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The Real Pepsi Challenge

The Inspirational Story of Breaking the Color Barrier in American Business

by Stephanie Capparell

Hardcover, 349 pages, Simon & Schuster, List Price: $25 |


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The Real Pepsi Challenge
The Inspirational Story of Breaking the Color Barrier in American Business
Stephanie Capparell

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Book Summary

Describes the achievements of one dozen pioneering African-American Pepsi Cola businessmen who successfully increased the company's post-World War II profits by effectively tapping African-American markets, an endeavor that was fiercely challenged by Jim Crow laws and corporate bigotry. 50,000 first printing.

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'Pepsi Challenge' and the Birth of Niche Marketing

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Note: Book excerpts are provided by the publisher and may contain language some find offensive.

Excerpt: The Real Pepsi Challenge


The start of the rivalry between the Pepsi-Cola and Coca-Cola companies in the 1940s is legend in business. Less known is that a bigger, more important battle was being fought on the front lines of the cola wars at the same time: the struggle ofAfricanAmericans to gain access to white Corporate America. Underdog Pepsi-Cola — under the direction ofan astute businessman with a keen sense of his role as a leader — joined forces with a group of striving African-American professionals. Their union made history, and taught American businesses a lesson in the value ofa diverse workforce.

To the ranks of the unsung civil rights pioneers, add Pepsi's first special-markets sales staff. Instead of schoolrooms or lunch counters, their struggles and victories took place in offices, storefronts, and factory floors. You haven't heard the names of these men in the myriad books written about the cola wars over the decades. They were workers whose talents were hidden in plain sight because of their race; their stories played out before the civil rights revolution. Businesses were just awakening to the potential of a diverse work place and untapped markets.

The Pepsi-Cola experiment began in 1940 with the hiring of a single black man, Herman T. Smith, and was followed by the addition of two young business interns — Allen L. McKellar and Jeanette Maund. Their mandate was to help Pepsi-Cola — then a struggling upstart — expand its consumption among African-American customers.

Some seven years before Jackie Robinson and Larry Doby integrated baseball's major leagues, these national sales representatives broke through the corporate color line. In retrospect, the Pepsi salesmen had even more of an uphill battle. Integrating sports meant creating opportunities for a few uniquely talented individuals for the sake of everyone's entertainment. Integrating business, by contrast, was a far more sweeping — and for some, threatening — proposition in white society: an invitation to the rank and file of an entire race to vie for the same jobs as everyone else in the corporate hierarchy. Yet, the business pioneers were optimistic. "Conditions are far from perfect, of course," said Maund in polite understatement during an interview at the time, "but if we can do what we have against obstacles, surely we need not be afraid of our future."

World War II interrupted the development of the special-markets department. Once the war was over, however, a renewed effort began with an even greater impetus to succeed. The victory over Hitler had encouraged social reformers in the United States to work toward making the world more just and egalitarian. It also was a time offerment in the business world — the democratization of commerce itself. Companies were perfecting mass distribution and getting to know their consumers as individuals with particular tastes. Business leaders were beginning to see their employees as valuable contributors to their companies' success. "It was a contribution to social progress," said Edward F. Boyd, who joined the Pepsi-Cola Company in 1947as assistant sales manager and was put in charge of selling to what was then called the Negro market. "I didn't make that much of a dollar. I wasn't paid on the basis of other executives. It was at the beginning. "

Boyd was an astute judge ofcharacter, and gathered and trained a talented marketing force. Sales of the cola surged wherever the team members went; at one point they helped Pepsi outsell all its rivals in some Northern cities. It was an object lesson for other companies that were ignoring the African-American consumer and standing on the sidelines when it came to integrating their professional staffs.

On their way to nudging their country to a better place, the sales team helped define niche marketing some thirty years before it became a widespread business strategy. They gave formal talks to white driversalesmen about their role in the company, thereby instigating some of the earliest formalized diversity training. They also helped to instill in African-Americans a unique sense of brand loyalty — to products produced by companies with a commitment to social progress as much as to product quality.

Pepsi's innovation was remarkable for its day. It took a boss with the pluck and foresight of Walter S. Mack, Jr. , who led Pepsi-Cola from 1938 to 1950. He gave the team the personnel, budget, and creative freedom to explore the market on a national scale, and fully recognized its clout. "One of the truly great pleasures I have is in helping other people, giving a guy a job so that he can build himself up," he once wrote.

It didn't matter to Walter Mack that in Coke he had a rival that was linked in the American psyche with Santa Claus and the American G. I. He was the feisty, progressive New Yorker pitted against a gentleman of the Old South, Coca-Cola president Robert Woodruff, an executive known for his opposition to "racial mixing"on the job or in society at large. Mr. Woodruffdid give generously to black universities, but that kind of generosity only helped prop up the system of segregation. When Mack made contributions, they were tied to opportunities and focused on individuals. It made all the difference.

This is not to say that Walter Mack was a starry-eyed do-gooder. Above all, he was motivated by the bottom line. When he looked at black, he also saw green. African-American leaders themselves had shrewdly pushed the idea to businesses that the population of fourteen million blacks in the United States represented a gold mine of pent-up consumer demand, and Mack wanted his share. None of this big picture was lost on the salesmen, who were realistic about their roles at the company. "I adored the man, but all he cared about in the end was one thing: selling Pepsi," said Boyd of his boss. "That was always foremost in his mind."

On the road, the team members became role models at a time when few Americans had ever seen a young black man with a corporate business card. But the corporate office was a lonely place for African Americans in the 1940s. Back at headquarters, the very presence ofthe special-market salesmen raised touchy questions: Would black Americans fit into Pepsi-Cola's corporate culture? Could the company help develop these promising careers and keep them in the corporate family? How could management promote the men above their narrow specialty to leadership roles that guide the company as a whole?

That was the real Pepsi challenge.

The Pepsi team itself had no role models, yet somehow its members were superbly prepared for the task at hand. Working with limited resources, they crisscrossed the country to speak in black churches, women's clubs, civic centers, fraternities, campuses, and convention halls. Boyd and the Pepsi staff created advertising that was among the first to show African-Americans, and hired some of the first professional black models. Their work made a mockery of the degrading images of blacks prevalent at the time in both mainstream and black media. They dared to create ads celebrating African-Americans of achievement. Their most popular series of ads ended up as a classroom teaching tool in African-American high schools and colleges around the country. More shocking still for its day were their ad campaigns that portrayed blacks as stylish, fun-loving, middle-class citizens living the American Dream.

The Pepsi team's accomplishments were all the more impressive considering the enormous obstacles they faced in the segregated America of the day. They were traveling salesmen who had to sit in the backs of buses, ride in separate train compartments, and eat behind closed curtains in dining cars. Because many restaurants and hotels across the country didn't want their business, they often had to rely on a network of families willing to give them food and lodging in their homes while on the road.

With innate gifts of tact, humor, and sheer grit, the salesmen successfully navigated this demoralizing minefield. If their sojourn in Corporate America was often filled with disappointments, the team members rose above them."I knew what the mission was," said Harvey C. Russell, one of Boyd's more inspired hires."There were no other places you could get that type of job. Pepsi was really the first. They, and a couple ofothers, were the only ones that had these black sales people."

In all, Boyd hired at least sixteen men during the four-plus years his team was active. At its peak in size and responsibility, Boyd had eleven men under him. The experience of these dozen men is the focus of this book. Six of them lived to tell their stories here: Edward F. Boyd, a onetime actor and singer in films, who was working for the National Urban League when he was picked to create the special-markets team; Allen L. McKellar, who first joined Pepsi as an intern in 1940 after he won a company essay contest and returned in 1950; Charles E. Wilson, a graduate of Virginia's Hampton Institute with a dream of becoming a doctor; William Simms, who was ordered by the great American thinker and human-rights advocate W. E. B. DuBois to get an education and get ahead; Jean F. Emmons, one of the few black MBAs in America; and Julian C. Nicholas, who came from a family of businessmen — and especially businesswomen — with a drive to succeed.

Two more — Harvey C. Russell and Richard L. Hurt — were interviewed for my 1997 Wall Street Journal column on the Pepsi team, but have since died. Other team members whose contributions are greatly missed include David F. Watson, H. Floyd Britton, Harold W. Woodruff, Alexander L. Jackson, Frank L. Smith, Winston C. Wright, Paul D. Davis, and William E. Payne.

After the breakup of the team, most ofthe men went on to remarkable second careers in international business, politics, journalism, medicine, and education. One, Harvey Russell, became a vice president at Pepsi-Cola in 1962, the first African-American to earn that title at a major corporation.

The life stories of the Pepsi salesmen connect us to the depth and complexity ofthe African-American experience in the twentieth century. Lest their stories seem a musty glimpse ofa shameful bygone era, know that after I first told this story in the 1997article, I received repeated calls from a Ku Klux Klan member who tried unsuccessfully to get an interview for the Grand Wizard. The article had mentioned a long-ago, Klan-led boycott of Pepsi, and the woman wanted to defend the Klan's side ofthe story.

My research for this book began with interviews of the team members. They were in their eighties and nineties. I was counting on recollections of each person's path to success despite adversity. Among the most moving stories told to me were those about the support given by their families and communities to prepare them for life's struggles. But before long it was clear I was among business royalty, the likes of which I had rarely seen during fifteen years of writing and editing for the Journal.

That they were ahead oftheir time is evidenced by the fact that it wasn't until 1952, a year after the team was disbanded, that The Wall Street Journal first addressed in a major article the so-called Negro market. The story valued the black population's total income at fifteen billion dollars, a 50 percent increase over estimates made elsewhere just five years earlier. Ever since then, newspapers have reported consistently on "the increasing importance of the expanding market" represented by African-Americans.

My first book, Shackleton's Way, was about the lessons learned from a hair-raising tale of survival of a crew shipwrecked in the savage nature of Antarctica. This is another tale of survival, in the uncharted waters of social progress, and it seems that manmade disasters can be every bit as harrowing. The lessons learned from the Pepsi men are how to strive for personal excellence even when the rewards seem distant. From their corporate leaders we see how a business can thrive only where diversity thrives; that the roadblocks to social progress are the same as those that hamper economic success.

To help document their experiences, team members saved an impressive sampling of their workaday correspondence, photographs, and newspaper clippings, and generously offered them for research on this book. Extensive research was done to corroborate their recollections where possible. Long-forgotten ad campaigns by various creative talents subsequently were unearthed. Where practical, articles and letters are generously quoted here to capture the language of the times. Negro was the accepted word for African-Americans at mid-twentieth century, and African-Americans had to fight just to ensure it was always capitalized in print and properly pronounced. The term special markets is used interchangeably with Negro market to describe the Pepsi-Cola campaign, even though the sales team was in the process of redefining its meaning.

It is a challenge to recount in brief African-American history of this period. I read through a dozen years of black weekly newspapers on microfilm and, thanks to modern search engines, more than one hundred years of major dailies on specific topics. The description of the events of the day — in turns shocking and joyful — as told by African American journalists at the weeklies was overwhelming, and I am indebted to my colleagues of yesteryear for their diligent reporting of the background ofthis story.

The famous dates in history, the landmark court cases, the new laws, the successful marches, the worthy black heroes, the enlightened white leaders — all grabbed the spotlight for a time, but they tell only part of the story. Progress came in almost imperceptible increments, with changes repeatedly written in sand before they became a concrete gain. The Pepsi team members worked at a time when the African American population encouraged many Rosa Parkses before the Rosa Parks refused to take a back seat on a bus. These foot soldiers tirelessly staged protests and walkouts and won scores of smaller court victories over a brutal system of segregation under the so-called Jim Crow laws.

These leaders were stalwarts of what has been dubbed the Greatest Generation, the ones who translated a wartime victory over white supremacy overseas into a peacetime struggle for equality at home. They were living among aging former slaves and self-made millionaires — and some who were both. Most of their neighbors may have worn workers' overalls, but they were able to envision themselves in the highest echelons of business and government. That they never doubted their eventual success was a remarkable show of faith in America.

The marketing team's endeavor was in many ways a resounding success: a study in how determination, focus, and a sense of purpose on the part of employees, combined with enlightened leadership, can enhance the bottom line while offering social benefits beyond the walls of the corporation. Jean Emmons, who joined the team in 1950, one day pulled out a newspaper clipping he kept in his pocket, dated in the late 1990s, that listed "major U. S. companies where blacks wield the most clout." It started with Kenneth I. Chenault, CEO of American Express, and ended with Oprah Winfrey, chairman and CEO of Harpo Incorporated." I'm proud I helped make that possible," said Emmons, who left Pepsi to earn a PhD in education." There's no way in the world that in 1950 anyone outside of God would have said this result today was possible."

The result ultimately included the promotion in August 2006 of Indra K. Nooyi, a fifty-year-old woman born in India, to the post of chief executive officer of PepsiCo Incorporated, just months after another "unthinkable" had happened: PepsiCo had surpassed the Coca-Cola Company in terms of market capitalization, roughly $105.4 billion to $103 billion.

The project's failures were more complicated. In short, Pepsi-Cola's early foray into diversifying its workforce, while a gigantic leap for its day, was seen by some of its managers as a limited task rather than the seeds ofa permanent transformation of a modern corporation. In the end, the team was broken up without any meaningful plan for the continued hiring and promoting of minority applicants.

Many issues about race and opportunity that surfaced then have not yet been resolved in the business world. Managers today aren't so much thinking about how to keep minorities out, as they aren't thinking about minorities at all. But maintaining diversity is an ongoing task, said Frank Wu, dean of Wayne State University Law School, not an assignment to be completed and checked off a list. "Diversity, like democracy, is a process; it never ends," he said. "If you're an optimist, you should never want it to end. No one ever says, 'I can't believe I'm here voting again.' The goal is to participate in something larger than yourselfand to keep inviting more people to participate."

When looking at discrimination, our society has come to rely on a useful cliché: We've come a long way, but we still have a long way to go. It's critical that we pause sometimes to get an honest measure of the distance traveled, to refocus on the goal of fairness and equality, and to recommit to making that end a reality.

The real coward, W. E. B. DuBois observed, is the one who dares not to know.

Copyright © 2007 by Stephanie Capparell