Pepsi has ventured into the hospitality and F&B scene with the upcoming launch of Kola House.
The company described it as “the first experimental kola bar, restaurant, lounge and event space to open in the US market.” This first-of-its-kind hospitality venture is set to open its doors in spring 2016, with its flagship location in New York City's Meatpacking District.
Kola House seeks to brand colas as a premium item, and its consumption a prime experience, going as far as introducing a full artisanal menu that offers "specialty plates inspired by the kola nut."
"We wanted to create a modern hub for consumers to share social and immersive experiences that were anchored in the exploration of our cola's artisanal craft and flavor," Seth Kaufman, chief marketing officer, PepsiCo North America Beverages, said in a press statement.
"The Kola House represents a new space for us to support our consumer-first approach to drive authenticity and innovation around our beverage offerings and ideals."
The flagship location will also serve as a transformative event space for pop culture moments in music, art, style, film, sports and more. Pepsi is leveraging its broad partnership with Live Nation to help build out a special music series, Live at the Kola House, which will serve as tent pole moments throughout its year-long programming.
Branching into hospitality
The company's move into hospitality came on the back of a reported 5% decline in net revenue and a 10% decline in operating profit, according to its Q3 financials released last year.
Commenting on the brand's experimental foray into hospitality, Nick Foley, president, SE Asia Pacific & Japan Landor, said, "It’s fresh and vibrant. Quite different to what we’ve come to expect from Pepsi. As to how relevant it is to the brand's target audience remains to be seen. Certainly, I don’t believe it will damage the brand."
The move's impact on the company's bottom line depends on how much consumers are prepared to pay for the Kola House experience.
This is a classic premiumisation strategy from Pepsi. If they get the offer right, and generate sustainable levels of patronage to the venue, then it could create profitable streams of income for a brand in its maturity.
Mahesh Neelakantan, founder and CEO, Newton, concurred with Foley's view: "I think it’s amazing that a global brand like Pepsi is venturing into this space – they have already made the headlines and are grabbing a lot of attention especially from marketers and the media."
"I am equally happy to hear that this isn’t just a pop-up store and is here to stay and am sure the Kola Housewill allow them to engage consumers directly, co-create concepts and marketing programs with them, test NPD initiatives, reward the participating consumers with experiences that will be unique and bespoke."
He hopes that the initiative will trigger a lot of similar initiatives by other brands.
"Keeping the brand experience central is a way to tell a multi-dimensional story. Not only that every offline interaction will be beamed online via the consumer’s social spaces – which in turn will attract more interest and engagement."
Neekalantan said that the Kola House initiative is similar to companies investing in R&D and Design Labs, in addition to its self-designed offline to online experiences and engagement.Though it's uncertain if the move could translate into immediate sales impacting the bottom line - it would definitely help the brand pump up its equity and brand love, impacting its bottom line in the long run.
While it may not directly translate to sales – I believe this will heap returns in many more ways directly impacting the brand imagery & connection with its core audience.
He added this this move can open up various possibilities and probably create trends in food pairing or rituals in beverage consumption. This will ultimately drive brand stories and will definitely resonate with the youth.
"This is exactly what Pepsi intends to do to connect with the next generation."