Crystal Pepsi's Demise: EXPLAINED

My father has this book about succeeding in business against larger companies, entitled Killing Giants, which compiles several business strategies in one book.  One of them - I shit you not - is a section entitled "Fighting Dirty" (this is business, after all), and one of the contained stories is an interview with an officer from Coke, whose name makes him seem like he'd be great as an assistant director on Zombi 2, explaining how he and Coca-Cola killed Crystal Pepsi.  I've reproduced the segment below, but for those who want the short version...

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MUTUALLY ASSURED (BRAND) DESTRUCTION: Tab Clear Versus Crystal Pepsi

The early nineties was a meat grinder for the beverage industry - unless you were Snapple, of course, in which case you were riding a rocket.  Snapple's meteor-like impact on the U.S. beverage market took volume away from everything else, including the powerhouse colas. This drop in volume had to be dealt with somehow, some way, because shareholders didn't care about the "why" as much as they cared about the "when" of the current management team's fix for the problem.  This was a tough time.  But tough times spawn interesting ideas.  And Crystal Pepsi was an interesting idea.

Read the press from 1992 and you'll see a very confident Pepsi eagerly launching their new product.  There was considerable buzz about this new clear, noncaffeinated cola.  Many predicted it would be very successful; some predicted it would change the face of colas entirely.  Positioned somewhere in the exploding New Age beverage category along with Snapple and other nontraditional drinks but still a cola, Crystal Pepsi was enigmatic and a source of concern for Coca-Cola.

By this point, Sergio Zyman had pretty much seen it all, having been Coke's marketing chief responsible for guiding the company's strategy through the launch of Diet Coke as well as New Coke.  Between his two tenures at Coca-Cola, and shortly before he returned to the company as its first chief marketing officer, Sergio was consulting with the company on a number of strategic issues and watching this unfolding drama at Pepsi closely.  "Pepsi had decided to launch a clear cola," he told me.  "So Pepsi said, 'If we launch a cola, which is the bulk of the market, that is clear, then we can capture a large percent of the market.'  They wanted to launch it at the Super Bowl.  They kind of got carried away with it."

While studying the competitive intelligence, Zyman saw an opening - and executed a strategic shift. "What I found was that, when I did the research, one of the critical attributes that was coming through was the whole idea that clarity conveyed welllness."  He realized that "a way to ambush Crystal Pepsi is to do a kamikaze on them - commit suicide and kill them in the process.  So I went to the company and sold them on the idea."

Crystal Pepsi had some confusing attributes, to be sure.  Clear meant "wellness" to consumers and the product's caffeine-free formulation supported this impression.  But its clear formulation made it visually similar to the lemon-lime category, even though it was a full-fledged cola.  And while clear may suggest wellness to consumers, Crystal Pepsi wasn't a diet drink.  There was plenty to be confused about.  So Zyman led the charge to reposition the competition and make sure the confusion was known to everyone.

"What we did is we said we would launch a Tab Clear product and position it right next to the Crystal Pepsi, and we'd kill both in the process," he told me.  "We basically repositioned the competition."  Tab Clear's launch, with its legacy of being a second-tier diet drink and its overlapping position of being clear, further muddied the already confusing image of Crystal Pepsi in the mind of the market.  It validated the clear beverage market - but with a deadly twist: The validation was coming from a brand perceived to be far below the status and cache of the flagship Pepsi product and one that was clearly cemented in the minds of the public as a diet entry.  Like a new fad too quickly adopted by the uncool members of the class, Crystal Pepsi's luster took an instant hit.

"They were going to basically say it was a mainstream drink," Zyman continued.  "This is like a cola, but it doesn't have any color.  It has all this great taste.  And we said, "No, Crystal Pepsi is actually a diet drink.'  Even though it wasn't.  Because Tab had the attributes of diet, which was its demise.  That was its problem.  It was perceived to be a medicinal drink.  Within three or five months, Tab Clear was dead.  And so was Crystal Pepsi."

To many industry watchers, the launch of Tab Clear was a failure - a clear cola, a me-too product weakly launched against a juggernaut.  But if its mission was to stick to Crystal Pepsi and drag both products down, it succeeded beautifully.

"It was a suicidal mission from day one."  Zyman explained.  "Pepsi spent an enormous amount of money on the brand and, regardless, we killed it.  Both of them were dead within six months."

Tab Clear gives us an excellent example of carefully sabotaging your competitor's flagship launch with the smart positioning of a drab market entry.  What lessons can we take from this story?

• NO ONE WANTS TO STAND NEXT TO THE CLOWN  Everybody ends up looking like they deserve a red ball on their noses.  Think off a presidential debate where too many people are up on stage.  Eveyone is trying to look "presidential," but they can't.  There's too much going on and the one guy who talks funny keeps making everyone laugh.  In the end, everyone ends up looking silly.  The debate ends in a draw.  Everyone loses.
  
  
• DON'T GIVE YOUR COMPETITOR THE VALIDATION IT DESIRES.  If Coke had launched a clear version of flagship Coca-Cola brand, we'd all be sipping some sort of clear cola today.  We're not.  Coke played its cards right, sending a slightly worn, very unsexy brand out to make both of them look foolish.  In the process, they sunk both - on purpose.
  
  
• WE CAN MOVE THE MARKET'S ANCHOR POINTS BY SUBTLE BUT IMPORTANT DEGREES WITH THE CAREFUL PLACEMENT OF OUR OWN COMPETITIVE PRODUCTS.   This strategy works better in more subjective, lower involvement products than many others, but the underlying truth still holds up to scrutiny.  When we're dealing with subjectivity - in matters of personal taste - this strategy makes sense.  Where emotional attachment to a brand, a product, or an idea is at stake, Tab Clear's self-destructing strategy is deadly.
  

Tab Clear's strategy was to muddy the already murky waters and make the entire category look less sexy than Pepsi planned for it to be.  By bringing the entire market segment down to a less sexy, quasi-medicinal pall, Tab Clear sank clear cola.  Both ended up dead within the year, which was the point all along.

That was interesting, but now I'm craving a Tab.

That's.....actually a pretty fucking brilliant move on Coke's part when you think about it.

You don't see the kamikaze business model much.   More power to Coke, though, they pulled it off.

Fun fact: Wanna know why we call lower calorie beer "light beer" and not "diet beer"? Diet beer failed badly, mostly due to the fact most beer drinkers are men, and back in the 60's no man wanted to be seen drinking a diet beer because dieting was a thing only women did (BTW, this is not my opinion or thought, this is how people thought back then). So the good people at Miller came up with the idea to call diet beer "Lite Beer". It was a smash hit and other brewers came out with "light' beers of their own, although Miller spells it "Lite" and others spell it "Light".

I'm FUBAR, and that's your beer fact of the day.

fubar_in_pittsburgh wrote:

Fun fact: Wanna know why we call lower calorie beer "light beer" and not "diet beer"? Diet beer failed badly, mostly due to the fact most beer drinkers are men, and back in the 60's no man wanted to be seen drinking a diet beer because dieting was a thing only women did (BTW, this is not my opinion or thought, this is how people thought back then).

Judging by those repulsive 1-Calorie Dr. Pepper commercials, they still do. :/

Although, now if I saw a beer try to market itself as "diet" I'd probably be nonplussed. Funny how we get used to consummables being described/presented a certain way.

actually i didn't know that about light beer. i don't remember tab clear at all. and i used to drink that like mad. i dunno the last time i had a tab. it's been years. anyways, but i drank crystal pepsi like water. damn i miss that drink. thanxs for the info though, it kinda reminds me of

brad's review for that new harrison ford movie Paranoia where it's a fight between cell phone companies. only for this it's pop and how the got rid of crystal pepsi the fuckers.

I like clear crystal soda. Well I like Diet Hansen that I get at Trader Joe's.