Why do some new products fail? Evidence from the entry and exit of Vanilla Coke

Abstract

We study a new brand (Coca-Cola's Vanilla Coke) that was discontinued after its introduction, to investigate reasons for its failure and why it was ever introduced in the first place. We estimate demand and supply and simulate a scenario in which it was not introduced. We estimate profit gains and show they may have been insufficient to cover fixed costs. We analyze the importance of variables for explaining its failure, investigating the levels of each required to cover fixed costs. We then explain how Coca-Cola may have incorrectly forecast the levels of these variables by focusing on their pre-introduction values.