A Column by Al Ries


Why New 'Mid-Calorie' Cola Products Make No Sense

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Don't fall into the mushy-middle trap.

Both Pepsi-Cola and Coca-Cola recently announced that this summer they will launch mid-calorie colas

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called "Pepsi Edge" and "C2," respectively.

Not a good idea.

For instance, with 70 calories per 12-ounce can, Pepsi Edge has roughly half the 150 calories found in a regular Pepsi. According to a company statement, the new product provides the "perfect balance of taste and calories."

Classic case
Edge, like rival C2, is a classic case of falling into the mushy-middle trap. Cola drinkers who want taste will continue to drink regular cola. Cola drinkers who want low calories will continue to drink diet colas. Where's the market for Pepsi Edge or C2?

Pepsi claims there are 60 million consumers who alternate between diet and regular colas. Maybe so, but there are also millions of consumers who alternate between coffee and tea, but that doesn't mean a product called "coftea" would be a big success.

A famous experiment in biology demonstrates the mushy-middle principle. Place two different species of paramecium in a test tube and come back in a few days. One species will have occupied the top of the test tube and the other species will have occupied the bottom of the test tube. The border between the two is a desert.

Likewise with barnacles. One species takes the high-tide line and another species takes the low-tide line.

Mass merchandisers
Take the three mass merchandisers. Wal-Mart focused on low prices, so Target went upmarket with wide aisles, neat displays and designer merchandise. Kmart tried to do both with low prices like Wal-Mart and designer merchandise (Martha Stewart, Joe Boxer and others) like Target.

If you put the Target, Wal-Mart and Kmart brands in a test tube and mixed them up, you would find Target at the top, Wal-Mart at the bottom and Kmart in the mushy middle. No wonder Kmart went bankrupt.

When in doubt, push the envelope. Acura was the first Japanese luxury car brand to be introduced in the U.S. market. But Honda, Acura's owner, didn't have the courage of its convictions.

In addition to expensive six-cylinder models, the company also introduced inexpensive four-cylinder Acura models, in essence re-badged Hondas.

The Lexus lesson
When Toyota introduced Lexus, the company brought in only expensive six- and eight-cylinder models.

Acura was the leading Japanese luxury car brand, but that didn't last long. Lexus rapidly took over the Japanese luxury car position and Acura fell into the mushy middle. (Last year Lexus sold 52% more cars in the American market than Acura.)

You know you have a winner when some people start calling the HOV lanes that now charge tolls for single-occupant vehicles "Lexus lanes."

In the early days of an emerging industry, you see repeated examples of the same folly. Companies jump in to provide the missing link between yesterday and tomorrow. Their motto: the best of both worlds.

Translation: The best of both worlds is usually the mushy middle.

Straddling two horses
They're like a circus performer who rides standing up into the ring straddling two horses. Nice display of horsemanship, but what would happen if each horse went in a different direction? Rider and mounts would part company in a big hurry.

In the ring, it doesn't happen because the rider keeps both horses under control. In the marketplace, it's a different matter. A company in the mushy middle usually gets pulled apart.

Early transoceanic steamships also had sails. At first, the hybrid combinations were big winners. They were faster than pure sailing ships and more economical than pure steamships. In retrospect, it's easy to see what happened. Sailing ships and steamships evolved in two different directions and the hybrid was pulled apart and sank.

The sailing ship became a toy for the rich and famous and the steamship became so economical to operate that the sails were nothing more than an expensive anachronism.

Many early jet-engineered aircraft were propjets (now called turboprops.) Early on, the propjet was an attractive alternative to both propeller planes and pure jets, especially for smaller aircraft. The propjet combined the high cruising speed of a jet with the slow-speed stability of a propeller plane.

Aircraft evolution
That's early on. Today's small, 30- to 100-seat regional jets are rapidly replacing turboprops because they are faster, more comfortable and quieter. Furthermore, jets can fly higher than turboprops and avoid the turbulence found at lower altitudes.

America's major airlines currently operate some 700 turboprops that they probably wish they hadn't bought.

It's hard to avoid the problem of the mushy middle. In the beginning, a new technology starts slowly and is burdened with problems. The halfway approach seems the safest and most productive. And many times it is, but a halfway strategy is almost always a loser in the long term.

Take facsimile, for example. After decades of growth, we're beginning to see the end of the road for fax.

The problem? Fax is a mushy-middle product that combines the physical aspects of a letter with the transmission speed of e-mail. The letter is likely to be around for generations to come and there's no question that e-mail is here to stay. But fax? Its days are numbered.

Fax at the mushy middle
From 1998 to 2002, the number of pages faxed fell by more than 50%. (Western Union's Mailgram, another halfway service, is already gone.)

What put fax on the ropes? E-mail evolution. Today, e-mail is much cheaper, much faster, more accurate and more flexible than facsimile. The day of the turboprop is ending and so is the day of the fax.

Another halfway brand is NetFlix. Subscribers pay $19.95 a month to order movies online. They may pick as many as three DVDs at a time and keep them as long as they like. Once they return them the same way they came, via postage-paid mail, subscribers may order more.

NetFlix has grown rapidly and now has more than a million subscribers. But sending electronic data (in the form of a DVD disk) by mail in a digital era seems like a step backward. Someday soon NetFlix will meet the same fate as fax. And the mushy middle will have claimed another victim.

By the way, Pepsi-Cola has already tried a mid-calorie cola that never made it in the marketplace. Launched in 1975, the product was called Pepsi Light.

Will history repeat itself?

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