The ad shows Kendall Jenner, a member of the Keeping Up With the Kardashians reality TV family, stepping away from a modeling shoot to join a crowd of smiling, young protesters.
The protesters cheer after Jenner hands a can of Pepsi to a police officer, who takes a sip.
TMZ reported Jenner had little to do with the ad's creative process.
PepsiCo Inc had previously said the ad was created by its in-house team and that it would "be seen globally across TV and digital" platforms.
It initially described the spot as featuring "multiple lives, stories and emotional connections that show passion, joy, unbound and uninhibited moments. No matter the occasion, big or small, these are the moments that make us feel alive."
That description was also derided on social media. On Twitter, Pepsi became the No. 1 trending topic of discussion.
The Purchase, New York, company had stood by the ad late Tuesday. But on Wednesday, it was apologising to Jenner for putting her "in this position".
Critics say the image of Jenner handing the officer a Pepsi evoked a photo of Black Lives Matter protester Ieshia Evans approaching an officer at a demonstration in Baton Rouge last year.
Others criticised the protesters' signs for being comically innocuous, with messages like "Join the Conversation" and heart and peace signs. The website Gothamist expressed a common sentiment online in calling the ad "gloriously tone-deaf."
Among those mocking the ad was Bernice King, who tweeted a photo of her father, civil rights leader Martin Luther King Jr., being confronted by a police officer at a protest march. "If only Daddy would have known about the power of #Pepsi," the tweet said.
Rosario Dawson also pointed out the similarities between the ad and a video she shot 15 years ago for the Chemical Brothers' song Out Of Control.
It isn't the first time PepsiCo has backpedaled and apologised for an ad.
In 2013, it pulled a Mountain Dew ad that was criticised for portraying racial stereotypes and appearing to make light of violence toward women.
It pulled that ad from online channels, and said it was never intended to run on TV.
- AP
