CASE STUDY

Manufacturing Operations Management

(EMM5606)

TOPIC : CRYSTAL PEPSI

Lecturer Name: Dr Zulkifle Leman

Group Name: Professionals

Group Members:
Sh ah zad Mu n ir

GS 42944

Ism ail Ab d u l Gh an i Mem o n

GS 39789

Ch o k Men Fei

GS 38803

Sh ar if ah Mu n ir ah Bt Syed Kam ar u lzam an GS 42374

Zu b aid ah b t Mo h am ed @ Macaso n

GS 42469

Fu ad Hassan Ah m ed

GS 42244

1. INTRODUCTION
This case study will cover a product failure from Pepsi Co which is Pepsi Crystal. Crystal Pepsi was a

caffeine-free soft drink made by PepsiCo from 1992 to 1993. However it only lasted a year
hence we are going to see the overall of it from the company history, historical sales data,
company size, complete description of product lines, brands to the reason of failure.

2. HISTORY OF COMPANY
Caleb Bradham, a pharmacist and industrialist from New Bern, North Carolina developed the
first recipe for soft drink Pepsi in the 1880s. He coined the name "Pepsi-Cola" in 1898. As the
cola developed in popularity, he created the Pepsi-Cola Company in 1902 and registered a patent
for his recipe in 1903. In 1919 the Pepsi-Cola Company was first incorporated in the state of
Delaware. The company went bankrupt in 1931 and on June 8 of that year, Charles Guth who
owned a syrup manufacturing business in Baltimore, Maryland purchased the trademark and
syrup recipe. Guth was also the president of Loft, Incorporated, and a leading candy
manufacturer. He used the company's labs and chemists to reformulate the syrup. He further
contracted to stock the soda in Loft's large chain of candy shops and restaurants, which were
known for their soda fountains. Guth used Loft resources to promote Pepsi, and moved the soda
company to a location close by Loft's own facilities in New York City. In 1935, the shareholders
of Loft sued Guth for his 91% stake of Pepsi-Cola Company in the landmark case Guth v. Loft
Inc. Loft won the suit and on May 29, 1941 formally absorbed Pepsi into Loft, which was then
re-branded as Pepsi-Cola Company that same year. Loft restaurants and candy stores were spun
off at this time. In the early 1960s, Pepsi-Cola's product lines expanded with the creation of Diet
Pepsi and purchase of Mountain Dew. In 1965, the Pepsi-Cola Company merged with Frito-Lay,
Inc. to become PepsiCo, Inc. At the time of its foundation, PepsiCo was incorporated in the state
of Delaware and headquartered in Manhattan, New York. The company's headquarters were
relocated to their present location of Purchase, New York in 1970, and in 1986 PepsiCo was
reincorporated in the state of North Carolina. Between 1990 and 1995, PepsiCo funded The
MacNeil/Lehrer News Hour on public television.

3. HISTORY SALES DATA

The beginning sales of Pepsi Crystal were good but dropped drastically. Pepsi pulled the drink
off the market by fall 1993, and the final batches were delivered to retailers during the first few
months of 1994. Pepsi returned several months later with a reformulated citrus drink titled
Crystal from Pepsi, but this was short-lived as well. Crystal Pepsi captured a full percentage
point of soft drink sales, approximately $474 million.

4. COMPANY SIZE
PepsiCo, Inc. is one of the world's top consumer product companies with many of the world's
most important and valuable trademarks. Its Pepsi-Cola Company division is the second largest
soft drink business in the world, with a 21 percent share of the carbonated soft drink market
worldwide and 29 percent in the United States. PepsiCo's product portfolio includes 16 brands
that generate more than $500 million in sales each year, ten of which generate more than $1
billion annually. Overall, PepsiCo garners about 35 percent of its retail sales outside the United
States, with Pepsi-Cola brands marketed in about 160 countries.
Today, after decades of new product innovation, partnerships and strategic acquisitions,
PepsiCos diversified portfolio of iconic beverages are enjoyed all over the world. PepsiCo offers
14 billion-dollar brands that span carbonated soft drinks, juices and juice drinks, ready-to-drink
teas and coffees, sports drinks, and bottled waters. It is enough choices to satisfy a wide range of
consumer taste, occasion, and lifestyle in over the world. Among the products brand listed under
Pepsi Co are Frito-Lay, Gatorade, Quaker Oats, Tropicana, Smiths Crisps Australia, Walkers
Crisps United Kingdom, Naked Juice and Lipton.

5. History of Product
The Crystal Pepsi was launched seeing the society's demand and perception towards healthier
beverages in 1990's based on its clear look, taste and its ingredients. Crystal Pepsi was taste by
5,000 participants before it hits the markets in April 1992. The test markets were conducted in
Dallas, Denver and Providence, Rhode Island for about nine months. It was then launched in
December 1992. Crystal Pepsi was basically available in the major grocery and retail stores in all
the countries where Pepsi was having a good shares in beverages, similar as where normal Pepsi
was distributed.
However, the initial sales were believed to be sufficient to cover Pepsi's cost. Crystal Pepsi got
total sales of $335 million in its first year sales, but it was well below its expected sales target of
$1 billion. Crystal Pepsi was available in the stores from end of 1992 to 1992 in USA and
CANADA. It was sold in the other markets for even for a shorter period but for a slightly longer
period in Europe only.

6. Targeted Market
PepsiCo targeted the first group of consumers which is a health conscious group. By making the
Crystal Pepsi color free, removing the caramel color of normal colas has, it was launched as a
image of "good health" , purity and icy cold water" to its consumers. It was also followed by the
trend during early 90s to make a product colorless in order to give an impression to their
consumers the impression of clarity and healthy beverages. The Other category of target market
of Crystal Pepsi was the consumers of cola besides soft drinks. There were about $47 billion
worth of Soft drink market only in USA in 1993.For these reason, PepsiCo invested millions of
dollars and Spent 15 months in multiple formulas to produce a whole new product named
CRYSTAL PEPSI.

7. Objective

Caffeine Free Clear Soft Drink

Taste similar to original Pepsi
It could take over majority clear soda shares.
Create competition for sprite and attempt to absorb its market share also
Didnt try to market it as a different Product.

But, after about a year of the launch, Pepsi decided to halt the production of Crystal Pepsi, as the
market for clear soda proven to be a fad. The Main Reasons of Crystal Pepsi Failure are as
follows:
1. It didn't have significant point of difference as compare to regular Pepsi. Even though
PepsiCo stressed that it was produced by different formulas from its Pepsi Cola.
2. Crystal Pepsi clear color of crystal was to target the group of people who are health conscious
consumers. Even though it had removed caffeine and the caramel color from the drink, Crystal
Pepsi didn't present an image of soft drink which is healthier to most consumers as it was
supposed to be. in fact it contains just a little less calories which are 130 compare to 150 calories
to the original one in one serving.
3. Lack of market attractiveness was another major factor of failure of Crystal Pepsi. Healthconscious and less frequent cola drinkers were the target market of Crystal Pepsi. However, it
failed to provide the image of Healthy and distinctive beverage, so Crystal Pepsi could not fully
attracted its target market.

8. Strategies to Drive Companys Growth

These six strategies are being implemented across PepsiCo that is geographically focused and
coordinated through global centers of excellence and global functional leadership.
1. Expand the Global Leadership Position of Our Snacks Business. PepsiCo is the global
snacks leader, with the No. 1 savory category share position in virtually every key region
across the globe. We have advantaged positions across the entire value chain in more than 40
developed and developing regions in which we operate as we capitalize on local
manufacturing and optimized go-to-market capabilities in each region, as well as the ability to
introduce locally relevant products using global capabilities. And we have significant growth
opportunities as we expand our current businesses in these regions, extend our reach into new
geographies and enter adjacent categories. Importantly, we will continue to make our core
snacks healthier through innovations in heart-healthier oil, sodium reduction and the addition
of whole grains, nuts and seeds.
2. Ensure Sustainable, Profitable Growth in Global Beverages. The merger with our anchor
bottlers creates a lean, agile organization in North America with an optimized supply chain, a
flexible go-to-market system and enhanced innovation capabilities. When combined with the
actions we are taking to refresh our brands across the entire beverage category, we believe this
game-changing transaction will enable us to accelerate our top-line growth and also improve
our profitability. We continue to see significant areas of global beverage growth, particularly
in developing markets and in evolving categories. We will invest in those attractive
opportunities, concentrating in geographies and categories in which we are the leader or a
close second, or where the competitive game remains wide open. Additionally, we will use our
R&D capabilities to develop low- and zero-calorie beverages that taste great and add positive
nutrition such as fiber, vitamins and calcium.
3. Unleash the Power of "Power of One." PepsiCo is in the unique position to leverage two
extraordinary consumer categories that have special relevance to retailers across the globe.
Our snacks and beverages are both high-velocity categories; both generate retail traffic; both
are very profitable; and both deliver exceptional cash flow. The combination of snacks and
beverageswith our high-demand global and local brandsmakes PepsiCo an essential partner
for large-format as well as small-format retailers. We will increasingly use this portfolio and
the high coincidence of consumption of these products through integrated offerings (products,
marketing and merchandising) to create value for consumers and deliver greater top-line
growth for retailers. We also will be accelerating Power of One supply chain and back-office
synergies in many regions to improve profitability and enhance customer service.
4. Rapidly Expand Our "Good-for-You" Portfolio. PepsiCo currently has a roughly $10
billion core of "Good-for-You" products anchored by: Tropicana, Naked juice, Lebedyansky,
Sandora and our other juice brands; Aquafina; Quaker Oats; Gatorade (for athletes); the new
dairy joint venture with Almarai; and local "Good-for-You" products and brands. We will
build on this core with an increasing stream of science-based innovation derived from the
R&D capabilities that we have been ramping up over the past couple of years, as well as from
targeted acquisitions and joint ventures. We will be investing to accelerate the growth of these

platforms, and we will use the knowledge from these initiatives to improve our core snack and
beverage offerings and also to develop highly nutritious products for undernourished people
across the world.
5. Continue to Deliver on Our Environmental Sustainability Goals and Commitments. We
are committed to protecting the Earth's natural resources and are well on our way to meeting
our public goals for meaningful reductions in water, electricity and fuel usage. Our businesses
around the world are implementing innovative approaches to be significantly more efficient in
the use of land, energy, water and packagingand we are actively working with the
communities in which we operate to be responsive to their resource needs. In 2009, we
formalized our commitment to water as a human right, and we will focus not only on worldclass efficiency in our operations, but also on preserving water resources and enabling access
to safe water. Our climate change focus is on reducing our carbon footprint, including a
reduction in absolute greenhouse gas emissions through continued improvement in energy
efficiency and the use of alternative energy sources. We actively work with our farmers to
promote sustainable agricultureand we are developing new packaging alternatives in both
snacks and beverages to reduce our impact on the environment.
6. Cherish Our Associates and Develop the Leadership to Sustain Our Growth. We have an
extraordinary talent base across our global organizationin our manufacturing facilities, our
sales and distribution organizations, our marketing groups, our staff functions and with our
general managers. As we expand our businesses, we are placing heightened focus on ensuring
that we maintain an inclusive environment and on developing the careers of our associatesall
with the goal of continuing to have the leadership talent, capabilities and experience necessary
to grow our businesses well into the future. As an example, we are implementing tailored
training programs to provide our managers and senior executives with the strategic and
leadership capabilities required in a rapidly changing environment.

9. Other Relevant Issues

9.1

Successful story behind the failure

It was not a total mistake to come out with Crystal Pepsi. This is because it still counted as
innovative product that would in the end lead to the favorable consumer attitudes towards
the Lewinsky (Pepsis name in 1993). Votes had been carried out based on the consumers
interest towards buying the product, the products value and its creativity, it was surprised
that Pepsi Crystal was still selected as the best of all among other grocery product in 1992.
Despite its ultimate failure in the second year after distribution, in fact it did attract a great
number of consumers to have a try on the innovative product. This is likely because there
was an inclination to try new and latest products among consumers, even though it does
not last long. Even Pepsi Crystal failed in the next year, it was believed that its initial sales
was enough to cover the companys costs.

9.2

Hard promotion of the product

As a means of communication between the seller and buyer, Pepsi did try hard to promote the
new product that time. This includes the slogan Youve never seen a taste like this with the
music from famous artist, Van Halen, namely Right Now. Advertisement had been done
through network TV after its official launch in 1992. In addition to TV advertisement, PepsiCo
was able to come out with the first ever computer generated, photo-realistic bus wrap in the
world! In order to put a strong push towards its expected market share, the company even
arranged promotions with most of the retailers, including USA today. Furthermore, little creative
advertisement product were also product like wall clock, pool float and glass.

9.3

Pepsi Crystals targeted market

There was some targeted market for the new product that time. It can be categorized into three
groups of people. Among the reported $47 billion of soft-drink market in the United States in
1993, PepsiCo aimed towards consumer of soft drink besides cola. This was mainly due to the
fact that new beverages always managed to grow much more than traditional one according to a
famous Journal reporter that time, which is about 10% over the 2-3% of the latter. Another
group of targeted consumer was health conscious consumers in the region. In order to do this,
PepsiCo put a brand new image for their new product good health, purity, and icy cold water.
In fact, that was a trend of colorless drinks during early 90s to present a sense of pureness and
clarity to the potential consumers. Lastly, Crystal Pepsi also aimed at old market which consists
of consumer aged between 21 to 25. According to Michael Bellas, president of Beverage
Marketing Corp, consumer within that age range would prefer healthier soft drinks compared to
the younger generations.

10.

Market Competition Analysis

Pepsi had failed to position the product correctly. In the meantime, Coca-Cola launched its own
transparent product called TaB Clear in December 1992. Coca-Cola positioned the product as
sugar/calorie free diet product. On the other hand, Crystal Pepsi had sugar content and failed to
find the right fit in the diet category. In late December 1992, Coca-Cola Co. president Doug
Ivester told a gathering of New York reporters that Tab Clear was being positioned as part of the
"mainstream of diet soft drinks" and "not a new-age beverage"

Consumers want an alternative new soft drink with a lot of flavor. A new-age label would doom
it. It would be aiming too low to go up against Crystal Pepsi and Clearly Canadian. After
positive consumer response in its initial 10 markets, it was announced on February 17, 1993 that
Tab Clear would be introduced into an additional 20 American markets the coming March,
increasing the drink's availability to 35 percent of the American population.[4] In an article from
the Los Angeles Times, it was reported that Coca-Cola expected to have Tab Clear available
nationwide by the end of the year.
After about a year since launch, Pepsi decided to halt the production of Crystal Pepsi. Pepsi
began working on a new formula. In 1994, Pepsi launched another variant. This time it called the
product just Crystal minus the Pepsi. However, Pepsi failed again and scrapped the idea of a
clear cola. Even Coke failed with the TaB Clear. The clear soda market proved to be just a fad.
Pepsi remained undeterred and actually tried to launch the clear cola concept not once, but twice
more. Shortly after Crystal Pepsi vanished, a citrus soda called Crystal from Pepsi hit shelves,
and in 1995, 7 Up which is owned by PepsiCo introduced 7 Up Ice Cola to the
international market. Like their predecessor, though, both of these drinks failed to catch the
interest of consumers and were quickly and quietly disposed of.
Public reaction was terrible and the brand was pulled from the shelves after less than three
months. The company reintroduced the original formula as Coca Cola Classic, and sales
rebounded after the New Coke marketing fiasco.

10.1 Market Analysis of Crystal Pepsi and TaB Clear

The market already had a long list of colas, diet colas, caffeine colas, among others and Pepsi
believed why not have another cola. After test marketing it in a few areas and receiving a fair
response, Pepsi launched Crystal Pepsi in April 1992. The marketing slogan for Crystal Pepsi
was Youve never seen a taste like this.
Though initial sales were promising, consumers were not happy with the taste. Sales (around
$470 million in the first year) were probably more out of curiosity than anything else was. It was
similar in taste to the original Pepsi. Other colorless sodas like 7UP and Sprite had a citrus or
lemon flavor. Customers were not sure how Crystal Pepsi was supposed to taste. Was it
supposed to taste like Pepsi? Or not? If it was supposed to taste like original Pepsi, why was it
more expensive?
Pepsi had failed to position the product correctly. In the meantime, Coca-Cola launched its own
transparent product called TaB Clear in December 1992. Coca-Cola positioned the product as

sugar/calorie free diet product. On the other hand, Crystal Pepsi had sugar content and failed to
find the right fit in the diet category.
Pepsi was successful with Diet Pepsi. However, this success did not guarantee success with
Crystal Pepsi. Even the re-launch as Crystal (minus the Pepsi in the name) was unsuccessful.
Perhaps it had identified and was trying to fill a market gap, which was unnecessary.

Some analysts, however, saw Coke cautiously avoiding a direct challenge to Pepsi, which
has attached its strongest brand name to Crystal Pepsi in the hopes of creating a third
profitable category beyond traditional colas and diet colas. Crystal Pepsi, introduced
nationally last week following test-marketing since April, is available in both regular and
diet
formulations

References
1.
2.
3.
4.
5.
6.

www.pepsico.com
www.pepsi.com
http://www.123helpme.com/failed-product-report-crystal-pepsi-view.asp?id=166232
http://www.bloomberg.com/bw/stories/1993-01-31/pepsis-future-becomes-clearer
http://en.wikipedia.org/wiki/Crystal_Pepsi
http://www.bustle.com/articles/25449-what-ever-happened-to-crystal-pepsi-a-brief-history-of-theclear-cola-trend

7. http://www.123helpme.com/failed-product-report-crystal-pepsi view.asp?id=166232