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Can somebody flank Coke & Pepsi?

Red Bull is trying to give Coke and Pepsi a run for their money. It seems that Red Bull seems to have the right and the wrong idea. First, what’s right about the idea. It seems that Red Bull is launching a premium cola in the US at $1.49 for a 12 ounce can which is expensive than Coke or Pepsi. There is no premium price cola and they have certainly found a gap in the market. One cannot fight with Pepsi and Coke head on. They have to be attacked from the side, in other words flanked.

But whats wrong with the idea? First, they have gone in for brand extension, that is, they are branding it as “Red Bull” cola. I am not sure if this is a good idea. Red Bull is associated with energy drinks and it should remain in that positioning. By launching a cola drink with the same name, they are going to dilute the Red Bull brand. Brand extensions seldom work. They can work if you are the first in the market. With strong brands as Coke and Pepsi, brand extension will have no chance. Second, the the new soda will come oin a slender blue, red and silver can similar to the energy drink. There needs to be differentiation between the two products. Imagine if Maruti 800 and Mercedes Benz are from the same company and they look alike. Do you think Mercedes Benz will remain a status symbol?

Two reasons convince companies to go for brand extension. One is that they feel that they can piggy back on the brand recognition. Two, they see economies of scale in advertising etc. Red Bull executives are forgetting the high level of brand recognition is for the energy drink. In fact, they will have to spend more money to convince the audience that Red Bull is not just an energy drink but also a cola. My above explanation also answers the second misception that they have with respect to economies of scale.

So lets see if Red Bull is able to make a dent in the Cola market.

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