Case Study: A look back at the New Coke

Recently, I visited Atlanta for vacation.  And while there, I visited World of Coca-Cola.  It was actually really fun.  If you are visiting Atlanta anytime soon, I’d highly recommend a stop.  For a marketer, there are a lot of great learning opportunities, ranging from looking at old ad creatives to more information about Project Kansas.  What is Project Kansas you ask?  Oh, you know – just the biggest failure in new product launch history.  I was most fascinated by it because I lived in Kansas for a long time, and it was funny to learn the project code name.  It was code-named Kansas because it was supposed to be all American.  We all know the outcome by now, but it never hurt to study history.  So here goes…

Coca-Cola, the most popular soft drink, is sold in more than 200 countries worldwide. Introduced in the year 1886 by John Pemberton, it was initially sold as a patent medicine in the United States. Its founder claimed that it cured many diseases like morphine addictions, dyspepsia, headache and impotence.

It was first bottled in the year 1891 and within 50 years, it became a national icon of the United States of America. In the year 2011, it was considered as the world’s most valuable brand. At present, nearly one billion Coca-Cola drinks are sold every day.

In spite of this remarkable success, the Coca-Cola company, in the year 1985, decided to put an end to its most famed soft drink and bring in instead, a revised formula, which it would sell as “New Coke”. This proved to be a costly mistake for the company. Why was such a potentially disastrous decision made? This was mainly because it started losing its market share to its main competitor “Pepsi”.

Cola Wars: It was during the 1970s, when the rivalry between these two cola giants reached its peak. Pepsi began conducting a series of blind taste tests across different stores, which was known as “Pepsi Challenge”. The majority of the people, who participated in this test, chose Pepsi over Coca-Cola as the better tasting of the two beverages. PepsiCo began reporting the results to the public with the help of television commercials. This unique way of marketing helped PepsiCo to improve its sales. Pepsi continued its campaign, taking this challenge around the globe. Pepsi focused mainly on younger audience and it also signed leading celebrities such as Don Johnson and Michael Jackson which helped it to reach their target audience. This strategy was rather a risky one as it could lose its older customers to Coca-Cola, but it proved to be successful. The rivalry between these two companies is popularly known as “Cola Wars”.

All these made Coca-Cola lose its market share to Pepsi. The dominance of Coca-Cola as the number one soft drink was at risk. Furthermore, it also started losing its market share to other drinks such as Fanta and Sprite, which were the products of the Coca-Cola Company itself.

In 1982, under the leadership of Roberto Goizueta, the Coca-Cola Company launched a new soft drink “Diet Coke”, which was a sugar free version of its popular drink. Diet Coke was a huge success for the company, but it was not a great news for the Coca-Cola drink, as its share was further lost to this new beverage. In the year 1983, the Diet Coke became the third largest selling beverage, next to standard Coke and Pepsi. During that same year, the Coca-Cola’s market share was just under 24 per cent, which was an all-time low number for this soft drink.

The company really needed to do something to tackle the downfall of its iconic drink. In 1984, the Coca-Cola Company launched a series of advertising campaigns, as its response to “Pepsi Challenge”. These campaigns praised Coke for having fewer calories than Pepsi. The face of this campaign was Bill Cosby, who was a famous American stand-up comedian and actor at that time. Coca-Cola was way ahead with spending on advertisements than Pepsi, by over a $100 million dollars per year. In spite of all these steps, the market share of Coca-Cola did not show any remarkable improvement while the shares of Pepsi were steadily increasing. The customers chose Pepsi over Coca-Cola, whenever they had to make choice between the two. Coca-Cola continued to be on top only because of its excellent distribution network, which Pepsi lacked. There were far more vending machines selling Coca-Cola than Pepsi. Fast Food chains such as McDonald’s and Hardee’s were serving Coca-Cola in their outlets, helping the brand to maintain its share in the market. However, there is no denying the fact that Pepsi was successful in attracting new customers and Coca-Cola risked its dominance as the number one selling beverage.

This set the Coca-Cola Company thinking and they thought that the problem was with the product itself, as people seemed to prefer the taste of Pepsi over Coca-Cola. The company began working on a new formula, which they thought was a sensible step. They had a great working team for research and development of the new formula and they came up with the “New Coke”. The Company conducted a series of tests, to see how the New Coke fared, in terms of taste. The response was astounding and not only did it taste better than the original Coke, but also tasted better than Pepsi. The Company spent more than $4 million in research and conducted interviews with more than 200,000 consumers for their feedback.

Birth of the New Coke: On April 23, 1985, the New Coke was launched with great expectations. To stay ahead of Pepsi, they realised, that they could not have two competing products at the same time, so the Coca-Cola Company decided to completely scrap the original Coca-Cola. This was the biggest marketing blunder of all time.

The New Coke came in a new can with red and silver graphics, replacing red and white colours to distinguish it from the original Coca-Cola. Initially, during the first few weeks, the general reaction of the consumers was positive and the sales of this product grew by 8%. According to the company’s weekly survey conducted on 900 people, the new Coke was preferred over the original Coca-Cola by a margin of 53% to 47%. But the company underestimated the attachment consumers had with the original 99 year old Coca-Cola. There was intense media coverage of the people who were unhappy with the change. There was a backlash against this change and people started boycotting this new product.

By June, it was apparent to the company that the consumers were increasingly dissatisfied with the change and were demanding to bring back the original product. In a weekly survey conducted, only 30% of the consumers preferred the new version over the original one.

On July 10, the company, due to public pressure, decided to bring back the original formula as “Coca-Cola Classic”.

What went wrong: First of all, the Company was not aware of the deep and emotional connection, people had with Coca-Cola, though New Coke tasted better. In its press conference, the brand could not answer why it made the change. It tried to fix something, which was not broken in the first place.

Since, the Company has conducted blind tests; the taste was the only factor under consideration and did not give importance to “originality”, for which it was known for.

During the blind tests taken, people would take only one sip of the cola and a sweeter taste was preferred. Actually, when they buy, they have to buy a can of 330 ml and the New Coke was too sweet, so the old Coke was preferred, as it was less sweet.

“The only thing like Coca-Cola is Coca-Cola itself. It’s the real thing”. This was the advert by the Coca-Cola Company in the 1940s. By launching New Coke, they contradicted their previous marketing strategy. Pepsi was the cola, which was related with the word ‘new’, a brand for the youth and comparatively new in the market. The old Coke had become a legacy and was considered as an integral part of American culture. Therefore, the ‘new’ change of Coca-Cola was something which was difficult to accept, to the brand loyal consumers of the iconic drink.

Pepsi also started attacking the New Coke with counter ads. It ran a commercial with an old distressed man, unhappy with the change in his coke. It was the clever marketing strategy of Pepsi, which made Coca-Cola company desperate to come up with a change. But it turned out to be a costly mistake and the company paid heavily for it.

Within months, Coca-Cola regained its market share as the number one beverage and the New Coke faded away. This led to many conspiracy theories, where the company was accused of deliberately removing the most loved drink, just to gauge public affection. However, the company officials denied it. The Chief Operating Officer of the company, Donald Keough responded ‘Some critics will say Coca-Cola made a marketing mistake; some cynics will say that we planned the whole thing, The truth is we are not that dumb, and we are not that smart.

 

Photo credit:  Kevin Trotman

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