Objective of the Project Work

This project begins with an evaluation of the failure of the brand extension of Coca-Cola
Company in case of the product Vanilla Coke (VC).

Certain causes are identified and after analysis it is deduced that the extension
opportunity exists w.r.t to the product vanilla coke.

Alternative extension opportunities are then evaluated and a relaunch strategy is

suggested.

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 Table of Contents

I. Reasons for Failure

II. Evaluating the extension Opportunity

A. Actual and Desired consumer knowledge about the brand

B. Identification of Extension Candidates

C. Evaluation of Extension Candidates

III. Relaunch Strategy – STP Analysis

A. Product

B. Segmentation

C. Target

D. Promotion

E. Suggested Promotional Methods

IV. Financials

A. Sales Forecast

B. Expense Budget

V. References

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 I. Reasons for Failure:

The brand extension here is evaluated on its

• Ability to create salience

• Its uniqueness and favorability
• The promotion model employed for communicating the extension

The Indian soft drink industry particularly in the CSD segment is a duopoly with Pepsi and
Coke leading the roost. Each has having specific brand loyal.

Thus the twin use of the names Vanilla and Coke in the new product description would have
demonstrated the category membership and created salience.

Strong brand loyalty would have prompted buying /sampling initially by the coke loyal.
However, the nomenclature of “Vanilla Coke “may have resulted in the product not have
being perceived as a new product. It would have thus immediately pitted against the classic
Coke. For the Coke loyal, VC had the promise of a Coke product, but not the taste of coke
which may have lead to its immediate rejection.

Additionally the high salience creation may have also contributed to the inability of VC
to create a unique association. The name Vanilla used along with coke may have created a
different perception. Its clarity as to whether the new drink was a cola or a non cola drink
was not visible. Since Vanilla is associated with ice cream, it is likely that, the product was
perceived as an ice-cream + soda and not as a soft drink.

From the favorability perspective there are two factors operating. Externally, this time
period was that of declining sales of carbonated drinks. One of the major reasons was
pesticide and groundwater controversies. In addition, the health drink and the bottled water
segment were also growing in large numbers. However, blind tests revealed consumer
acceptance of the new taste so it is hard to conclude that the demand for the product would
be low.

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The model adopted for communication was the use of a retro theme. In terms of reach
the promotion methods had a huge impact with an excess of 4 lakhs smses in just an
estimated 4 weeks. However the sustainability of the reach, measured in terms of
favorability of the launch theme could not be built by activities such as launch of remix
songs. One reason for this could be the choice of a celebrity Vivek Oberai for promotion. He
conformed to the tagline and lent credence to the launch of a new product as he was also a
newcomer in the film industry winning acclaim. However, he was appreciated for
unconventional roles and did not fit into the theme of retro. (Mismatch between
product specification (new drink) and promotion (retro))

The new drink was targeted at the youth in the age group of 12 to 29.However its positioning
vis-à-vis other products in the soft drinks market was not clearly defined. Following
positioning might have been intended:

• Target group laggard; the group of consumers highly resistant to change and are
characterized by their conformance to traditional products. The retro feel was aimed
at creating an impulsive behavior by appealing to traditional values.
• In addition, Coke also ambitiously banked on high sales to the adventurous, by
riding on the USP of novelty.
• With the 2 broad segments in hand it was also logically assumed that the third group
of followers would also pitch in.

However this process did not do well for VC, because it conflicted with its image of
something new. (Mismatch between product specification and promotion)

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 II. Evaluating the extension opportunity

A. Actual and Desired consumer knowledge about the brand

To identify sources of equity a mental map is constructed. The steps in construction of the
mental map are as flows,

A face to face interview was conducted with 8 respondents, (4 male & 4 female) in the age
groups of 20-25, all were asked the following

• Top of mind recall, words association that came with the coca cola company/coke
• Colors they would never associate with Coke
• The associations always preferred for the “No color” association with coke.(This
is an adaptation if Zaltman Metaphor Elicitation Technique(ZMET))

No Always associations with the No color

Top of Mind Associations Color association
Environment, forests, nature, freshness,
Green mountain dew, Indian flag
dynamic, power, sky, Pepsi, ocean, music
Tradition, chilled, "thanda", Amir khan, friends, Blue band(one Love),
party, relaxation/recreation, black, red, Aiswarya “Girly”, Barbie, soft toys, costumes, small
Rai, Pink kids
Yellow flower, footie, mango, jelly, candy
church, milky bar, hospitals walls, Venice,
White Christmas, pure
Inferences

• Thus the colors red/black is the most favorable associations.

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 • The equity of cokes is highly dependent on brand ambassador, Amir Khan shows a
strong and uniform association with Coke
• Uniform disconnect of Cokes with nature, freshness, power, dynamism, purity

B. Identification of possible extension candidates on basis of overall brand

associations

As seen above white is a strong “no color” association for Coke. The same respondents
however

• Did not pick up vanilla as the most favorable association with the color white.
• However when given the option or told about vanilla the immediate association
was with the color white.
• Vanilla showed a uniform association with ice cream and age old tradition

Hence

• Coke cannot introduce a product that has any source of association with the color
white
• Cannot introduce a product using “Coke” in the product name,
• Drinks with any departure from existing color of black, from the stable of Coke
are suspect of success
• An association with the color red is acceptable

Thus possible extension candidates are products that have a traditional appeal,
usage among groups, on occasions of celebration, recreation or relaxation and are
consumed cold/chilled. The product here is

• A flavored drink
• Black in color , consumed cold
• Has an association with vanilla, which in turn has a traditional usage in cold form

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 Thus the alternative product characteristics are (Extension candidates), Classic
Mix, Classic Tinge, Coke Mix, Cold -dose, “Thanda” Mix/Tinge.

C. Evaluation of extension candidates

Basis of Thanda
Evaluation Coke Mix Classic mix Mix/Tinge Cold Dose Classic Tinge
High as
Thanda
High as Thanda
word is
word is used
Very high, immediate association used
Salience Low Low almost
with parent Coke Brand almost
interchangeably
interchang
with Coke
eably with
Coke
A new Very high
association as it Low - A new
is built but leverages association is
Uniqueness/ Low as a new association is not not an existing No new built but not
Favorability built leveraging favorable association leveraging on
on old association old positive
positive to create a association
association new
Compelling Low Medium Medium Low Medium

The basis of evaluation are defined as

• Salience the extent to which the extension is able to derive strong category
association
• Uniqueness the ability to leverage and existing positive association to build on a
new association that shows high match to the product characteristics
• Compelling the logic of extension evidence

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 The relevance of the extension measure the logic of the new product w.r.t to the
parent brand .Here it is high across all alternatives as Coke is launching this
product by leveraging its existing presence in the soft drink segment.

Thus on the basis of the above evaluation the most likely extension candidate is Thanda
Mix/Tinge. However the word tinge has a touch of nostalgia (tradition) hence can create
connect with traditional values as compared to mix.

III. Relaunch Strategy – STP Analysis

The relaunch strategy has been proposed taking into consideration only the Indian Market.

A. Product

• The product to be offered is not vanilla coke but a new drink which is Thanda
Tinge (TT).
• The product is not a cola, lime or an orange flavored drink but a completely new
drink in a new category of Mixes.
• This product specification also gives the freedom of designing future variants
similar to TT say for instance vanilla orange. Additionally such a product
specification has clearly defined POPS and PODS.
o POPS (Points of Parity): Carbonated soft drink
o PODS (Points of Differentiation): A new variety (Mix) of carbonated
soft drink clearly differentiable from cola, lemon and orange variants.

B. Segmenting

The carbonated soft drink market can be broadly segmented into the following:

1. Cola 2. Lemon 3. Orange.

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The segments are derived assuming the basis of the buying of carbonated soft drink is
solely determined by user preferences with a low degree of dependence on factors such
as:

• Geographic: Parameters such as States, Region and Neighborhoods.

• Demographic: Parameters such as Gender, Occupation, and Religion.

For the Relaunch a similar type of segmentation, is proposed. However, it is planned to

create a new segment (Mixes) which is combination of certain fractions of existing 3
segments. Hence it is planned to have an undifferentiated marketing of the product by
temporarily discarding the prevalent segmentation criteria but targeting the entire market
as a whole.

C. Target: Within the broadly defined three segments above the buyers can also be
grouped according to their buying preferences into laggards, ambitious and

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followers .The laggards of each group are the loyalists of a particular brand and flavor.
That is in the broadly defined carbonated market the cola buyers would include some set
of people who would always buy a cola (laggards), ambitious(those who buy cola but are
always willing to experiment ) and finally the followers who always follow others.

The target audience for the TT would be the ambitious of each segment population in the
short run. Then the promotion campaign would leverage on the increased sales on
account of use by ambitious to promote the use of TT among laggards. The advantage of
this would be lower cannibalization of sales of other products. That is to say that
since the plan is to target existing users in the 3 segments the decrease in sales of a
particular product in each segment would be comparatively low as compared to the
previous drop in sales of classic coke(during launch of VC).

D. Promotion:

It is planned to promote the use of TT as a drink for an occasion. Leverage on the

traditional use of vanilla as an essence to promote drinking of TT. The use of vanilla
as an essence is prevalent in ice creams and intuitively the vanilla ice cream buyers
would comprise of laggards and ambitious with a major portion being laggards.

Phase 1: Target ambitious group of buyers in each segment. Stress on novelty factor
and promote TT as a drink for a daily occasion. TT would initially be available in
small bottles to aid impulsive buying by the consumer who would wish to try the new
product. The advantage would be an increase in sale of number of units but margins
would suffer on account of increasing packaging expense.

Phase 2: The test period is anticipated to be 6 months as was in the earlier case. The
second phase of promotion would leverage on:

• The sales for the past 6 months (so many people have experienced the joy of
TT kind….).
• And stress on the traditional use of vanilla.( building a new association)

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The target is laggards so; greater emphasis would be on the second factor. The sales are
expected to be constant if not increasing Here it is assumed that the ambitious group
would have either stopped the use of Tinge or have considered it as another drink to be
had regularly. In the worst case scenario of first case, the conversion of even a small % of
laggard group can lead to sustainable sales.

Phase 1 Phase 2
Advertising media Laggards Ambitious Laggards Ambitious
Bill
Board/hoardings Low Low High Low
Television Low High Low Low
Web Based None High None Low
Radio Low Low High Low
Magazines Low None High None

Advertising Breakup

The above table is a rough estimate of the proportions of various media used for
promotion. In the first 6 months ambitious of each segment are targeted. One common
characteristic would be preference for non traditional media hence the promotion
methods place a heavy emphasis on the television and web based media. Present time
radio makes sense as it is considered non traditional particularly FM channels.

At the same time the emphasis on bill board, radio and magazine advertising is kept low
as these may impact laggards to a greater degree as compared to ambitious.

After the first 6 months that is in the second phase of launch there would be a heavy
focus on radio magazine and bill board form of advertising. Simultaneously reducing
time on television and web based forms. This is expected to impact the laggards.

E. Suggested Promotional Methods

The initial phase can be done by promoting TT as a drink for celebrating small happy
events that are personal and also shareable. VT should be promoted as the ideal drink for
such occasions. The tag line may be “Har Khushi me ek mithas hai”: Vanilla Tinge
should be targeted to urban markets showcasing the subtle typical “Indian” daily happy

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moments common to all such as , “A girl smiles to a boy”, “Appreciation by boss”,
“India wins a match”, “small anniversaries” etc.

The above promotional campaign provides a carbonated drink for above mentioned
needs, which have not been targeted by any of the existing similar products in
existing markets presently.

IV. Financials:

The numbers for TT are forecasted in the following manner:

A. Phase 1

• Sale of carbonated beverages as a % of total beverage sale (382.5 million units

approximately, 40% of the total beverage sale)
• A niche beverage sale that resembles the new product being launched specifically
in the novelty factor rating is identified. Here it is assumed to be the sports based
energy drink in India.
• Estimate % contribution of the sale of this drink to the total carbonated beverage.
(Approx =1.1%)

B. Phase 2

• Estimate the population of the major metros, and find out the distribution among
the different age groups. (40 million)
• Identify the estimated size of the target age group. (The age group 12-29 years
approximately 30% equals 12 million)
• Assume the sale of TT to be to the same % of this age group as contributed by the
sports based energy drink to the total carbonated drink sales (1% of 12
million).The reason being, this group would logically comprise of a higher
fraction of adventurous oriented potential consumers who are the target during
the first phase of launch.

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 Sales Forecast (millions of units)

Year 2009 2010 2011

First 6 months Last 6 months
Sales - Units (Total) 1.2 2 2.75 3.025
Breakup
Adventures 1.2 0 0 0
Laggards 0 2 2.2 2.42
Followers 0 0.5 0.55 0.605

Sales Details:

• First 6 months sale has been assumed to the adventurous of the target age group
• Post 6th months it has been assumed that the remaining % of the target age group
shows a 2% conversion rate.
• YoY growth has been assumed at the industry standard of 10% CAGR.

Expense Budget (Figures in Million, INR)

Sales Revenue 12 20 27.5 30.25

Total Expenses 3.024 2.64 3.63 3.993
Breakup
Promotion 2.88 2.4 3.3 3.63
Distribution 0.12 0.2 0.275 0.3025
Raw Material 0.024 0.04 0.055 0.0605

Expense Details

• Cost/ Unit has been assumed the same as existing classic coke.(Rs10)
• The cost of raw material has been marked over the existing breakup for coke
taking into account increased cost of vanilla. Instead of .1% of the sales price it
has been doubled
• Promotion expenses have been assumed to be 25% of the total sales revenue again
doubles the existing breakup since it is planned to aggressively promote only in
the first 6 months

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 • Distribution cost again industry standards 1% of total sales. This is a source of
competitive advantage as existing distribution networks can be leveraged.

The above analysis indicates a margin of 75%. Capital expenditure is not factored in,
however it is assumed that no huge expense would be incurred as an existing line
intuitively may be easily customized for manufacture of TT. If that is factored, margins
are estimated to drop down to 60% which is the current industry standard for carbonated
drinks.

V. Reference Links

Secondary, desk research was done. Following are reference links

1. http://www.google.co.in/search?hl=en&client=firefox-a&rls=org.mozilla:en-
US:official&q=coke+vanilla+why+did+it+fail+india&start=20&sa=N
2. http://sxtcglobal.typepad.com/my_weblog/article_9_why_vanilla_coke_wont_wo
rk/index.html
3. http://www.marketingprofs.com/6/mininni2.asp?sp=1
4. http://www.icmrindia.org/casestudies/catalogue/Marketing1/Vanilla%20Coke
%20A.htm
5. http://www.icmrindia.org/casestudies/catalogue/Marketing1/MKTA002.htm
6. http://www1.economictimes.indiatimes.com/articleshowarchive.cms?
msid=1183273
7. http://marketingpractice.blogspot.com/2006/12/vanilla-coke-wakaw.html
8. http://www.icmrindia.org/casestudies/catalogue/Marketing1/Vanilla%20Coke
%20%20B.htm
9. http://www.indiantelevision.com/mam/special/y2k4/wakaw.htm
10. http://marketingpractice.blogspot.com/2006/12/vanilla-coke-wakaw.html

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