The Computer Error That Led to a Country Declaring War on Pepsi

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On May 25, 1992, the Channel 2 News program in Manila, Philippines aired a segment that had been running since February of that year. Each night, the station alerted viewers to the day’s winning number in Pepsi’s Number Fever promotion. Buying a specially marked Pepsi product allowed consumers to match the number underneath the bottle cap to the announcements. While most prizes were just 100 pesos (roughly $5 in today’s U.S. currency), there was an opportunity to win the grand prize of one million pesos, or the equivalent of $37,000 to $40,000.

The Philippines was a country struggling with a modest economy and widespread poverty, and that grand prize was perceived as a life-changing amount of money. So when 349, that night's winning number, flashed on screen that night, tens of thousands of Filipinos couldn’t believe their luck. The number was associated with the largest prize in the sweepstakes. The next morning, Pepsi plants in Manila were overrun by people toting their 349-emblazoned bottle caps and looking for the promised reward.

There wasn’t one.

Only two of the grand prizes were supposed to have been doled out. Instead, Pepsi had somehow manufactured 800,000 caps with the winning number. Consumers were told the company had made an error and were turned away in droves. Barbed wire was erected around the plants. Riots, boycotts, and picketing ensued. Homemade bombs were launched at bottling factories. In the words of one Pepsi executive, “we had death threats for breakfast.”

The giveaway was intended to boost sales. Instead, Pepsi executives were not only bleeding market share—they were suddenly in fear for their lives.

 

As the perennial number two in the cola industry, Pepsi had engaged in several promotional attempts over the years to compete with rival Coca-Cola. In 1989, they marketed Pepsi A.M. as an alternative to coffee. (It had 28 percent more caffeine than regular Pepsi.) The product didn’t catch on, nor did the company’s expensive attempt to recruit pop star Madonna that same year. Stung by controversy over her religious-themed “Like a Prayer” video, the company pulled advertising featuring the singer despite having paid her $5 million for the endorsement.

Their Number Fever campaign didn’t appear to carry the same risks. Pepsi saw only upside: In the Philippines, then the world's 12th largest market for soft drinks, the company was a distant second to Coca-Cola. The promise of winning anything from a modest amount of money to 1 million pesos was enough to spike sales 40 percent, capturing 26 percent of the country’s market share. From February to May, 51,000 people had won 100 pesos, while 17 had captured the grand prize.

To determine winning numbers, Pepsi recruited D.G. Consultores, a marketing firm based in Mexico. The numbers were generated via computer, then secured in a safe deposit box in Manila. From there, the list would be used to “seed” bottle caps in the bottling plants. Each night, the company would announce the day’s winning number on television.

A Pepsi bottlecap is pictured against a blue background
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Somehow, that system went awry. A computer glitch told bottlers to print 800,000 caps with the 349 designation, although all of them except for two lacked a special security code that proved the cap was authentic. That detail was irrelevant to consumers, who saw that they had the number and proceeded to demand the prize they felt was owed to them—a number that eventually grew to 486,170 people. (Though more caps were printed, not everyone noticed they held a “winning” number.)

Quickly, Pepsi executives in the Philippines and stateside convened for an emergency meeting at 3 a.m. on how to proceed. Economically, honoring the perceived value of all of the caps was virtually impossible to justify—it would’ve cost the company tens of billions of dollars. Instead, they opted to declare it a computer error and offered $18 to $20 to cap holders as a “goodwill gesture.” What was originally earmarked to be a promotion with $2 million in total prizes ballooned to $10 million.

While some accepted the prize, most consumers were livid. Pepsi, they argued, had raised the hope of lessening their financial burdens. They didn’t care about a clerical mistake. Pepsi was a massive conglomerate and should accept fault.

The company disagreed, and that's when the trouble began.

 

Pepsi delivery trucks became an early and frequent casualty of the war on the soft drink manufacturer. Between 32 and 37 trucks were overturned, burned, stoned, or otherwise vandalized by protestors, many of whom took to the streets with signs and bullhorns to voice their displeasure over the company's wrongdoing. Corporate Pepsi offices were targeted by Molotov cocktails, makeshift explosives that crashed into windows and front lawns. One homemade grenade intended for a truck kept rolling and landed near a schoolteacher, killing her and a 5-year-old student and wounding six others.

Fretful Pepsi executives hired bodyguards, armed passengers in delivery trucks, and pulled expatriates from the country, leaving just a handful—including one with experience in Beirut—to face the angry mobs, which were quickly becoming organized. Several spun off into factions, including Coalition 349, which took a systematic approach to shaming Pepsi into paying up. After electing a leader, Vicente del Fierro Jr., they printed anti-Pepsi tracts and called for product boycotts. Paciencia Salem, a then-64-year-old protestor whose husband died of heart failure while marching in opposition, declared that the company would never see relief.

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

Protestors voice anti-Pepsi sentiment during a rally in Manila
Romeo Gacad, AFP/Getty Images

Though Pepsi was reticent to respond to these impassioned revolts, calling it “extortion,” they were compelled to answer questions from the Philippines government. Senator Gloria Macapagal Arroyo called the mistake “negligent,” while thousands of civil and criminal complaints flooded state prosecutor offices. A crop of “speculators” even offered to buy the caps for $15, betting that the company might one day relent and agree to pay the full prize amount.

The tumult stretched well into 1993, at which point a sensational new twist captured local headlines. In December of that year, a police officer filed a report alleging that the bombings and riots were not the result of protestors. They were, he insisted, deliberate acts of self-sabotage by Pepsi against itself.

The accusation, which was reported in the Chicago Tribune, came from Artemio Sacaguing, chief of the organized crime division of the country’s National Bureau of Investigation. In his brief, Sacaguing reported to Manila prosecutors that a man had confessed to being a Pepsi security guard and knew of three mercenaries who were hired by the company to damage their property. In doing so, Sacaguing claimed, they could portray the anti-Pepsi groups as being violent and labeled as terrorists, harming their position in court.

Almost immediately, Sacaguing’s superiors dismissed his accusations and stated that the official’s report had already been discredited. A Pepsi lawyer refuted the allegation; Senator Macapagal Arroyo floated a slightly more plausible theory. Rival bottlers, she said, were acting out in order to weaken Pepsi’s grip on the market.

 

Slowly, Pepsi’s black eye in Manila began to fade. Most of the civil suits (689) and criminal complaints (5200) were tossed out of court. Sensing that the company had more determination to remain in the country than protestors had the time or energy to continue marching, the anti-Pepsi sentiment began to dim. By 1994, their market share had rebounded from a low of 17 percent post-scandal to 21 percent. A 1.5 liter “mega bottle” was a brisk seller.

In 2006, a Philippines Supreme Court ruling closed the book on the outstanding court cases and potential liability, finding that Pepsi was not obligated to honor the sweepstakes payout due to the error. It was a prolonged, if satisfactory, conclusion to the controversy.

Soda companies continue to perpetuate giveaways as a method for raising awareness, though there’s always risk that consumers want to push the envelope. In 1996, Pepsi offered prizes for people who collected points based on product purchases. One ad facetiously offered a Harrier fighter jet to anyone who submitted 7 million points. John Leonard, a 21-year-old business major, decided to take the company up on their offer to buy points for $.10 each. After raising $700,000, he demanded his jet, but Pepsi declared the prize offering was just a joke. A court agreed, granting summary judgment to the soda company. In future airings of the ad, they increased the number of points needed from 7 million to 700 million.

Good Fortune: The Story of Miss Cleo's $1 Billion Psychic Empire

The woman sat behind a table, tarot cards in front of her, a turban wrapped tightly around her head. In Jamaican-accented patois, she invited viewers to benefit from her gift of second sight. “Call me now,” Miss Cleo said, and she would reveal all.

Mostly, respondents wanted to know if a lover was cheating on them, though there was no limit to Miss Cleo's divinity. No question was too profound. She could speak with as much wisdom about concerns over financial choices as she could sibling rivalries. Her only challenge was time: Miss Cleo could connect with only a fraction of the people looking for her spiritual guidance, leaving callers in the hands of other (potentially psychically-unqualified) operators.

Still, Miss Cleo became synonymous with psychic phenomena, a way to consult with a medium without getting off your living room couch. From 1997 to 2002, she was a virtually inescapable presence on television—the embodiment of a carnival stereotype that annoyed native Jamaicans, who bristled at her exaggerated accent. It was nonetheless effective: Roughly 6 million calls came in to Miss Cleo over a three-year period, with $1 billion in telephone charges assessed.

Not long after, the companies behind Miss Cleo would be forced to give half of that back amidst charges that they had misled consumers. Despite being a cog in the machine, Miss Cleo herself was vilified. Of the $24 million her hotline raked in monthly, she claimed to have earned just 24 cents a minute, or approximately $15 an hour.

Most people didn’t know she was born in Los Angeles, not in Jamaica; that her real name was Youree Dell Harris; and that her late-night infomercial promising psychic assistance was little more than performance art.

 

Harris may have been raised in California, but Miss Cleo was born in Seattle. While living in Washington in the 1990s, Harris tried her hand at playwrighting, authoring a play titled For Women Only under the name Ree Perris, which she performed at Seattle's Langston Hughes Performing Arts Center. In it, Harris wrote and portrayed a Jamaican woman named Cleo, a clear predecessor to the character that would later pop up in television ads.

After producing three plays, Harris left Seattle amid allegations that she had taken grant money from the Langston Hughes Advisory Council, leaving some of the cast and crew unpaid. (Harris later said she left Seattle due to wanting to distance herself from a bad relationship. She told colleagues she had bone cancer and was leaving the area but that they would be paid at a later date.) She ended up in Florida, where she responded to an ad seeking telephone operators. Harris taped a commercial in character as Cleo—the hotline added the “Miss”—for $1750 and then agreed to monitor a phone line for a set wage. Operators made between 14 and 24 cents a minute, she later said, and she was on the higher end.

Psychic premonitions can be difficult to validate, though Harris never claimed to be a medium. In her own words, she was from a “family of spooky people” and was well-versed in voodoo thanks to study under a Haitian teacher. The Psychic Readers Network and Access Resource Services, a set of sister companies that used workers sourced by a third party for their hotlines, recoiled at the word voodoo and declared her a psychic instead.

If Harris was the genuine article, many of her peers were not. As subcontractors who were not employed by the Psychic Readers Network or Access directly, some responded to ads for “phone actors” and claimed they were given a script from which to work. (Access later denied that operators used a script.) The objective, former "psychics" alleged, was to keep callers on the line for at least 15 minutes. Some customers, who were paying $4.99 a minute for their psychic readings, received phone bills of $300 or more.

When the Federal Trade Commission (FTC) began responding to complaints in 2002, it was not because Harris was portraying a character or because she may have not been demonstrably psychic. It was because the Psychic Readers Network and Access were accused of deceptive advertising. Miss Cleo would urge viewers to call a toll-free 800 number, where operators would then refer them to a paid 900 line to reach a psychic. Miss Cleo also pledged that the first three minutes were free. That was true, though those first three minutes were largely spent on hold.

When people began to dispute their phone charges, Psychic Readers Network and Access were alleged to have referred accounts to collection agencies. Even if a telephone carrier like AT&T canceled the charges, customers would still find themselves subject to harassment over unpaid debt.

Individual states like Missouri and Florida sued or fined the companies, but it was the FTC that created the largest storm cloud. Of the $1 billion earned through the hotline, $500 million remained uncollected from stubborn or delinquent consumers. In a complaint and subsequent settlement, the FTC ordered those debts canceled and imposed a $5 million fine on the companies. Psychic Readers Network and Access did not admit to any wrongdoing.

As for Miss Cleo: Harris was only briefly named in the Florida lawsuit before she was dropped from it; the FTC acknowledged that spokespersons couldn’t be held liable for violations. But the association was enough, and newspaper reporters couldn’t resist the low-hanging fruit. Most headlines were a variation of, “Bet Miss Cleo didn’t see this one coming.”

 

Outed as a faux-Jamaican and with her Seattle past further damaging her reputation, Harris faded from the airwaves. Her fame, however, was persistent. She recorded a voice for a Grand Theft Auto: Vice City game for a character that strongly resembled her onscreen psychic. Private psychic sessions were also in demand, with Harris charging anywhere from $75 to $250 per person. Her Haitian-inspired powers of deduction, she said, were genuine.

Eventually, enough time passed for Miss Cleo to become a source of nostalgia. In 2014, General Mills hired her to endorse French Toast Crunch, a popular cereal from the 1990s that was returning to shelves. Following both the Grand Theft Auto and General Mills deals, Psychic Readers Network cried foul, initiating litigation claiming that the Miss Cleo character was their intellectual property and that Harris's use was a trademark and copyright violation. General Mills immediately pulled the ads. (The argument against Rockstar Games, which produced Grand Theft Auto, was late in coming: Psychic Readers Network brought the case in 2017, 15 years after the game’s original release. The lawsuit is ongoing.)

Unfortunately, Harris’s continued use of the image would shortly become irrelevant. She died in 2016 at age 53 following a bout with cancer. Obituaries identified her as “Miss Cleo” and related her longtime frustration at being associated with the FTC lawsuit. “According to some articles, I’m still in jail,” she told Vice in 2014. Instead, she was where she had always been: Behind a table, listening, and revealing all.

When 'Courage' Caused Controversy for Dan Rather

Kevin Winter, Getty Images
Kevin Winter, Getty Images

In early 1981, Dan Rather was profiled by a number of media outlets as he prepared to take over as news anchor of CBS Evening News that March. The venerable news program had been headlined by Walter Cronkite for the previous 19 years, with Cronkite typically signing off each broadcast by telling viewers, “And that’s the way it is.”

Speaking to journalists, Rather didn’t give any indication if or when he might adopt his own signature closing statement, a tradition in news exemplified by Cronkite, Edward R. Murrow (“Good night and good luck”), and Charles Osgood (“See you on the radio”), among others. But in one October 1981 interview, Rather did mention that one of his favorite words was courage.

“[Ernest] Hemingway thought that courage was grace under pressure,” Rather told The Boston Globe. “When it comes to courage, I have not been put to the test.”

Just five years later, Rather would find himself the focus of a situation that, while not necessarily requiring courageousness, tested his resolve in the face of public ridicule. It started when he concluded a summer newscast with a pithy send-off that was part self-help advice, part personal message, and somewhat confusing.

“And that’s the CBS Evening News for this summer-ending Labor Day,” he said. “Dan Rather reporting from New York.”

Rather paused, then added, “Courage. Good night.”

That an innocuous, two-syllable word like courage could cause such a stir is attributable in part to the landscape of the news media of the 1980s. In addition to newspapers, Americans got their information primarily from the three major networks: CBS, NBC, and ABC. Fox, which launched in 1986, didn’t offer primetime news programming; CNN, which debuted in 1980 and pioneered the 24-hour news cycle, didn’t hit its hard news stride until the 1990s (it was regularly referred to as the Chicken Noodle Network during its first decade on the air). As a result, the networks placed great emphasis on the approach and style of their news programming.

Contrasted against his counterparts—Tom Brokaw at NBC and Peter Jennings at ABC—Rather was considered a stern presence on television. The Rather “stare,” as one television critic put it, defied viewers to question the veracity of each report. Management urged Rather to lighten his tone, first by getting him to wear V-neck sweaters, then by interjecting misplaced quips into his reports. (“Ready, set, Gorbachev!” Rather declared before one segment on the then-Soviet Union leader.)

Still, an emphasis on human interest stories and audience loyalty kept the CBS Evening News on top of the ratings during the first few years of Rather’s tenure. The broadcast finished first among the three news programs for 200 straight weeks.

Then, in the summer of 1986, it fell behind. In the mercurial world of news, there was no one specific reason. Brokaw, whose program took the lead, was well-liked; but Rather bristled at suggestions of adopting a lighter tone and was adamant about returning to harder news.

When he came back from an August vacation in time for the Labor Day broadcast on September 1, 1986, he had decided to take a new approach to concluding the broadcast. “Courage” was added before Rather told viewers to have a good night. To some, it was peculiar. To media observers, it was a sharp departure from the kind of objectivity expected of journalists. Was Rather advising viewers to grow a backbone? Was he dismayed at the state of affairs? Others used it as fodder for comic takes in editorials.

Attempts to parse his use of the word went unaided by Rather himself, who cautioned people not to read into it. “Don’t overanalyze it,” he said. “There’s no deep, hidden meaning.” It was just a salutation he had used with friends for years and one that also happened to be one of his father’s favorite words. Rather used it to sign off on some of his radio broadcasts in the 1970s.

“If feels right to me and I think the audience will be comfortable with it,” he said.

CBS executives tried to talk him out of it. “I’m the only one who likes it,” Rather said of the internal response. Howard Stringer, a CBS Evening News producer who had just been named president of the CBS news division, said it was Rather’s “right” to close the broadcast however he liked, but stopped short of endorsing the habit.

Rather did it on Tuesday of that week, and again on Wednesday, but with a twist: Following a Bill Moyers report on the Texas-Mexico border, Rather said coraje, the Spanish word for courage. When that was met with derision, he labeled it an “ill-advised lark.”

Ultimately, Rather's sign off experiment was short-lived. It ended that Friday, with the anchor again wishing “courage” on his viewers. The following Monday, it was back to business as usual, with reports claiming that executives were finally able to convince the broadcaster to abandon his closing statement. September ended with the CBS Evening News again trailing the NBC Nightly News by one-half a ratings point.

Rather had the last word—of sorts—when he ended his tenure as the CBS Evening News anchor in March 2005. For his final broadcast, he looked into the camera and made one final statement. “And to each of you, courage,” he said.

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