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Former Yum CEO on Crystal Pepsi: every leader has an ‘epic fail’

·Writer
·4 min read
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Leaders from all walks of life, from politics to business and finance, can experience major setbacks during their tenure. David Novak, co-founder and former CEO of Yum! Brands, Inc. (YUM), is very much aware of this.

In an Influencers interview with Yahoo Finance Editor-in-Chief Andy Serwer, Novak discussed the infamous failure of Crystal Pepsi, a product he was behind the development of, as well as how he bounced back as a business leader and the lessons others can learn from his missteps.

“I think every leader has what I call an epic fail, something [you would] like to play over again and again. Believe me, I've relived those Crystal Pepsi days,” Novak said. “But, you know, when I went to Pepsi, Pepsi was in need of a turnaround. The business was not doing well, so I developed the idea of a clear cola.”

A view of Crystal Pepsi and a Crystal Pepsi signature cocktail at Billy's Sports Bar on August 1, 2017 in Bronx, New York. (Photo by Bryan Bedder/Getty Images for Crystal Pepsi)
A view of Crystal Pepsi and a Crystal Pepsi signature cocktail at Billy's Sports Bar on August 1, 2017 in Bronx, New York. (Photo by Bryan Bedder/Getty Images for Crystal Pepsi)

Yum! Brands currently operates the brands KFC, Pizza Hut, Taco Bell, The Habit Burger Grill, and WingStreet worldwide except for China, where brands are operated by Yum China, a separate company. Formerly known as Tricon Global Restaurants, Inc., Yum! was created in 1997 from PepsiCo’s (PEP) fast food division, serving as KFC, Pizza Hut, and Taco Bell’s parent corporation.

A Texas native coming from humble beginnings, Novak served as CEO of Yum! from 1999 to January 1, 2016, where he doubled the number of restaurants to 41,000 and grew the company’s market cap from $4 billion to nearly $32 billion by the end of his tenure. He is the founder and current CEO of David Novak Leadership, an online leadership skills development platform, where he also hosts the “How Leaders Lead” podcast.

The U.S. and Canada first got their hands on Crystal Pepsi in 1992, five years before Yum! Brands branched off from PepsiCo. The clear cola was sold in the Americas for just two years, and was also offered in Europe and Australia for a brief period. Through a combination of branding issues, corporate sabotage from archrival Coca-Cola (KO), and overall consumer dissatisfaction with the flavor of the product, Crystal Pepsi would become one of the most well-known product flops in history.

WASHINGTON, DC - OCTOBER 03: David Novak, Chairman and CEO of Yum! Brands attends the 11th annual George McGovern Leadership award ceremony at The State Department on October 3, 2012 in Washington, DC.  (Photo by Larry French/Getty Images)
David Novak, Chairman and CEO of Yum! Brands attends the 11th annual George McGovern Leadership award ceremony at The State Department on October 3, 2012 in Washington, DC. (Photo by Larry French/Getty Images)

“The only issue that I had — the consumer loved the idea — it didn't taste enough like Pepsi,” Novak said. “And you know, my big learning was I had franchise bottlers tell me, ‘David, it needs to taste more like Pepsi. You're calling it Pepsi.’ And you know, I didn't listen to them because I thought it was such a big idea. And if I would have listened to them, given it a little bit more Pepsi flavor notes, I'm convinced that Crystal Pepsi would still be around today.”

And although the failure of Crystal Pepsi did not precede a financial downfall of PepsiCo — far from it — Pepsi’s credibility and reputation in the early '90s may have been dealt a significant blow.

“But I was able to survive it because, number one, the business did take off when we launched Crystal Pepsi,” Novak added. “I mean, everybody tried Crystal Pepsi. It was like a gigantic in-and-out product. But people didn't come back and buy it again. So it didn't have the sustainability that I was hoping for.”

Ultimately, Novak believes that Crystal Pepsi was a “breakthrough idea poorly executed.” He said that the idea came to him as a result of the booming water business at the time, which he thought could lead to an opportunity for growth in clear beverages.

In the summer of 2016, Pepsi brought Crystal Pepsi back for a limited time in the U.S. and Canada as a move to test consumer preferences for clear soda and allow them to experience the iconic beverage once more.

Thomas Hum is a writer at Yahoo Finance. Follow him on Twitter: @thomashumTV

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