The Pepsi Challenge: Perseverance Pays

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Digital Library > Legal Issues and Taxes > Bankruptcy"The Pepsi Challenge: Perseverance Pays"

Need inspiration? Pepsi-Cola Co. went bankrupt twice — and still kept bubbling.

Invented in the 1890s by pharmacist Caleb Davis Bradham, Pepsi soon made a name for itself. By 1913 several plants were exhibiting increases of more than 200%.

Then World War I began, sending the country into a sugar shortage. Sugar prices tripled. But Bradham refused to raise Pepsi's price, which remained firmly set at 5 cents per 6-ounce bottle.

Price pressures: In the 1920s sugar became even more expensive, thanks to a cartel of Cuban sugar growers. In a last-ditch effort, Bradham established a new Pepsi-Cola Co. in Wilmington, Del., trying to raise enough capital to save the business through the sale of stock. Yet few were interested, and in 1923 Pepsi was certified bankrupt.

Craven Holding Co. purchased Pepsi's assets and production was again underway. The Roaring '20s were good for Pepsi — America was riding high on a postwar economic expansion, and Prohibition nudged consumers to nonalcoholic refreshment. Pepsi's new owners attempted to stave off future sugar crises by selling syrup in concentrate (rather than finished form), hoping to shift the burden of sugar acquisition to bottlers.

Then the U.S. stock market crashed. In 1931 Pepsi was forced to file for involuntary bankruptcy.

Pepsi again was sold to a long-time investor for $9,600. The resulting third incarnation of Pepsi-Cola began badly. In 1933 the company even gave Coca-Cola the opportunity to buy them out. Coke declined.

Packaging innovation: Then Pepsi began to fill recycled 12-ounce beer bottles with Pepsi, selling them for a nickel, and Pepsi became a household favorite.

Writer: Julie Cook

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