7 CPG Brand Dilution Examples And How To Avoid It.

When Dr. Pepper launched its BBQ sauce, customers were scratching their heads, wondering how a beloved soda could venture so far from its roots. This is just one case among many brand dilution examples, highlighting the risks a brand may face when it strays too far from its core identity.

This article examines seven striking brand dilution cases in the CPG industry, revealing the lessons learned from each misstep. By understanding these high-profile examples, you can safeguard your brand equity, maintain a strong brand identity, and ensure your brand extensions resonate positively with consumer perception. 

Let’s uncover these cautionary tales and learn how to avoid the pitfalls of brand dilution.

Why Does Brand Dilution Occur?

Brand dilution occurs when a brand’s value and strength are weakened due to poor strategic decisions. It leads to decreased brand equity and consumer trust, which can result in significant brand damage and even trademark dilution, undermining brand loyalty and overall market perception.

Several key factors contribute to brand dilution, which we will explore in detail. These include overextending the brand into unrelated product categories, misaligning with consumer expectations, neglecting thorough market research, and inconsistent brand messaging. Understanding these pitfalls is crucial for maintaining a robust and trusted brand in the competitive CPG landscape.

How to Prevent Brand Dilution from Occurring in the First Place

Preventing brand dilution starts with understanding the actual cost of success when entering a new category. Don’t just expand into new categories but ensure the brand stays true to its core identity. Conducting consumer research is critical to gauge whether the new direction aligns with existing perceptions and expectations. 

Next, it is essential to apply a data-driven evaluation of various concepts. By analyzing market trends and consumer preferences, brands can make informed decisions that support long-term growth. A solid brand innovation strategy should include testing innovations and packaging designs to measure impact.

Shelf testing is another crucial step. This process determines how your product compares to competitors and ensures your brand maintains a distinct presence in a crowded market. Successful examples of brand innovation and packaging show that thoughtful repositioning is critical to safeguarding brand equity while pushing forward into new territory.

Beyond Meat Jerky

Reason for dilution: Ingredient stigma

Beyond Meat, renowned for its plant-based alternatives, faced a challenge when it expanded into the jerky market, aiming to attract health-conscious consumers. There were two main problems: The product was too expensive, and consumers didn’t see it as healthy anymore. 

The product launched across various stores in March 2022, initially showing strong potential. CEO Ethan Brown described the early sales as “a resounding success, exceeding our initial expectations.” But, by August, sales momentum had slowed, with Brown acknowledging that velocities were “falling below initial forecasts.” As the fall approached, the company began facing under-utilization fees due to co-manufacturing agreements.

A more strategic brand extension could have focused on products that align with Beyond Meat’s plant-based roots—such as plant-based snacks or ready-to-eat meals. These offerings would have resonated better with their target audience, reinforcing their expertise in plant-based nutrition. 

Nestle’s Wunda

Reason for dilution: Insufficient market research

Nestlé launched Wunda, a split pea-based milk alternative, to capitalize on the rising demand for plant-based products. Despite its nutritional strengths—high in protein and fiber—the brand struggled to carve out a distinct identity in a market dominated by oat and almond milk. 

The critical misstep was in Nestlé’s brand extension. Wunda entered a competitive market and struggled to generate sales due to brands like Alpro and Oatly. It was withdrawn because it was deemed “not viable” in the current market conditions. Rising production costs and a saturated market landscape exacerbated factors such as the war in Ukraine affected it.

Instead of Wunda, Nestlé could have leveraged its existing dairy brands by introducing fortified plant-based alternatives under familiar names. This strategy would have tapped into its existing consumer base, built on brand trust, and created a more substantial alignment with Nestlé’s legacy while meeting the growing demand for plant-based options.

Pepsi Cafe

Reason for dilution: Brand limit underestimation

Pepsi Café aimed to capture consumers seeking an energizing blend of cola and coffee. The buzz around its potential was undeniable, but the product never launched. This case highlights how unmet expectations damage brand perception before a product hits the shelves.

Pepsi Café’s primary error was overreaching into the coffee category, an area outside Pepsi’s core expertise. While Pepsi dominates the soft drink market, stretching the brand into coffee risked confusing loyal consumers who associate Pepsi with refreshments, not coffee. This brand identity misalignment could have diluted consumer trust and hurt Pepsi’s overall brand equity.

Instead of a coffee-cola hybrid, Pepsi might have focused on expanding its existing product lines with innovative, trend-driven options. Capitalizing on the growing demand for healthier, low-calorie, or functional beverages would align with current consumer preferences. Such an approach would strengthen the core brand without diluting Pepsi’s identity.

Pixel-Flavored Coca-Cola

Reason for dilution: Ingredient Stigma

As a leader in the beverage industry, Coca-Cola sought to engage a younger demographic with its “Pixel Flavor,” inspired by digital culture. But, this abstract concept confused many consumers, straying too far from the traditional, recognizable flavors that define Coca-Cola’s brand.

The critical mistake was a disconnect between consumer perception and brand equity. Coca-Cola has spent decades building a strong, trusted brand. By introducing an abstract flavor concept like “Pixel Flavor,” the company risked undermining that equity. Consumers were left unclear about what “Pixel Flavor” represented, diluting the essence of what makes Coca-Cola iconic.

A more fitting extension could have been a limited-edition collaboration with a famous dessert brand featuring Coca-Cola-infused ice creams or floats. This approach would better align with consumer expectations while tapping into nostalgic experiences—creating a low-risk, high-reward opportunity for brand growth.

Cheetos Lip Balm

Reason for dilution: Category overextension

Frito-Lay launched Cheetos Lip Balm to capitalize on the snack’s popularity by offering the iconic cheesy flavor in a new format. While it may have seemed like a novel idea, the product quickly became a textbook example of a failed brand extension.

The primary mistake was a lack of alignment between the product and consumer perception. Cheetos, beloved for its crunchy, savory appeal, ventured into a category that didn’t fit its core identity. This dissonance diluted the brand equity built around its snack line, confusing consumers. 

Rather than moving into an unrelated category like lip balm, Cheetos could have expanded its snack offerings with complementary products like cheesy popcorn or flavored cheese dips. These products would have played to Cheetos’ strengths while appealing to its core audience of snack enthusiasts.

Redline Energy Drinks

Reason for dilution: Weak Brand Stewardship

Redline Energy Drinks, produced by VPX Sports, was once a top contender in the energy drink market. It was known for its high caffeine content and positioning as a pre-workout supplement. The brand became overshadowed by BANG Energy, which appealed to a similar demographic with more compelling flavors and marketing strategies. 

Redline’s critical mistake was its willingness to reduce distribution to sports nutrition stores, limiting its accessibility to a broader consumer base. This decision effectively narrowed its market reach when competitors were expanding theirs.

To combat brand dilution, Redline could have considered developing a distribution strategy that was better aligned with the products use-case. 

Girl Scouts Personal Care Products

Reason for dilution: Over-licensing

The Girl Scouts attempted to leverage their brand equity by launching personal care products inspired by their beloved cookie flavors, such as Thin Mints and Samoas. This move aimed to attract novelty-seeking consumers in the personal care market.

The critical error in this brand extension was a misalignment with the Girl Scouts’ mission. As an organization focused on empowering young girls, introducing cookie-flavored deodorants and body washes puzzled many consumers. The products strayed too far from the values. This disconnect diluted the brand’s identity, leading to skepticism about its direction and potentially weakening the trust built over decades.

Rather than venturing into personal care, the Girl Scouts could have introduced cookie-scented candles. These products evoke freshly baked cookies’ warm, familiar aromas, complementing the Girl Scouts’ heritage while potentially driving cookie sales.

The Psychology of Consumer Trust

Insights from consumer psychology reveal that brand loyalty and recognition are deeply rooted in emotional and cognitive processes. When a brand extends into new territories, it risks creating cognitive dissonance among consumers if the latest offering doesn’t align with its existing brand image and expectations.

Emotional attachment to a brand can either amplify success or exacerbate failure in brand extensions. A strong brand identity fosters trust, but when extensions deviate significantly, they can damage the consumer perception.

The expectation vs. reality gap is particularly critical. When a brand promise doesn’t match the delivered experience, it can severely impact brand equity and integrity. This discrepancy can weaken brand strength and awareness, ultimately affecting brand value.

Successful extensions maintain consistency with the brand’s core identity, meeting consumer needs while reinforcing brand awareness and trust. Conversely, misaligned extensions can dilute brand equity, compromising long-term consumer trust and loyalty.

Data-Driven Brand Stretch Extensions that Avoid Dilution

Want to explore new categories and capture new markets? Smashbrand can help. Our PathToPerformance™ process guarantees a brand performance lift on retail shelves. From strategy to design, we take consumer brands through our Path To Performance™ brand development process, setting them up for long-term success. Book a time to discuss your project with our team.