Dale Earnhardt Jr.'s move to Pepsi all started with a couple of Mountain Dew hats.
Junior was walking the grounds at Michigan International Speedway during a Busch race in August 2006, several months before his departure from Dale Earnhardt Inc., the team started by his celebrated father and stepmother.
At the race, Brian Vickers was driving a car with a retro Mountain Dew paint scheme and wearing a matching firesuit. Earnhardt liked the look and asked the Pepsi team for some of the Dew retro gear.
"We gave him two or three caps," said David Dzanis, vice president of client services for Pepsi's sports agency, Genesco Sports Enterprises.
"Obviously, there was a lot of work between then and signing Junior. But that was probably when we first got his attention. We're all thinking, 'Here's a guy driving for Bud and he wants Mountain Dew hats?' But we knew then that he drank our product."
More than a year later, the cap giveaway paid off. Pepsi ended up paying a share of the estimated $25 million to $30 million per year to put its Mountain Dew Amp brand on the Hendrick Motorsports No. 88 Chevy. The sponsorship and personal services contract with Earnhardt makes him the highest-paid endorser in Pepsi's long history of celebrity spokespeople, according to company executives. It's a history that has included sports icons as varied as Alex Rodriguez and David Beckham, and pop stars as diverse as Madonna and U2. Ray Charles is part of the Pepsi generation, and so are Joan Crawford and Regis Philbin.
Junior's multiyear deal with Amp is more than Michael Jackson was paid to moonwalk for Pepsi at the top of his game and more than fellow driver Jeff Gordon gets from Pepsi after 12 years. And it all started with a couple of caps.
All of the executives involved in bringing NASCAR's top attraction into the Pepsi fold and interviewed for this story say that in addition to signing a big check, the stars had to align -- independent of resources that the $39 billion soft drink and snack food giant could bring to bear. And they did.
"No one would describe anything this big as easy," said Ralph Santana, Pepsi's vice president of sports media and interactive marketing, "but the planets just seemed to line up for us. Nine months ago, this really wasn't on our radar screen and it happened so quickly and so easily, it's almost scary."
The first of those constellations in motion was that Junior grew up drinking Mountain Dew, a Pepsi-owned brand since 1964. In addition, Pepsi had a successful relationship with Junior's new team, Hendrick Motorsports. One of its star drivers, Gordon, has been sponsored by Pepsi since 1996.
For Pepsi, getting Gordon's buy-in was key. Given its longtime relationship with him, Pepsi approached the four-time NASCAR champion before it ever spoke to Earnhardt directly, seeking Gordon's blessing, if not his permission, to sign the driver who had raced under the Bud flag for nearly a decade.
"It's kind of like A-Rod and Jeter," Genesco CEO John Tatum said. "You don't want to ruin the dynamics in your locker room, even if you are adding a superstar. But Gordon was behind this from the start; [he] figured it was just another teammate for him in the race."
But the impetus for Pepsi to empty its wallet for America's top motorsports attraction derived from a different race. While full-calorie sodas have been bubbling out of fashion over the past decade, energy drinks, most notably Red Bull, have become a $6.5 billion market -- and one with considerably better margins than carbonated soft drinks.
Pepsi is accustomed to being first or second within beverage categories.
But within energy drinks, it has a somewhat haphazard portfolio: SoBe's No Fear, some Starbucks-branded beverages and Amp, which has a market share of around 6 percent depending on the data source.
Unaccustomed and tired of riding the fifth horse in a five-horse energy drink race, Pepsi's senior management decided early last year that it would spend against this growing market and it knew that to challenge competitors, it would have to ramp up Amp.
Every energy drink has action sports endorsers and many have motorsports ties of some kind. But none had a driver near Earnhardt's stature.
Before Earnhardt's defection from DEI became public last May, Pepsi executives knew that was where they wanted to spend behind Amp.
"It's a big bet," said Santana, a 13-year Pepsi marketing veteran, who helped engineer the company's largest individual endorsement deal in just his second year running Pepsi's sports marketing. "Anyone in the business will tell you that it [the energy drink category] is still growing, that it's still highly profitable and there is no real sign of it slowing. So for us, it was about figuring out which brand to focus on. When you look at market dynamics, where consumers are headed and where the real growth is, clearly this is it."
