The Genius Strategy of Coca Cola to beat Pepsi | Business War: PEPSI VS COCA COLA
Summary
TLDRIn 1992, Pepsi launched Crystal Pepsi, a clear cola that initially saw huge success, selling $474 million in its first year. However, it quickly failed due to a combination of poor taste preservation, incongruent marketing, and a clever attack strategy by Coca-Cola with their Tab Clear product. This case study explores the reasons behind Crystal Pepsi's failure, highlighting the importance of thorough product testing, clear marketing, and learning from bold, innovative attempts. Additionally, it underscores the lesson that effective positioning and clarity in marketing are crucial to avoid product failure.
Takeaways
- 🚀 In 1992, Pepsi launched Crystal Pepsi, a clear soda that was initially successful but failed within a year.
- 💡 Crystal Pepsi was a response to the 'clear craze' of the late 1980s and early 1990s, where clear products were seen as healthier and more honest.
- 📈 Crystal Pepsi quickly captured 2.4% of the American soft drink market and recorded sales of $474 million within a year, but failed to sustain its popularity.
- 🔬 Pepsi's food scientist, Surendra Kumar, warned about the potential issues with taste degradation due to sunlight exposure, which was ignored by Pepsi.
- 🤔 The product was marketed as a healthier alternative, but in reality, it was not significantly different from regular Pepsi in terms of calories and ingredients.
- 🛒 Coca-Cola launched Tab Clear as a kamikaze strategy to confuse the market and split the demand for clear sodas, which contributed to Crystal Pepsi's downfall.
- 🎯 Marketing congruence is crucial; consumers expect certain attributes from products based on their appearance and branding, which Crystal Pepsi failed to deliver.
- 🛑 Pepsi rushed the product development process, which resulted in a product that did not meet the fundamental taste and quality expectations of consumers.
- 📊 Coca-Cola's strategic move to launch a clear diet soda under the Tab brand instead of Coca-Cola protected their main brand while confusing the market.
- 📚 The story of Crystal Pepsi teaches three key business lessons: the importance of not compromising on product quality, clear product positioning, and the value of learning from failures.
- 🌟 Despite the failure, the attempt was brave, and it's important for businesses to continue innovating and trying new ideas, as success often follows many attempts.
Q & A
What was the name of the product launched by Pepsi in 1992 that was considered a sensation at the time?
-The product launched by Pepsi in 1992 was called Crystal Pepsi.
How did Crystal Pepsi perform in terms of sales within its first year on the market?
-Crystal Pepsi recorded sales of $474 million within its first year, capturing 2.4% of the American soft drink market.
What was the main reason Crystal Pepsi was considered a massive failure and was eventually pulled from the shelves?
-Crystal Pepsi was considered a massive failure due to its bottling issue that led to a bad aftertaste when exposed to sunlight, and its incongruent positioning as a non-healthy clear drink.
What marketing strategy did Coca-Cola use to counter Pepsi's Crystal Pepsi?
-Coca-Cola used the Kamikaze strategy by launching Tab Clear, a clear diet soda, to create confusion in the clear cola market and cannibalize the market for clear colas.
What is the 'clear craze' mentioned in the script, and how did it influence product launches during the late 1980s to early 2000s?
-The 'clear craze' was a marketing trend where clear and transparent products were considered cool and associated with purity, honesty, and the absence of artificial colors and preservatives. This craze influenced many brands, including Pepsi and Coca-Cola, to launch clear versions of their products.
What was the role of Surender Kumar in the development of Crystal Pepsi, and what issue did he raise?
-Surender Kumar was the head of Pepsi's research and development branch and was responsible for creating a clear Pepsi. He raised the issue that the clear bottle could cause the drink to develop off-flavors and odors when exposed to sunlight.
Why did Pepsi decide to rush the launch of Crystal Pepsi, and what event were they trying to capitalize on?
-Pepsi decided to rush the launch of Crystal Pepsi to capitalize on the 'clear craze' and to have a strong marketing presence during the Super Bowl, which is a major American sports event with a huge viewership.
What is the significance of the Super Bowl in terms of advertising, and why was it important for Pepsi to launch Crystal Pepsi during this event?
-The Super Bowl is significant for advertising because of its massive viewership, reaching up to 100 million people. It is a golden opportunity for advertisers to gain extraordinary returns on their ad costs, making it crucial for Pepsi to launch Crystal Pepsi during this event for maximum exposure.
What is the concept of 'congruence' in marketing, and how did Crystal Pepsi fail in this aspect?
-Congruence in marketing refers to the alignment between consumer expectations and the actual product experience. Crystal Pepsi failed in this aspect because it was marketed as a pure and healthy drink due to its clear appearance, but it was not a healthier alternative in reality, leading to consumer disappointment.
What are the three main business lessons that the failure of Crystal Pepsi teaches us, according to the script?
-The three main business lessons are: 1) Not to compromise on the fundamental qualities of a product during a rushed launch; 2) The importance of clear product positioning in marketing to avoid consumer confusion; and 3) The value of persistence and not fearing failure when attempting innovative ideas.
Outlines
🥤 The Rise and Fall of Crystal Pepsi
In 1992, Pepsi introduced Crystal Pepsi, a clear cola that initially captured the American market with record sales of $474 million within a year. However, due to a lack of sustainability in consumer interest, the product was discontinued within 9 months. This section explores the initial success and rapid failure of Crystal Pepsi, setting the stage for a deeper analysis of the business strategies and lessons learned from this 'epic fail'.
🏈 Marketing Strategies and the Super Bowl Launch
Pepsi expedited the launch of Crystal Pepsi to capitalize on the high viewership of the Super Bowl, a major advertising opportunity. Despite the initial success of the Super Bowl ad, which led to significant sales, the product faced several issues, including bottling problems that resulted in a bad aftertaste when exposed to sunlight. The rushed development process and the incongruence between consumer expectations and the product's reality contributed to its failure.
🔍 The Incongruity of Crystal Pepsi and Coca-Cola's Kamikaze Strategy
Crystal Pepsi's failure can be attributed to its incongruity as a product that did not align with consumer expectations of a clear, healthy beverage. It was marketed as a pure and natural drink but contained high fructose corn syrup, similar in calorie content to regular Pepsi. Coca-Cola countered with the Kamikaze strategy by launching Tab Clear, a clear diet soda, to confuse the market and split the consumer base, ultimately contributing to Crystal Pepsi's downfall.
🚀 Embracing Failure as a Catalyst for Innovation
The story of Crystal Pepsi concludes with important business lessons: the importance of not compromising on product quality during a rushed launch, the necessity of clear and consistent marketing, and the value of embracing failure as a stepping stone to success. The narrative encourages taking brave attempts and learning from failures, as demonstrated by successful figures like Steve Jobs and Elon Musk.
Mindmap
Keywords
💡Crystal Pepsi
💡Clear Craze
💡Coca-Cola
💡Kami Kazi Strategy
💡Product Launch
💡Marketing Strategy
💡Consumer Behavior
💡Incongruent Product
💡Cannibalization
💡Epic Fail
💡Business Lessons
Highlights
In 1992, Pepsi launched Crystal Pepsi, a product that initially captured the American market with its unique clear taste.
Crystal Pepsi recorded a sale of $474 million within a year, capturing 2.4% of the American soft drink market.
Despite its initial success, Crystal Pepsi was pulled from shelves within nine months and labeled a failure by Time magazine.
The product's failure teaches important lessons on avoiding product failure and effective marketing strategies.
Coca-Cola's launch of Tab Clear, a sugar-free clear soft drink, initiated the 'clear craze' in the late 1980s.
The clear craze was a marketing trend where clear and transparent products were perceived as healthier and more honest.
Pepsi rushed the launch of Crystal Pepsi to capitalize on the clear craze and the Super Bowl advertising opportunity.
The Super Bowl is a significant advertising platform with an average ROI of 360% on ad spend.
Food scientist Surender Kumar faced challenges in creating a clear Pepsi without compromising taste and quality.
Crystal Pepsi's exposure to sunlight led to off flavors and an aftertaste, affecting its consumer appeal.
The product was incongruent, misleading consumers about its health benefits despite its high calorie content.
Coca-Cola's Kamikaze strategy involved launching Tab Clear to confuse the market and undermine Crystal Pepsi's success.
Tab Clear's introduction as a diet variant created confusion among consumers about the nature of clear colas.
Coca-Cola's strategic positioning of Tab Clear as a separate brand protected its main brand reputation.
Consumers' negative experiences with Crystal Pepsi, including a bad aftertaste, led to its market failure.
Three key business lessons emerged from Crystal Pepsi's failure: the importance of product quality, clear marketing, and embracing failure.
The story of Crystal Pepsi emphasizes the value of persistence and innovation, even in the face of failure.
Transcripts
[Music]
hi everybody in 1992 Pepsi launched a
sensational product that blew the mind
of America this product was called
Crystal
Pepsi there's never been a product quite
like it I love it it's refreshing clear
taste just different Crystal Pepsi
really appeals to everyone at all ages
especially the health C consumer Crystal
Pepsi was such a crazy product that
within just one year it recorded a sale
of $474 million it captured 2.4% of the
entire American soft drink market and
most importantly it scared the hell out
of Coca-Cola but you know what within
just 9 months something shocking
happened because of which the same
crystal Pepsi turned out to be a massive
failure it was pulled out from the
shelves of America and Time magazine
named it among the top 10 failures of
all time every leader has what I call an
epic fail the business you know did take
off when we launched Crystal Pepsi I
mean everybody tried red Crystal Pepsi
it was like a gigantic In-N-Out product
but people didn't come back and buy it
again so it didn't have the
sustainability that I was hoping for and
this failure of Pepsi teaches us a very
very important lesson on how to avoid a
terrible product failure and from
Coca-Cola standpoint it teaches us how
to kill a competitor's product using a
marketing strategy so in this case study
let's do a deep dive and try to
understand why did Pepsi release the
crystal Pepsi what went wrong in their
business strategy how did Coca-Cola kill
Pepsi's opportunity and most importantly
what are the business lessons that we
need to learn from this epic failure of
Pepsi before we move on I want to
quickly thank Geeks for geeks for
supporting our content people the new
year is finally here and I'm sure most
of you have planned to learn a lot of
skills this year and if you're
considering to master your coding skills
this year then Geeks for geeks is one of
the best platforms to learn from whether
you're aiming for a Tech Career or just
a new skill coding enhances problem
solving boosts creativity and offers
versatile applications Geeks for geeks
provides a beginner friendly course
covering coding Basics web development
and data science and it goes by the name
coding for everyone so even if you're
not from a coding field and if you just
want to learn coding this is just the
perfect course for you there is
something very special about this in the
description box so do not miss that out
and that's not all the best part is the
390 challenge and this is something that
you must have never seen before whereby
if you buy a course during January and
complete about 90% of it in 90 days
Geeks for geeks promises to give you a
90% refund this challenge will keep you
motivated to complete the course and to
acquire a new skill in just 90 days so
if you found this useful use the link in
the description and get yourself
registered now and now on with the
episode this is a story that dates back
to 199 92 America this is when the
United States was catching up with
something called the clear craze
Coca-Cola launch tab clear a sugar-free
soft drink with a mysterious new flavor
and completely clear unveiling in test
markets the newest weapon in the Cola
Wars Crystal FC to tell you about it
clear craze was a marketing fat from the
late 1980s to early 2000s so any brand
that launched something clear and
transparent was considered to be a cool
product because somehow people equated
clear with transparency and honesty in
case of food if you sold a drink that
was colorful it was perceived as if the
drink had a lot of artificial colors and
preservatives but at the same time
transparent goods were viewed as if they
had no preservatives no artificial
colors and no harmful flavors at all
this is the reason why not just Pepsi
but many Brands were trying to release
products that were transparent products
so beer companies came up with the trend
of Light beer which had fewer calories
Proctor and Gamble changed their soap
color after 100 years from milky to
transparent Nintendo released a
translucent Game Boy and even Apple made
its iMac translucent this is iMac the
whole thing is translucent you can see
into it it's so cool this is how
powerful the clear graze was now when it
comes to the soft drink Market of the
United States Coca-Cola and Pepsi both
were dominating the cola was while
Coca-Cola had a market share of
19.7% Pepsi was trailing with 17.8% %
market share while Diet Coke had 8.7%
market share Diet Pepsi had just 5.7%
market share this was also the time when
the US economy was facing a recession
because of which the soft drink Market
was slowing down this is the reason why
Pepsi decided to find a way to
capitalize on the clear craze of America
so you know what they decided to launch
a brand new product in just 9 months now
usually a new Pepsi product took at
least 3 years to be properly launched
this was because the product first had
to be made then it has to be tested in
the lab for safety then it had to be
tested with a sample audience supply
chain had to be designed marketing
campaigns needed to be designed and then
slowly the product needed to be taken to
the masses with a giant marketing
campaign but with Crystal all of this
was done three times faster why because
they were just 9 months away from the
greatest American sports event of the
year which the Americans called the
Super Bowl the National Football League
proudly presents a small world salute to
25 years of the Super Bowl in the
biggest annual American sports event in
the world the Super Bowl for those who
don't know the Super Bowl is America's
national football league championship
which is 10 times crazier than IPL and
it hits a peak viewership of 100 million
people watching this is the reason why
it was and still is a golden opportunity
for every Advertiser to get
extraordinary Returns on their ad cost
in fact according to Kanto research the
2021 Super Bowl ads delivered an average
return on investment of
360% on every dollar spent on ads this
is a reason why even a 302 ad at Super
Bowl cost $7
million so Pepsi did not want to lose
out on this golden opportunity this is
the reason why they FastTrack the launch
of Crystal Pepsi and after a lot of hard
work finally Crystal Pepsi was launched
in December 1992 and their Super Bowl ad
launch happened in
1993 now as we all know from the intro
the ad was a massive hit and Pepsi sold
$474 Million worth of Crystal Pepsi but
even then it failed miserably so the
question is what exactly went wrong well
the first thing that went wrong with
Crystal was its bottling issue to tell
you about it Pepsi had a food scientist
named surender Kumar and surrender was
the head of Pepsi's research and
development Branch so Pepsi asked him to
make clear Pepsi in clear bottles so
that they could show off the
transparency of the soft drink but you
know what Surendra pointed out an
important problem to tell you about it
if you look at 7 Up and Sprite they are
packaged in a green bottle instead of a
transparent bottle now most people will
tell you that it is done to make the
drink look more interesting and
attractive but the real reason is that
soft drinks contain various ingredients
like flavors sweeteners preservatives
and acids so when they are exposed to
sunlight these components can react for
example UV light can cause some flavors
and preservatives to break down or react
with other ingredients this leads to off
flavors and odors so in the words of
surinder it made the drink smell and
taste like shoe polish so even though
surender raised this flag Pepsi did not
care secondly surrender was told to make
a caffeine and preservative free clear
soda that tastes just like the original
Pepsi but at the same time time they did
not reveal the secret recipe of Pepsi to
surender so somehow Surendra Kumar had
to find a way to mimic the Pepsi recipe
without knowing the recipe at all and
make it clear and transparent but even
then Surendra turned out to be such a
genius that he cracked the problem and
got Pepsi a clear drink that tastes just
like Pepsi and cherry on the cake when
Pepsi tested this product with a few
people those people enjoyed Crystal
Pepsi a lot but you know the problem was
that after exposure to sunlight the
Taste of drink became a little different
and soon enough it started leaving a bad
aftertaste this was the first problem
with Crystal Pepsi secondly Crystal
Pepsi was an in congruent drink now this
is very very interesting so hear me out
in congruent literally means a lack of
consistency as in a mismatch between
what is expected and what is actually
received by the customer and this is
where Coca-Cola also came up with a
genius strategy you see there are
multiple research papers which show that
there is a very deep relationship
between the degree to which consumers
can make sense of a new product and
their evaluation of a product for
example if you look at sports cars
sports cars are traditionally associated
with powerful and ruring engines but if
I give you an option between an electric
sports car which is very quiet and
environmentally friendly and the other
that sounds like
this my question to you is which one
would you buy obviously the Roaring
sports car right this is because our
brain believes that if it is a sports
car it has to freaking Roar now I know
it's not logical but somehow that's how
consumer Behavior Works similarly in
packaging whim is known for its tagline
of carrying the power of 100 lemons and
even its packaging and liquid color
shows as if it is literally made up of
lemons but if you look at the back label
and their website there is no mention of
100 lemons in their ingredients at all
and lastly if you look at detl and
savlon detol burns when applied and
savlon doesn't but but somehow a lot of
people thought that detl is more
effective and not Savon this is because
when you apply detl it burns so it
almost feels as if DET all is working so
this is congruence of people's
perception with the expectation of how
the product looks feels and operates if
this is very clear to you let's
understand Pepsi's
scenario in Pepsi's case the clear C
stood for pureness naturalness and
health but in reality Crystal Pepsi was
anything but healthy while a 12 O can of
regular Pepsi had 150 calories Crystal
Pepsi came in pretty close with 130
calories now even though it was caffeine
free it was filled with high fructose
corn syrup so even though it was clear
it tasted like Pepsi it had the same
calories as Pepsi and it wasn't a health
drink so if you look at this product it
looked like a health drink but did not
taste or operate like a health drink now
some people thought this would work
because consumer behavior is illogical
but this is where Coca-Cola stepped into
the game and Coke went into attack mode
to use something called the Kami Kazi
strategy to kill the demand of Crystal
Pepsi to tell you about it the Kami Kazi
strategy is basically a war tactic that
the Japanese used during the World War
II in this war move they sent Pilots to
crash their bomb loaded aircrafts into
the enemy ships this way they could kill
the Americans by committing
suicide we thought we had the war one
and then when they began the kamikazi
attacks it just it scared the Living
Daylights out of everybody the Japanese
pilot
Dives then coly deliberately aims his
bom Laden zero fighter at the SRO and
crashes into the
ship now in the context of Coca-Cola
Coca-Cola decided to launch a product
that would purposefully fail and while
failing it would also kill Crystal Pepsi
so the question is how did Coca-Cola
apply this Kami Kazi strategy and kill
Crystal pepsy well Coca-Cola launched a
product called tab clear which was their
version of clear soda this product was
meant to cause confusion in the clear
cola market so if you look at the
strategy closely tab clear was
positioned as a die drink whereas
Crystal Pepsi was marketed as a regular
Cola so this introduction of a clear
diet variant by a major competitor like
Goa created lots of confusion among
consumers about what a clear cola was
supposed to be whether it was supposed
to be a regular drink or a die drink
secondly the entry of tab clear
cannibalized the market for Clear colas
so instead of one clear cola option
which was crystal Pepsi consumers now
had two major choices this split the
market and made it difficult for Crystal
Pepsi to survive and the best part was
while Pepsi launched Crystal Pepsi with
the name Pepsi in it Coca-Cola very
cleverly launched its clear cola under
the brand of tab so that Coca-Cola's
brand name would not suffer this is how
Coca-Cola added to the confusion and the
customers became sick of clear drink and
false wellness and when this got
combined with a bad aftertaste crystal
soda became a massive failure in the
United States of America so because of
the Super Bowl ad everybody bought it
once but nobody tried it again so the S
tanked retailers rejected it and Crystal
Pepsi was no longer selling in America
this is how in spite of selling $474
Million worth of products Crystal Pepsi
became an epic failure in the American
market and this failure of Crystal Pepsi
teaches us three very important business
lessons lesson number one in the rise of
FASTT tring the process of your product
launch you should never compromise on
the fundamental qualities of a product
in this case instead of taking 3 years
to build test and improve the product
Pepsi rushed to capitalize on the clear
Trend and compromised on the fundamental
taste and positioning of its product
lesson number two clear product
positioning is by far the most important
step in marketing and even if your
marketing is slightly confusing please
pull back all of your campaigns evaluate
it and then roll it because marketing
must be used to convince people and not
to confuse them and this confusion will
kill your products within no time and
lastly never ever stop yourself from
failing miserably in this case While
most amateurs might consider Pepsi to be
stupid for trying something like Crystal
Pepsi what is important to note is that
only Brave attempts lead to gamechanging
inventions and many legendary people
were called stupid when they tried
something absolutely crazy whether that
is Steve Jobs for making iPad or Elon
Musk for making SpaceX but even then
they had the persistence to try again so
don't hold back your crazy ideas and
keep trying them out because the the
world will definitely call you a fool
until you succeed and when you succeed
you will be called an overnight success
but only you will know that you are an
overnight success but yours in the
making that's all from my S of today
guys if you learn something valuable
please make sure to hit the like button
in order to make you baba happy and for
more such insightful business and
political case studies please subscribe
to our Channel thank you so much for
watching I will see you in the next one
[Music]
bye-bye
[Music]
5.0 / 5 (0 votes)