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Honest Tea Teaches Coke A Lesson

By Denise Harrison, EVP

Strategic Planning Expert

Coca Cola, known for its marketing prowess, does not always get it right.  Yes, everyone knows about the Coke Classic/New Coke mistake, but what about its entry into the health conscious and environmental space?

What Went Right

Growth goals are often met by identifying new market trends and emerging market segments during the development of a strategic plan.  Coke correctly identified an emerging segment in the beverage market: health conscious consumers, to whom high fructose corn syrup was an anathema. Coke decided the best way to enter the segment was through acquisition.  Honest Tea, an organic tea, was already entrenched in this segment, which in addition to meeting the health conscious requirements, also appealed to the social responsibility and environmental preferences of this segment.  It was a no-brainer that Honest Tea’s organic roots, when combined with Coke’s production and distribution infrastructure, would be a winning combination – but wait, what really happened?

What Went Wrong

Coke took a page out of its successful brand management book and applied its traditional marketing formula to Honest Tea’s brand and launched the brand nationally.  This launch included:

  • National advertising campaign
  • Shelf placement at retail outlets
  • Deep discounts

The result: a flop.  The traditional approach, which had worked well with well-known brands that appealed to the mass market, did not necessarily work with niche brands.  Rather, a grass roots, bottom-up approach was required.  Honest Tea’s success had been built by in-store promotions and local marketing, which gave the brand an elite following that said, “We are not like everyone else – we require something special”.

A guerilla marketing campaign called Honest Cities worked particularly well; Honest Tea set up displays with bottles of tea with a $1 collection barrel next to the pallets– purchase on the honor system.  They promoted Earth Day by handing out reusable shopping bags with each purchase of Honest Tea. The brand built its presence first in a local market, then spread out to the region, and then moved to the next local market, then positioned itself to grow into the next region.  In addition, the brand continued to focus on the health food chain channel – not a stronghold for the traditional Coke beverages.

Lessons Learned

  • After you have achieved significant market penetration in your traditional markets, you often need to find emerging niches in order to meet your growth objectives
  • Assuming that the target audience for the niche business can be reached through the same “go to market” strategy that you use successfully with your traditional markets, may be a mistake
  • In order to truly understand an emerging market niche, you not only need to understand the product or service requirements, but also how to reach these niche customers.  You may be able to leverage some of your competencies but you may need to develop other competencies, to fully realize the market potential.

As Coke moves forward, it expects to apply these lessons to revive some of its past healthy beverage launches, as well as to future niche product launches. These lessons will enable Coke to raise its batting average when launching niche products.  Leveraging “lessons learned” is an important part of strategic planning – to read more about how to learn from your mistakes please click on:  Mistakes Happen: But Did You Learn from Them?

Denise Harrison is Executive Vice President and COO of the Center for Simplified Strategic Planning, Inc.  She can be reached at  harrison@cssp.com 

© Copyright 2011 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.