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

iStock
iStock

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
iStock

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.

Traumatic Episodes: A History of the ABC Afterschool Special

BCI / Sunset Home Visual Entertainment via Amazon
BCI / Sunset Home Visual Entertainment via Amazon

My Dad Lives in a Downtown Hotel. The Toothpaste Millionaire. Me and Dad’s New Wife. She Drinks a Little. Please Don’t Hit Me, Mom. High School Narc. Don’t Touch. From 1972 to 1996, no topic was too taboo for the ABC Afterschool Special, an anthology series that aired every other Wednesday at 4 p.m. Each of the standalone, hour-long installments highlighted issues facing teens and young adults, from underage drinking to the stress of living in a foster home. For the millions of viewers tuning in, it might have been their first exposure to a difficult topic—or the first indication that they weren’t alone in their struggle.

The Afterschool Special originated in the early 1970s, when programming executives at ABC had an epiphany: While there was a lot of content for families and adults during primetime, soap operas for adults in the daytime, and cartoons for children on Saturday mornings, there was relatively little content directed specifically at teenagers and pre-teens. The network saw an opportunity to fill that gap by airing topical specials midweek, when parents watching General Hospital might leave the television on and stick around to watch some TV with their adolescent children.

Initially, the network solicited a mix of fanciful stories and serious, issue-based melodramas. In the animated Incredible, Indelible, Magical Physical Mystery Trip, two kids were shrunk down to the size of a cell to travel through their uncle’s body. In Follow the Northern Star, a boy ushers a friend through the Underground Railroad to escape slavery.

 

Not long after the series debuted in the fall of 1972, ABC executives—including Brandon Stoddard, who was initially in charge of the show and was later responsible for getting the landmark 1977 miniseries Roots and David Lynch's quirky Twin Peaks onto the air—realized that the more puerile stories may have been working against them.

According to Martin Tahse, a producer on dozens of these specials, it was rare for older teens to watch programming intended for younger children. Pre-teens, on the other hand, would watch content meant for an older audience. By season three, the specials were largely made up of topical content. In The Skating Rink, a teen skater overcomes shyness borne out of stuttering. In The Bridge of Adam Rush, a teen copes with a cross-country move after his mother remarries.

The ABC Afterschool Special was an immediate hit, drawing an average of 9.4 million viewers between 1972 and 1974. Many episodes were based on young adult novels, like Rookie of the Year, which stars Jodie Foster as a girl struggling to find acceptance on a boys’ Little League team, or Sara’s Summer of the Swans, about a young woman searching for her missing, mentally challenged brother.

The series also sourced material from magazine articles, short stories, and other venues. For 1983’s The Wave, which originally aired on ABC in primetime in 1981, the story of a high school teacher who describes fascism and Hitler’s rise to power by successfully convincing his students to subscribe to a dictatorial rule, was based on the real experiences of Palo Alto teacher Ron Jones.

The effect of the topical episodes could be potent. For a 1985 special titled One Too Many, which starred Val Kilmer as an underage drinker and Michelle Pfeiffer as his girlfriend, one viewer wrote in to the Los Angeles Times to explain how the show had impacted her:

After watching the ABC Afterschool Special titled One Too Many, a story of drinking and driving, I realized I have taken too many chances with my life. I always think I can handle myself and my car after I’ve had something to drink. Nothing has happened to me … yet. I’d like to thank ABC for showing a program that could possibly save the lives of my friends and me. I’ve realized that drinking and driving is not worth the price of life.

 

As Tahse explained to interviewer Kier-La Janisse, the specials resonated with kids because they rarely indulged in what could be considered a fairy tale ending. “It had to be real,” he said. “If kids watched any of my three specials dealing with alcoholic parents, they were never given a fairy tale ending. I saw to that, because I came from an alcoholic father and knew all the tricks and I wanted the kids who watched—many dealing with the same problem or having friends who had alcoholic parents—to know how it really is.”

The shows also picked up their share of awards. One installment, the self-explanatory Andrea’s Story: A Hitchhiking Tragedy, won five Daytime Emmys in 1984, a third of all the Daytime Emmys ABC won that year. A Special Gift, a 1979 show about a basketball player who takes up ballet, won a Peabody Award.

By the mid-1980s, the specials attempted to strike more of a balance between morality plays and lighthearted fare. The 1984-1985 season consisted of seven episodes, including three comedies and one musical. In The Almost Royal Family, Sarah Jessica Parker stars as a teen whose family buys a home outside the jurisdiction of Canada and the U.S. In Mom’s on Strike, an overworked mother decides to suspend her duties until her family can appreciate her contributions.

Gradually, the specials began leaning back toward hot-button topics. Oprah Winfrey’s Harpo Productions took over producing the series in 1991. That season, Winfrey introduced the episodes, including two panel discussions about relationships and race relations. Though the series did revert back to fictional narratives, it gradually lost its footing in the wake of shows that had a more adolescent bent. A “Very Special Episode” of Beverly Hills, 90210 or Family Matters was essentially a stealth afterschool special. The series was canceled in 1996.

That the show endured for nearly a quarter of a century is a testament to the craftsmanship of producers like Tahse and the support of ABC, who rarely shied away from difficult topics. Still, Tahse—who died in 2014—believed that the series' broad appeal went beyond that.

“The only rule of storytelling that ABC required we follow was … the kid always had to figure out what to do and do it,” he said. “No finger-waving by parents, no lectures by parents. It was a kid who was in a situation and found, through his or her own efforts, a solution.”

Batmania: When Batman Ruled the Summer of 1989

JD Hancock, Flickr // CC BY 2.0
JD Hancock, Flickr // CC BY 2.0

“Flop” is how marketing research group Marketing Evaluation Inc. assessed the box office potential of the 1989 Warner Bros. film Batman. The big-budget production, directed by Tim Burton and co-starring Michael Keaton as Batman and Jack Nicholson as the Joker, was expected to be one of the rare times a major Hollywood studio took a comic book adaptation seriously. But according to the marketing data, the character of Batman was not as popular as the Incredible Hulk, who was then appearing in a slate of made-for-television movies. And he was only a quarter as appealing as the California Raisins, the claymation stars of advertising.

That prediction was made in 1988. The film was released on June 23, 1989, and went on to gross $253.4 million, making it the fifth most successful motion picture up to that point.

While Marketing Evaluation may have miscalculated the movie’s potential, they did hedge their bet. By the time profits from the movie’s merchandising—hats, shirts, posters, toys, bed sheets, etc.—were tallied, the company said, Warner Bros. could be looking at a sizable haul.

When the cash registers stopped ringing, the studio had sold $500 million in tie-in products, which was double the gross of the film itself.

In 1989, people didn’t merely want to see Batman—they wanted to wear the shirts, eat the cereal, and contemplate, if only for a moment, putting down $499.95 for a black denim jacket studded with rhinestones.

Batmania was in full swing. Which made it even more unusual when the studio later claimed the film had failed to turn a profit.

 

The merchandising blitz of Star Wars in 1977 gave studios hope that ambitious science-fiction and adventure movies would forever be intertwined with elaborate licensing strategies. George Lucas's space opera had driven audiences into a frenzy, leading retailers to stock up on everything from R2-D2 coffee mugs to plastic lightsabers. It was expected that other “toyetic” properties would follow suit.

They didn’t. Aside from 1982’s E.T., there was no direct correlation between a film’s success and demand for ancillary product. In 1984 alone, Gremlins, Ghostbusters, and Indiana Jones and the Temple of Doom were smash hits. None of them motivated people to flock to stores and buy Gizmo plush animals or toy proton packs. (Ghostbusters toys eventually caught on, but only after an animated series helped nudge kids in their direction.)

Warner Bros. saw Batman differently. When the script was being developed, producers Jon Peters and Peter Guber were urging writers to make sure scenes were aligned with planned merchandising. They scribbled notes insisting that no onscreen harm come to the Batmobile: It should remain pristine so that kids would want to grab the toy version. As Batman, millionaire Bruce Wayne had a collection of vehicles and gadgets at his disposal—all props that could be replicated in plastic. Batman's comic book origins gave him a unique iconography that lent itself to flashy graphic apparel.

In March 1989, just three months before the film's release, Warner Bros. announced that it was merging with Time Inc. to create the mega-conglomerate Time-Warner, which would allow the film studio to capitalize on a deep bench of talent to help drive the “event” feel of the film.

Prince was signed to Warner's record label and agreed to compose an album of concept music that was tied to the characters; “Batdance" was among the songs and became a #1 hit. Their licensing arm, Licensing Corporation of America, contracted with 300 licensees to create more than 100 products, some of which were featured in an expansive brochure that resembled a bat-eared Neiman Marcus catalog. The sheer glut of product became a story, as evidenced by this Entertainment Tonight segment on the film's licensing push:

In addition to the rhinestone jacket, fans could opt for the Batman watch ($34.95), a baseball cap ($7.95), bicycle shorts ($26.95), a matching top ($24.95), a model Batwing ($29.95), action figures ($5.95), and a satin jacket modeled by Batman co-creator Bob Kane ($49.95).

The Batman logo became a way of communicating anticipation for the film. The virtually textless teaser poster, which had only the June 23 opening date printed on it, was snapped up and taped to walls. (Roughly 1200 of the posters sized for bus stops and subways were stolen, a crude but effective form of market research.) In barber shops, people began asking to have the logo sheared into the sides of their heads. The Batman symbol was omnipresent. If you had forgotten about the movie for even five minutes, someone would eventually walk by sporting a pair of Batman earrings to remind you.

At Golden Apple Comics in Los Angeles, 7000 packs of Batman trading cards flew out the door. Management hired additional staff and a security guard to handle the crowds. The store carried 36 different kinds of Batman T-shirts. Observers compared the hysteria to the hula hoop craze of the 1950s.

One retailer made a more contemporary comparison. “There’s no question Batman is the hottest thing this year,” Marie Strong, manager of It’s a Small World at a mall in La Crosse, Wisconsin, told the La Crosse Tribune. “[It’s] the hottest [thing] since Spuds McKenzie toward the end of last year.”

 

By the time Batman was in theaters and breaking records—it became the first film to make $100 million in just 10 days, alerting studios to the idea of short-term profits—the merchandising had become an avalanche. Stores that didn’t normally carry licensed goods, like Macy’s, set up displays.

Not everyone opted for officially-licensed apparel: U.S. marshals conducted raids across the country, seizing more than 40,000 counterfeit Batman shirts and other bogus items.

Collectively, Warner raked in $500 million from legitimate products. In 1991, the Los Angeles Times reported that the studio claimed only $2.9 million in profit had been realized from merchandising and that the movie itself was in a $35.8 million financial hole owing to excessive promotional and production costs. It was a tale typical of creative studio accounting, long a method for avoiding payouts to net profit participants. (Nicholson, whose contract stipulated a cut of all profits, earned $50 million.)

Whatever financial sleight-of-hand was implemented, Warner clearly counted on Batman to be a money-printing operation. Merchandising plans for the sequel, 1992’s Batman Returns, were even more strategic, including a tie-in agreement with McDonald’s for Happy Meals. In a meta moment, one deleted script passage even had Batman’s enemies attacking a toy store in Gotham full of Batman merchandise. The set was built but the scene never made it onscreen.

The studio was willing to give Burton more control over the film, which was decidedly darker and more sexualized than the original. Batman Returns was hardly a failure, but merchandising was no longer as hot as it was in the summer of 1989. Instead of selling out of shirts, stores ended up marking down excess inventory. McDonald’s, unhappy with the content of the film, enacted a policy of screening movies they planned to partner with before making any agreements. By the time Warner released 1995’s Batman Forever, the franchise was essentially a feature-length toy commercial.

It paid off. Licensing for the film topped $1 billion. Today, given the choice between a film with Oscar-level prestige or one with the potential to have its logo emblazoned on a rhinestone jacket that people would actually want to buy, studios would probably choose the latter. In that sense, the Batmania of 1989 endures.

SECTIONS

arrow
LIVE SMARTER