Incubation and Innovation: How PepsiCo Crafts STUBBORN SODA

By Barbara L. Vergetis Lundin, Assistant Editor

[Editor’s Note: This is a sponsored post.]

Craft pizza and burgers

New products aren’t always about reinventing the wheel. Some of the most successful innovations put a new spin on an existing product or create new experiences. Some of the most groundbreaking innovations, however, are creating new categories and starting something from scratch, reimagining the experience as opposed to taking a new approach to something old.

A big key is building upon lessons learned with other product launches – be it your own or that of others. That said, innovation doesn’t happen overnight; it is definitely an intense and lengthy process – one that must incubate from within the corporate culture.

On the tech side, take the highly innovative and intensely popular Nest smart thermostat. Nest Labs CEO Tony Fadell summed it up at the 2014 Fast Company Innovation by Design Award and Conference in New York City. “Don’t just build a product, build a culture, company, and mission.”

Consumers value innovation. A 2015 Lab42 study revealed that, for 84 percent of respondents, it is somewhat or very important to buy from an innovative company. And consumers are willing to pay a premium for it. In fact, 67 percent of respondents would pay more for what they perceive to be innovative items.

Stubborn to the Soul

At PepsiCo, innovation is seen as all-encompassing, and much broader than just a product or packaging (from the way they communicate with customers to the way plants are set up to the product launch). In fact, there is an actual KPI (key performance indicator) setting a goal for the percentage of sales that should come from innovation, because the company knows that this is what keeps brands relevant and alive.

Its latest innovation, STUBBORN SODA, validated what they already knew by talking to owners and operators in the fast-casual space. PepsiCo confirmed that, as one of the fastest growing channels, fast-casual operators understand what consumers are looking for: authenticity, prominence of food, depth of experience, and new experiences.

“Fast-casual owners and operators have been successful because they reflect what consumers are looking for,” said Roberto Rios, CMO of Foodservice for PepsiCo. “We realized they were so passionate about their concept, and they wanted a beverage solution that reflected those same values. We realized that we had a great opportunity to develop something unique that reflected those values and that’s how we started working on STUBBORN.”

PepsiCo's Hello Goodness vending initiative.

PepsiCo's Hello Goodness vending initiative.

PepsiCo believes the craft sodas will pair nicely with the artisanal pizza and burgers some of their customers across the country, including Umami Burger, Oath Craft Pizza, and California Fish Grill, are serving.

Incubation for the STUBBORN line started with a whole new fountain experience. The tap machine takes into account everything from the feel of the handles (which are real wood, like in Italy) to the way it pours (with a feel similar to craft beer), users not only get a sense of how the product is coming out, but they get a whole different experience.

The STUBBORN brand brings what customers value — authenticity and a premium experience — to life by giving customers what they are looking for in terms of natural, higher quality ingredients, prominence of flavors, and new tastes (like black cherry and tarragon), as well as a story around how the brand was formed.

“It’s a lot about storytelling, the content. We have a very clear positioning — of course, the name [STUBBORN] helps a lot,” Rios said. “We have so much fun around how we bring it to life, what type of spokesperson we’re going to use to represent the values of the brand. We believe that, in their soul, any creator is stubborn — to be able to put something out there into the world, to have the courage to do that.”

PepsiCo is hyper targeted in its processes — from its holistic business approach to its brand presence to its go-to-market strategy. Millennials are a key target for the craft brand.

“The fast-casual segment has a very unique and different approach to how they are providing differentiated food and beverage experiences. Because of that and because they are tapping into what millennials are looking for, they are being rewarded with growth,” Rios noted. “We realized that in order for STUBBORN to be everything we want it to be, it is important to…start in those spaces.”

Out of hundreds of names, some about prominence, some nostalgic, and everything in between, the decision was STUBBORN.

“It really reflected who we are because, to launch something in the market in today’s world, especially in a market like the U.S. where more than 10,000 innovations are launched every year, you have to be stubborn,” Rios explained. “You have to be on a mission.”

According to Harvard Business School, 95 percent of these products fail. Those that succeed take a “jobs to be done” or “purpose marketing” approach to market segmentation, according to Clayton M. Christensen, Kim B. Clark Professor of Business Administration at Harvard Business School.

A History of Innovation and Incubation

PepsiCo NSPIRE kitchen on wheels.

PepsiCo NSPIRE kitchen on wheels.

Mtn Dew Black Label is another example of PepsiCo’s innovative incubation. With 22 million college students in the United States, many of which engage with Mountain Dew, it was only logical to target the Mtn Dew Black Label brand to colleges and universities initially, making the product exclusively available in 900 schools. Samples were given out on campus, but beyond that, the campaign went much further, offering unique services to students like doing their laundry, delivering free pizza, and stocking their fridge — all centered around communicating the exciting new Mtn Dew Black Label, which became available nationally in 2016.

“The college kids went crazy on social, and we couldn’t believe some of the posts. The product ended up being sold on eBay and Amazon for $70 a case,” Rios recalled. “It created a craze because there’s a very loyal fan base of Mountain Dew, and Mtn Dew Black Label is also a unique product. It had the right target.”

The innovation team is fortunate to be able to learn from these previous incubations and launches.

“Every year we’re defining what we are going to do, and we take on the lessons of the past. Specific to STUBBORN, we learned that we had to be really uncompromising on everything that has to do with the brand,” Rios explained. “To command a premium, it had to have premium ingredients. We realized, that to break through the clutter to connect in today’s world, you need a different approach with a brand like STUBBORN.”