C2 is a bust

Sneaky Pete wants you
to buy this book.

Six months ago, I noted Coca-Cola was going to be introducing a mid-calorie cola, which I referred to as a product for “low-carb dieters who have been marooned on the distant asteroid where Diet Coke is unavailable.” After some minor success during the marketing blitz of its debut, overall sales of C2 have fizzled. Coke will announce earnings tomorrow, and they’re
expected to have declined.

So what happened? First, C2 is a silly idea. There’s little enough distinction between C2 and the other colas (Diet Coke and regular Coke). Someone who drinks regular Coke doesn’t care that much about the calories. If they did, and they still wanted a cola buzz, they’d drink Diet Coke. On top of that, there are a gazillion competitors and alternatives. With such little distinction, it’s surprising C2 ever got past the concept stage.

Second, C2’s pricing sucked. At times, C2 cost 40-60% more than regular Coca-Cola. This, and discounting on regular Coke turned consumers off from a product that’s basically a staple with plenty of substitutes.

Third, the incompatible business models of Coke and the cola bottlers are exacerbated by the increased pricing. Coke charges its bottlers fixed fees for syrup. Coke’s profits are therefore tied to volume. Bottlers’ profits are tied to margins. Consumers are price-sensitive on soda. If you’re a bottler, and you have an opportunity of promoting ten units with a $2.00 profit or ten units with a $1.00 profit, guess which ones you’re going to do? The bottlers initially tried passing along the price increase, but that tempered demand. Now it’s to the point where stores are pulling it off the shelves. (N.B. The syrup producer — bottler relationship is complicated. Porter’s model is here, while a more thorough and lengthy explanation is here.)

(Totally random silly note: I was surprised to see I had > 120 referrals last month from one of the Coca-Cola internal web sites. If you’re reading this, Coke, my services are available at surprisingly high consulting rates.)

3 thoughts on “C2 is a bust”

  1. Do you think C2 is also in the midpoint of health risk?

    Coke -> As safe as sugar
    C2 -> Causes brain rot in some mice
    Diet -> Causes brain rot in most mice

    Unfortunately, I’m in the most mice category.

  2. > Do you think C2 is also in the midpoint of health risk?

    I suppose it depends on your feelings on the safety of sugar. 🙂 Thus, C2 could be the worst of both worlds, too.

    I used to be staunchly in the brain rot category, though I started cutting back on the caffeine. Caffeine-free diet Coke is not that far from club soda (aka “fizz water”), which is what I’ve switched to.

    I’m surprised Coke hasn’t tried fizzy iced herb tea, sans sweetener.

  3. Mr. GeT RiTe

    C2 had half the SUGARS….And still tasted far better than BLAH…DIET COKE….OR FOR THAT MATTER, ANY DIET DRINK!!! Pepsi had a version too. Corporate America is just like our government…. Corrupt, and blind…DuH, Meaningful, and treacherous…….As for me I live in Hawaii, lay on da beach all day; gurls everywhere. I drink water now […] F@#K CoKe, or PePsI. BaN them if you don’t like them, and stop crying already….

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