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Monday, July 26, 1993 - Page updated at 12:00 AM

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Pepsi-Cola Uncaps A Lottery Nightmare -- Bombings, Threats Follow Contest With Too Many Winners

Los Angeles Times

MANILA, Philippines - Pepsi's advertisements, splashed for weeks all over Philippine newspapers, radio and TV, were hardly subtle: "Today, you could be a millionaire!"

From her tin-roofed shack in one of Manila's more squalid slums, Victoria Angelo couldn't resist. The unemployed mother of five and her husband, Juanito, who pedals people about in his three-wheeled cab for about $4 a day, began drinking Pepsi with every meal and snack. Each morning, the family prayed for a specially marked bottle cap. Each night, they and their neighbors flocked around a small TV set to see if their prayers were answered.

And then, a miracle!

On May 25 last year, the nightly news announced that anyone holding a bottle cap marked 349 had won up to 1 million pesos, about $40,000, tax-free.

Spreading her collection of caps on a table, Victoria Angelo screamed, "We are a millionaire!"

Her voice ringing with excitement, she recalled that she turned to her family: "I tell my children you can finish school and go to college. I tell my husband he can buy a (passenger jeep). I tell myself we can buy a real house. Can you imagine? It is a dream come true!"

But her dream has become a nightmare for New York-based Pepsico Inc. In a marketing mistake that surely must rank among the world's worst, Pepsi had announced the wrong number. Instead of a single 1-million-peso winner, up to 800,000 bottle caps marked 349 had been printed. And tens of thousands of Filipinos soon began demanding billions of dollars that Pepsi refuses to pay.

The dispute - on which Pepsi has spent millions of dollars - has sparked a Cola War, Philippines-style. Pepsi records show that at least 32 delivery trucks have been stoned, torched or overturned. Armed men have thrown homemade bombs at Pepsi plants and offices.

In the worst incident, police say a fragmentation grenade tossed at a parked Pepsi truck in a Manila suburb Feb. 13 bounced off and killed a schoolteacher and a 5-year-old girl and wounded six other people.

Pepsi executives here have gotten so many death threats they use round-the-clock bodyguards and vary office hours and travel. Heavily armed guards ride Pepsi trucks. The company has withdrawn all but two non-Filipino officials, leaving in charge one who has experience in Beirut.

And suing Pepsi has become the choice of a new generation. Criminal and civil claims filed against Pepsi across the Philippines far outnumber those against the late President Ferdinand Marcos and his wife, Imelda, who are accused of looting up to $10 billion during their reign.

At last count, more than 22,000 people have filed 689 civil suits seeking damages from Pepsi, plus more than 5,200 criminal complaints for fraud and deception, the company says.

Only a handful of trials have begun, but the nation's appeals court this month upheld arrest orders against 10 local Pepsi executives. The company has appealed, and no arrests have been made.

Even more remarkably, in a country crippled by daily electric blackouts, endemic corruption and poverty that is among the most pervasive in Asia, the only protests that regularly draw angry crowds into the streets are those against Pepsi.

In ways the government never could, the anti-Pepsi fever has brought together Communist rebels and army generals, well-dressed Manila matrons and barefoot rural peasants. All hold 349 caps.

"This has united the people. Pepsi has cheated the Philippine people," Bhambi Santos, an anti-Pepsi activist and evangelist, bellowed into a bullhorn at a recent rally of several hundred banner-waving, drum-beating people in Manila's high-rise business district.

Kenneth Ross, spokesman for Pepsi-Cola International, which owns 19 percent of the local bottling company, said the company's position is clear. "We will not be held hostage to extortion and terrorism," he said in Purchase, N.Y. "And that's exactly what we have faced in the Philippines in the last year."

But unlike Pepsi's cool crisis management in the United States after false reports spread that syringes were found in Pepsi cans, company officials here panicked. When mobs rioted after the bottle-cap error was announced, frightened executives decided at a pre-dawn meeting to offer $20 in pesos to anyone with a 349 cap.

"They made two mistakes," said one official, who like all local Pepsi employees asked not to be identified. "You should never make a decision at 3 a.m. And they thought it was a few thousand people at most."

To their horror, at least 486,170 cap-holders already have flooded in. Pepsi, which had budgeted only $2 million for prizes, had to pay $10 million more for what it calls a "goodwill gesture." It also agreed to pay a $6,000 penalty to the government's consumer protection bureau.

"We have done everything that we think is reasonable to amicably conclude this issue," said Ross, who has repeatedly refused to explain how the bottle-cap mistake occurred. "At this point, we do not intend to lay out additional money."

But Pepsi is clearly worried. A telling sign: In this basketball-crazed culture, the company changed the name of its professional team from the Pepsi-Cola Hotshots to the 7-Up Uncolas.

More important, Pepsi President Christopher Sinclair flew to Manila in early April for an unannounced meeting with Philippine President Fidel Ramos. A Ramos aide said that Sinclair warned that the fiasco could harm government efforts to lure foreign investment. But Ramos said he does not think Pepsi's predicament will discourage other investors. "It's a special kind of case," he said.

That it is. Pepsi has run similar promotions around the world. A garbled fax led to a wrong number being announced on TV in Chile last year, and that case is in the courts there. But only in the Philippines has the Pepsi generation taken up arms.

Pepsi has been burned before in the Philippines. This is the world's 12th-largest carbonated soft-drink market, and competition is fierce. In the late 1970s, at the height of Marcos' rule, Pepsi led the huge market - but at huge cost. Pepsi ultimately lost nearly $90 million in what Ross calls "accounting irregularities and overstated profits."

Coca-Cola has controlled most of the market since. Then came Pepsi's "Number Fever." After the promotion was launched in February 1992, sales of Pepsi and its other brands zoomed nearly 40 percent.

Elated officials added five more weeks to the initial 12 weeks of the advertising campaign. New ads read: "More chances to be a millionaire!"

As the weeks wore on, more than 51,000 people won cash prizes. The vast majority won the smallest prize, 100 pesos. But 17 people won 1 million pesos and were featured in Pepsi's advertising blitz.

Disaster hit on May 25 when Channel 2's nightly news routinely flashed the winning number: 349. By the next morning, thousands of winners had besieged Pepsi bottling plants. The company locked its gates and built barbed-wire barricades.

Thousands have joined anti-Pepsi organizations such as Coalition 349.

One, Paciencia Salem, 64, said her husband died of heart failure at a rally last year and she said she is prepared to do the same.

"Even if I die here, my ghost will come to fight Pepsi," she promised. "It is their mistake. Not our mistake. And now they won't pay. That's why we are fighting."

Copyright (c) 1993 Seattle Times Company, All Rights Reserved.

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