Selling Sugar Water
Do you want to sell sugar water for the rest of your life, or do you want to come with me and change the world?
Steve Jobs used the line above in order to woo PepsiCo President John Sculley over to Apple. Apple was a fast-growing company, and the board felt that they needed experienced leadership at the top in order to navigate the corporate space.
Sugar water! What a sick burn, right?
Jobs had a point. Sodas are a lot like a commodity, or at least that’s how he saw them. He figured you had to use gimmicky marketing to trick people into picking your particular brand of cola, which certainly wasn’t the case with Apple—again, how Jobs saw it.
Soda marketing really is something—full of drama if you know where to look. I can’t tell this part of the story without mentioning New Coke right away.
What’s the biggest product flop of all time?
If you were born between 1960 and 1980, I bet you already started thinking about New Coke when I mentioned products failing. This experiment is seared into our collective memory.
Facing increasingly stiff competition from Pepsi, and losing “Pepsi Challenge” contests, Coca-Cola felt… threatened. They tried a desperate gambit: they would change the formula of the most popular soft drink in human history. That would show ‘em!
The warning signs were there with focus groups, but there’s an important reason Coke felt they had to take this risk: sugar water is very, very hard to sell.
I’m not saying that nobody wants sugar water! If someone makes it, someone else will almost certainly buy it. What I mean is that it’s hard to make a living or to carve out a competitive advantage by selling sugar water, and that’s because anyone can do it.
That’s why branding is so important, and why Coke apparently felt a ton of pressure to do something bold in order to stand out.
The gambit failed so badly that there might as well be a picture of New Coke next to the dictionary definition of “marketing catastrophe.”
People sent a lot of very angry letters. 79 days later, Coca-Cola admitted that it had made an expensive mistake. The original formula was reintroduced as “Coca-Cola Classic.”
New Coke lived on as “Coke II” for a few years, but then it…. fizzled out.
Roberto Goizueta was Coca-Cola’s CEO during this apparently bonkers strategy, and his tenure overlapped with Sculley’s, who was President of PepsiCo from 1977 until 1983, when he left for Apple. Goizueta had taken on the reins at Coke in August of 1980, and would remain until 1997.
It’s impossible for me not to compare these two leaders. One of them turned away from his industry after someone pointed out how trivial the whole enterprise was. Jobs wasn’t warning Sculley away from cola sales because it was a cutthroat business, though—that’s what I’m saying today, but what Jobs was saying is that sugar water branding isn’t likely to change the world.
So, sodas are unlikely to change the world, and since they’re all pretty much the same thing, it takes incredible branding just to keep up.
I've significantly reduced my sugar water over the years because, while addicting, it's so much better not to drink it. I'm not sure I could work in a place that sells that sort of stuff and feel good.
Brilliant breakdown of the commodity trap. The Jobs quote nails something most executives dunno how to articulate: when differentiation becomes almost entirely about perception rather than substance, thewhole game shifts to branding theater. I've seen this play out in SaaS where companies with nearly identical features burn millions on positioning wars.