The ad shows Kendall Jenner, a member of the "Keeping Up With the Kardashians" reality TV family, stepping away from a modelling shoot to join a crowd of young protesters.
One person said: "Their new ad campaign is Kendall Jenner showing up at a BLM protest and handing a police officer a Pepsi and suddenly he's happy".
It was immediately slammed online for appropriating and trivializing social justice movements such as Black Lives Matter and for its tone deaf attempt to appeal to a diverse audience.
Pepsi said in a statement that it was trying to promote unity, peace, and understanding.
While the ad did not make clear what the featured protest was in opposition to, with the only clues being peace signs and a background song with the lyrics "we are the movement, this generation", observers were quick to condemn it. "We did not intend to make light of any serious issue", Pepsi said in the statement. We are pulling the content and halting any further rollout.
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One wrote: "Kendall Jenner hands cop a Pepsi".
In the short video, Jenner, 21, takes part in a photoshoot when the parade comes past waving banners that read "Join the conversation".
While the source claims that Jenner did have approval rights in her contract, the source says, "Kendall relied on Pepsi to do their due diligence and trusted that it would tasteful".
"If only Daddy would have known about the power of #Pepsi", she tweeted, with a black-and-white photo of her father being confronted by a highway patrol officer.
Community organizer Deray McKesson also commented on the ad, tweeting, "If I had carried Pepsi I guess I never would've gotten arrested".