I checked it out with snopes.com.
(Yes, I know snopes is just two liberals and their computer.)
According to them, the offending phrase was supposedly “Come alive with Pepsi,” although in reality, the U.S. ad campaign was “Come alive; you’re in the Pepsi generation.” They claim there’s no record of the campaign in China, but Pepsi has never denied it.
Other potentially mythical blunders:
These are the nominees for the Chevy Nova Award. This is
given out in honor of the GM’s fiasco in trying to market this
car in Central and South America. “No va” means, of course,
in Spanish, “it doesn’t go”.
1. The Dairy Association’s huge success with the campaign
“Got Milk?” prompted them to expand advertising to Mexico. It
was soon brought to their attention the Spanish translation
read “Are you lactating?”
2. Coors put its slogan, “Turn It Loose,” into Spanish, where
it was read as “Suffer From Diarrhea.”
3. Scandinavian vacuum manufacturer Electrolux used the
following in an American campaign: “Nothing sucks like an
Electrolux.”
4. Clairol introduced the “Mist Stick,” a curling iron, into
Germany only to find out that “mist” is slang for manure. Not
too many people had use for the “Manure Stick.”
5. When Gerber started selling baby food in Africa, they used
the same packaging as in the US, with the smiling baby on the
label. Later they learned that in Africa, companies routinely
put pictures on the labels of what’s inside, since many people
can’t read.
6. Colgate introduced a toothpaste in France called Cue, the
name of a notorious porno magazine.
7. An American T-shirt maker in Miami printed shirts for the
Spanish market which promoted the Pope’s visit. Instead of “I
saw the Pope” (el Papa), the shirts read “I Saw the Potato”
(la papa).
8. Pepsi’s “Come Alive With the Pepsi Generation” translated
into “Pepsi Brings Your Ancestors Back From the Grave” in
Chinese.
9. The Coca-Cola name in China was first read as “Kekoukela”,
meaning “Bite the wax tadpole” or “female horse stuffed with
wax”, depending on the dialect. Coke then researched 40,000
characters to find a phonetic equivalent “kokou kole”,
translating into “happiness in the mouth.”
10. Frank Perdue’s chicken slogan, “It takes a strong man to
make a tender chicken” was translated into Spanish as “it
takes an aroused man to make a chicken affectionate.”
11. When Parker Pen marketed a ball-point pen in Mexico, its
ads were supposed to have read, “It won’t leak in your pocket
and embarrass you.”
The company thought that the word “embarazar” (to impregnate)
meant to embarrass, so the ad read: “It won’t leak in your
pocket and make you pregnant!”
12. When American Airlines wanted to advertise its new
leather first class seats in the Mexican market, it translated
its “Fly In Leather” campaign literally, which meant “Fly Naked” (vuela en cuero)
in Spanish!
“Coors put its slogan, “Turn It Loose,” into Spanish, where
it was read as “Suffer From Diarrhea.”
Perfect description!