoughts about
landing Junior as early as January 2007, when reports
began to surface that Junior might not renew with DEI.
When Earnhardt announced that he was leaving four months
later, Dzanis immediately called Pepsi Sports Group
Manager John Stamatis at home, reminding him of
Earnhardt’s selling power in the sport. Industry
analysts estimate that Junior accounts for about a third
of all NASCAR’s licensed merchandise sales.
“We have to get in on this,” Dzanis recalls saying in
his initial pitch. But first, Pepsi had to see which
team would land Earnhardt.
“If he wasn’t going in the Hendrick stable, we
weren’t going to pursue him,” Santana said.
Conversely, Santana knew that having Junior with
Hendrick gave Pepsi at least an even chance of landing
the popular driver. Just days after Earnhardt hit the
market, Genesco had some rough marketing concepts
sketched out and presented the idea more formally the
next week to Santana and Stamatis.
On May 23, a very informal and initial conversation
with Kelley Earnhardt Elledge, Junior’s sister and
president of his JR Motorsports operation, indicated
some mutual interest. Approval from Gordon came the next
day. On May 29, Hendrick Motorsports director of
marketing Pat Perkins was at Pepsi’s headquarters in
Purchase, N.Y., for some Gordon-related business.
Santana and others told Perkins that if Junior joined
Hendrick, they wanted him. Perkins told them they were
at the top “of a very short list.”
Things heated up from there. Just after the Autism
Speaks 400 race in Dover, Del., in early June, Gordon
and Earnhardt discussed the deal on the helipad, and
just about 10 days later, on June 13, Junior announced
his decision to join Hendrick.
The race within the race was on.
Immediately following, a two-word e-mail from the
ivory towers of Pepsi management convinced any doubters
that the Junior hunt was real. The all-caps message from
Chris Kempczinski, vice president of noncarbonated
beverages, was simple and direct:
“GET JUNIOR.”
Hendrick said he heard from more than 20 brands about
sponsoring Junior’s car. A few he knew, but most he
didn’t. “There were sponsors from within the sport and
sponsors that I had no idea wanted to be in the sport,”
he said. “But it was always Pepsi’s and (the) National
Guard’s to lose. And they never did anything to lose
it.”
Rumors immediately surfaced regarding who would
sponsor Junior’s new car, and the speculation included
Wrangler, Visa and M&M’s. But June 17 was the first time
the eventual sponsor’s name came up publicly.
Earnhardt confidant and longtime friend Darrell
Waltrip did an interview on Speed’s “Wind Tunnel” that
showed Pepsi’s hand.
“It will still be probably something you can drink,”
Waltrip said, when asked which company would sponsor
Junior’s new ride. “And it won’t be in a red can.”
Even though Pepsi’s existing deal with Hendrick
offered it beverage exclusivity, Anheuser-Busch wasn’t
ready to surrender its relationship with Earnhardt.
Within minutes of Junior’s announcement with Hendrick,
Tony Ponturo, Anheuser-Busch’s vice president of global
media and sports marketing, personally called Rick
Hendrick to express his interest in moving over with
Junior and sponsoring the car. But as the days passed,
speculation surfaced that Bud and Hendrick weren’t on
the best of terms from their split a decade ago, and
there was a prevailing sense that Earnhardt might be
ready to go in another direction, as well.
“We were going to have a hard time with
(Anheuser-Busch) anyway because there was already the
conflict with Pepsi,” Perkins said. “Then there was the
whole Dale Jr. side of it. So there were a lot of major
hurdles to get past before we could have any real
serious discussions with Pepsi.”
Santana remembers an initial meeting with Hendrick in
the team owner’s trailer at the July 7 Pepsi 400 at
Daytona, where he again tried to get first dibs. But
those involved said if there was a single critical
meeting, it was one just after Baseball’s All-Star Game
in San Francisco on July 10.
Since-deposed Pepsi CEO and president Dawn Hudson,
along with Santana, Stamatis, Dzanis and Bloomberg, flew
by private jet from the West Coast to Hendrick
Motorsports’ headquarters in Concord, N.C., just outside
of Charlotte. On the other side of the table, the
Hendrick team included the team owner, Perkins,
Earnhardt, Elledge and Thayer Lavielle, vice president
of marketing and brand development at JR Motorsports.
It was the first time all the dealmakers met
face-to-face. A pitch book was handed out and the tone,
Dzanis said, was, “We’re serious. We hope you are.” A
scheduled two-hour meeting lasted closer to four hours.
“I know I got home really late that night,” said
Perkins, who acknowledged that the familiarity between
the two sides helped negotiations progress briskly. “It
made for an easy dialogue.”
By the end of the meeting, Junior had already
expressed an interest in designing the new Amp car. He
was then handed a stack of new businesses cards with the
title that read simply: “Manager — Pepsi Racing.”
“The message was clear,” Bloomberg said. “We wanted
to put him to work.”
As their jet took off for New York that evening, the
Pepsi team celebrated with toasts and high fives.
“That’s when we felt it really was going to get done,”
Santana said. “Emotionally, I felt we were on the same
track.” Perkins said the team at Hendrick shared that
enthusiasm. “Everyone left there feeling good about it,”
he said.
Because Junior’s interest was catalyzed by his
childhood memories of Mountain Dew, explaining to him
that the Dew he grew up with was not sponsoring the car
may have been the toughest part of the deal. Mountain
Dew was still part of Amp’s brand name and Junior still
ended up wearing white and green.
“I’d call it more of an education than an ‘upsell,’ ”
Tatum said. “He had to understand the market dynamics
and that, if we were going to get the deal done, it was
going to be with Amp, because that’s where Pepsi was
placing their cannons.”
Still, Earnhardt had to be sold on the idea. The
strategy behind marketing Junior has been to partner
with a few select, elite brands that are authentic to
his likes and tastes. Wrangler has been a longtime
sponsor, while Sony and Adidas were added to the fold in
2007. The idea of a primary sponsor with so little
market share was cause for a brief pause.
“Let’s be honest” Perkins said. “There’s a certain
perception with energy drinks — hard-living, extreme
personalities. There’s definitely a persona to it. But
as they went through their plan and positioned it as
‘everyone’s energy drink,’ that it was something more
mature, more refined than other brands in the category.
You could see that it appealed to him. But, yeah, that
was a sort of sales process.”
Even before financial terms were finalized with
Junior, Pepsi executives began rounding out their plan.
They felt confident enough to have a preliminary
discussion with Talladega Superspeedway president Rick
Humphrey about buying title sponsorship to a 2008 race
at the track long known as Junior’s favorite. In a deal
completed later, the Oct. 5 Sprint Cup race at Talladega
became the Amp Energy 500.
There were more meetings to come. National Guard,
like Pepsi, expressed an interest in sponsoring Junior’s
car and had a relationship with Hendrick from sponsoring
the No. 25 car driven by Casey Mears. Because of those
pre-existing relationships, Hendrick said the
sponsorship was theirs to lose, which they never did.
Hendrick met with National Guard officials in late July
and in August, then brought Pepsi and National Guard
officials back for their first joint meeting.
The co-primary is a model that has worked for
Hendrick before. On Jeff Gordon’s No. 24, DuPont shares
space with Pepsi and Nicorette.
“It was a chance for everyone to get to know each
other,” Perkins said. “Each meeting was extremely
positive and it stayed that way each time we met. The
partnership was something that everyone felt good
about.”
By then, most of the heavy lifting was done. Other
than the number of personal appearances Earnhardt would
approve, terms of the deal were worked out in relatively
easy fashion. Pepsi and Hendrick officials went to a Los
Angeles Galaxy game in late July where Beckham was a
no-show, and the financials were finalized during a
three-hour meeting later at the Four Seasons in Beverly
Hills.
A letter of intent followed. The deal still had to be
approved by Pepsi’s board in September, and the sell-in
process offered paradigms in which endorsers and product
were large, inseparable and symbiotic. Hudson was armed
with convincing examples, such as Nike and Michael
Jordan, EA Sports and John Madden, Canon and Andre
Agassi and George Forman’s ubiquitous grill. The board
was convinced.
“Everyone got the appeal right away, and a lot of
people in there were charged up about it, but in a
boardroom, that goes away after five minutes,” Santana
said. “Ultimately, we had to make the business case, and
that was probably the hardest part. We could take this
same money and spend it on a TV campaign and the
probability of it being able to deliver you an instant
fan base is not high. So the case that we made was that
his fans would become our fans.”
The announcement of the Junior/Amp alliance at a
Pepsi bottlers’ meeting in Dallas on Sept. 19 elicited
an unprompted standing ovation of nearly two minutes.
There’s applause within Pepsi as well. Earnhardt won
the Feb. 9 Budweiser Shootout and the first Gatorade
Duel 150 five days later, and Amp’s sales volume has
doubled over the past six months. Name a major retailer
— Sam’s Club, Kroger, Wal-Mart — and it has bought into
a massive activation program that will run across the
NASCAR season. If Junior keeps winning, Amp won’t have
any problem with brand recognition. He finished ninth in
the Daytona 500 after spending a race-high 196 of 200
laps in the top 15.
A few days before the 500, Santana was marveling
about his new No. 1 endorser, who was splashed on top of
his car hood across the cover of Sports Illustrated.
Junior’s pose shows more car and the gleaming green
logo of Amp than it does of the driver — a remarkable
boon for a brand still seeking widespread awareness.
“Y’know, you can’t buy exposure like this,” Santana
said, looking down at the SI cover. “Or maybe you can.”
|
Dale Earnhardt Jr.’s move to Pepsi all started with a
couple of Mountain
