Pepsi Loses Its Bottle in Dispute Over Hip-hop Commercial

Pepsi-Cola and the American hip-hop community reached a an agreement yesterday after a bitter dispute over the soft drink giant's decision not to run an advertisement by a controversial rapper.

The company announced it would give $3m (£1.9m) over three years to urban charities. The beneficiaries will be chosen by a committee of Pepsi executives and members of the hip-hop world.

At the centre of the row was a Pepsi commercial made by the rapper Ludacris that was due to run during last month's Super Bowl. But Pepsi's decision to employ a rapper who sometimes uses obscene lyrics was condemned by the influential rightwing talkshow host Bill O'Reilly. He said Pepsi was "immoral" to hire Ludacris.

As the controversy gathered steam, Pepsi pulled the ad. This angered many of Ludacris's colleagues and fans, not least because the drinks company broadcast an ad featuring Ozzy Osbourne, whose show on MTV is notable for bleeped-out obscenities.

The hip-hop community threatened to boycott Pepsi for showing "cultural disrespect". Pepsi, while anxious not to alienate a key part of its market, has said it will offer $1m a year for the next three years.

"It all seems like a victory," Jody Miller from the Hip-Hop Summit Action Network in New York said. She added that Ludacris had turned down offers of making more Pepsi ads. The rapper was said to be happy that so much money would be going to good causes.

Pepsi spokesman Larry Jabbonsky denied any climbdown. "We're helping kids. This is just an extension of our long-standing commitment to community relations and to urban marketing."