The Genius Strategy of Coca Cola to beat Pepsi | Business War: PEPSI VS COCA COLA

Summary

In 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

00:00

🥤 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'.

05:01

🏈 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.

10:02

🔍 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.

15:03

🚀 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.

Keywords

💡Crystal Pepsi

Crystal Pepsi was a clear, caffeine-free cola beverage launched by PepsiCo in 1992. It was marketed as a 'new' and 'refreshing' product that captured the 'clear craze' of the time. The video discusses how this product initially made a significant impact with sales of $474 million but ultimately failed due to various strategic and marketing issues, illustrating the theme of product innovation and market response.

💡Clear Craze

The 'clear craze' refers to a marketing trend in the late 1980s to early 2000s where clear and transparent products were considered fashionable and desirable. The video explains that this trend influenced the food and beverage industry, leading to the creation of Crystal Pepsi. It exemplifies how consumer perceptions can drive product development and market strategies.

💡Coca-Cola

Coca-Cola is a major competitor of Pepsi and is mentioned in the context of the 'cola wars' and their strategic response to Crystal Pepsi. The video details how Coca-Cola launched Tab Clear, a competing clear beverage, as part of a marketing strategy to undermine Crystal Pepsi's success. This keyword is central to the narrative of competition and strategic countermeasures in the soft drink market.

💡Kami Kazi Strategy

The 'Kami Kazi Strategy' is a term borrowed from World War II to describe a self-destructive attack on the enemy. In the video, it is used metaphorically to describe Coca-Cola's strategy of launching Tab Clear, a product designed to fail but also to take down Crystal Pepsi with it. This concept is key to understanding the aggressive marketing tactics used in the beverage industry.

💡Product Launch

The term 'product launch' is used in the script to describe the process of introducing a new product to the market. The video emphasizes the rushed nature of Crystal Pepsi's launch, which took only 9 months, as opposed to the usual 3 years, highlighting the importance of thorough product development and testing before market introduction.

💡Marketing Strategy

The 'marketing strategy' refers to the methods and tactics used to promote and sell a product. The video discusses how Pepsi's marketing strategy for Crystal Pepsi was both innovative and flawed, leading to initial interest but ultimately to the product's failure. It underscores the critical role of clear and consistent marketing in product success.

💡Consumer Behavior

Consumer behavior is the actions and decisions of consumers in relation to the purchase of goods and services. The video script uses the concept to explain how consumers' perceptions and expectations, such as associating clear drinks with health, influenced the reception of Crystal Pepsi and contributed to its eventual failure.

💡Incongruent Product

An 'incongruent product' is one where the consumer's expectations do not match the actual product experience. The video explains that Crystal Pepsi was perceived as a healthy drink due to its clear appearance, but in reality, it contained high fructose corn syrup, leading to a mismatch between expectation and reality.

💡Cannibalization

In the context of the video, 'cannibalization' refers to the situation where a company's new product takes market share away from its existing products. The introduction of Tab Clear by Coca-Cola is cited as an example of this, where it split the clear cola market and weakened Crystal Pepsi's position.

💡Epic Fail

The term 'epic fail' is used to describe a significant or spectacular failure. The video uses this term to describe the failure of Crystal Pepsi, emphasizing the scale of the product's initial success and subsequent downfall, and serving as a cautionary tale in business strategy.

💡Business Lessons

The 'business lessons' extracted from the failure of Crystal Pepsi are key takeaways for viewers. The video outlines three lessons: the importance of not rushing product development, the need for clear product positioning, and the value of learning from failures. These lessons are integral to the video's message on business strategy and innovation.

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

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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

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[Music]

bye-bye

[Music]