Vanilla Coke And a Smile

By Sean Gregory

Coca-Cola has moved another step closer to making everyone forget the debacle of New Coke. The company's latest brand extension, Vanilla Coke, appears to be an early hit. Vanilla Coke was the top-selling 20-oz. soft drink in supermarkets and drugstore chains in the four weeks after its May launch, according to Beverage Digest. It's too soon to declare it a winner, but analysts say Coca-Cola may have found a drink that bridges generations: Vanilla Coke reminds the baby-boom-and-older crowd of the days when soda jerks would spritz your glass with a shot of vanilla from the fountain. And kids like the sweet taste. The launch has also been helped by strong bottler distribution, cute Chazz Palminteri ads and single-serve-only packaging that attracts impulse buyers. The strong sales may encourage further innovation in a busy market: Dr Pepper's Red Fusion debuted in July, Pepsi Blue rolls out this month, and Coca-Cola has reintroduced grape and orange Fanta. Expect a diet version of Vanilla Coke soon and maybe some new twists on the lagging Sprite brand. "The buzz is some sort of tropical fruit flavor for Sprite," says Skip Carpenter, beverage analyst at Thomas Weisel Partners. What, no chocolate?

--By Sean Gregory