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Instant Analysis: PepsiCo, Inc. Is Opening a Restaurant in a Trendy New York Neighborhood

By Jeremy Bowman – Feb 2, 2016 at 9:15AM

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The soda giant is making a bizarre move by launching a theme restaurant. Could it pay off?

What happened? 
PepsiCo (PEP -0.66%) is making a surprising move in its quest to stem the decline of soda consumption. The food and beverage giant is opening a restaurant/bar in New York's tony Chelsea neighborhood called the Kola House. As the name indicates, the kola nut will be the star of the show, serving as the restaurant's theme and the focus of the menu. 

The Kola House seems to be a type of guerrilla marketing stunt as Pepsi's marketing heads hope the restaurant will galvanize enthusiasm and chatter on social media. It wants the space to generate buzz, as itself and fellow soda giant Coca-Cola (KO -0.95%) seem to have lost its edge as young people have turned to beverages like Monster energy drinks or Starbucks (SBUX 1.82%) instead of sodas. In its ambitions to open a storefront, Pepsi seems to be borrowing form Starbucks' latest experiment, the Reserve roastery, which has been called a Willy Wonka-like creation. It also mirrors the success that global brands like Apple and Nike have had in opening their own specially branded retail stores.

Does it matter?
There's little to lose for Pepsi in the Kola House experiment. Even if the restaurant doesn't prove as popular as the brand hopes, it's a first step in building out its relationship with young people and will likely serve as a lesson for similar brand engagement in the future.

Pepsi has no further Kola House restaurant openings planned, but it will leverage the concept nationally, introducing it at Super Bowl 50 and making temporary Kola Houses a part of events like Lollapalooza.   

Much still needs to be decided on the Kola House. The menu still has not been finalized, nor has an executive chef been named. Pepsi doesn't have a set opening date, though it expects to launch the restaurant in the spring.

While the Kola House alone isn't likely to reverse Pepsi's decline in soda, it's evidence of the company's willingness to think outside the box and take a bold a step in shaking up the brand. In doing so, it understands that reinvigorating the brand is the first step toward driving sales higher again.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends PepsiCo and Starbucks. The Motley Fool recommends Coca-Cola. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

PepsiCo Inc. Stock Quote
PepsiCo Inc.
$166.00 (-0.66%) $-1.11
Coca-Cola Stock Quote
$56.24 (-0.95%) $0.54
Starbucks Stock Quote
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