Coca-Cola might be the first brand that comes to mind. Coca-Cola is the most well-known brand in the world, selling nearly one billion drinks every day. In 1985, the Coca-Cola Company made a decision to discontinue its most popular drink in favor of a new formula that it would call New Coke. For this decision to be made, we must understand the current state of the soft drink industry. I would like to focus on the fierce competition between Coca-Cola’s and Pepsi-Cola’s in the decades and years prior to New Coke.
The relationship between these arch-rivals was not healthy. Marketing experts believed for many years that competition between the two firms had increased cola awareness among consumers, but the companies themselves did not see it that way. Coca-Cola Company actually lost a lawsuit against Pepsi-Cola because it used the word “cola”. Coca-Cola was always ahead outside of the courtroom. Time magazine reported on Coke’s ‘peaceful nearly-conquest of world’ shortly after World War II. Pepsi’s brand image changed during the 1990s as it positioned itself to be a younger-oriented product. This was a risky move, since it meant that Coca-Cola would gain older customers. However, it worked. Pepsi managed to differentiate itself from its old-fashioned competitor by focusing on a narrower audience. Pepsi succeeded in narrowing the gap, as it was increasingly viewed as ‘the youth drink’. In the 1970s Coke’s chief rival increased the stakes with the Pepsi-Challenge – testing whether consumers could tell the difference between the brand they were drinking and the’real thing. Robert Woodruff’s, long-serving Coca-Cola president, was shocked when most participants chose Pepsi over its sweeter version. Pepsi pushed its offensive in the 80s, bringing the Pepsi Challenge worldwide and heralding a new generation of Pepsi drinkers. It also signed up celebrities like Don Johnson, Michael Jackson and Robbie Williams to help it reach its target markets.
Roberto Goizueta’s chairmanship in 1981 was a time when Coke began to lose its top-ranking status. Pepsi was gaining market share and so were some drinks produced by Coca-Cola, including Fanta. Diet Coke’s phenomenal success has had a dual-edged impact, reducing the market share of sugar colas. Diet Coke was able to move up from third place behind Pepsi in 1983. Coke had dropped its market share down to just 24 percent.
Coke needed to take action to maintain its supremacy. Goizueta was the first to respond to this phenomenon by launching a 1984 advertising campaign, which praised Coke for having less sweetness than Pepsi. Bill Cosby, one of most well-known faces of that time, was the star of these television advertisements. Bill Cosby clearly wasn’t a member of the Pepsi Generation. Coca-Cola was not able to make a significant difference in the market despite its efforts. Coke’s market share remained unchanged while Pepsi caught up. When shoppers were given the option, as they are in supermarkets, Pepsi was often chosen. Coke only remained ahead due to its better distribution. Coke is still available in more vending-machines than Pepsi, for example. Pepsi’s popularity was not going to change despite its proliferation. Coca-Cola, which had already suffered a loss in taste, could not afford losing its position as the number one soft drink.
Coca-Cola believed that the problem was in the product. Pepsi had proved millions of time that Coke would always lose when it comes to taste. Diet Coke’s success, which had a flavor that was similar to Pepsi, seemed to confirm this. Coca-Cola then began to work on a brand new formula, which was a logical move. New Coke arrived a year after that. Atlanta-based Coca Cola conducted 200,000 taste trials to evaluate its new formulation. The results are overwhelming. The results were overwhelming.
Coca-Cola could not sell two products directly competing with each other on the shelves. It then decided to do away with the original Coca-Cola.
Coca-Cola undervalued its own first-brand’s power. Immediately after the announcement, many Americans decided to boycott the product. New Coke, introduced on April 23, 1985, was discontinued a few days after. The joint decision was dubbed ‘the greatest marketing blunder ever’. New Coke sold poorly and the public was angry that it was no longer offered.
Coca-Cola was forced to return its original formula and brand. Goizueta told a press conference in July 1985 that he had listened to the concerns of his audience. Donald Keough was left to announce that the product would be returning. Keough admitted that the research and time spent on the new Coca-Cola product could not reveal the strong emotional attachment of so many consumers to the original Coca-Cola. We were surprised by the passion people have for Coca-Cola original. It’s an American mystery. An enigma. And you can’t measure that any more.
Coca-Cola understood that marketing was about more than just selling the product. As the tests were mostly blind, only taste was evaluated. Pepsi had finally gotten the company to give up their most important brand asset. Originality.
In the 1880s, Coca-Cola became the only drink on the market. In 1880, Coca-Cola was the only product on the market. Coca-Cola has used advertising campaigns to capitalize on its ‘originality.’ This was true for the majority of last century. In 1942 magazine ads appeared all over the United States proclaiming that Coca-Cola was unique. Coca-Cola had been promoting its products in a way that was contradictory to their previous marketing. Coca-Cola had never been called “new” since its first advertisement appeared in the Atlanta Journal of 1886. The advertisement described Coca-Cola, as the newest pop soda fountain beverage, as having the properties of wonderful Coca-plants and famous Cola-nuts. The company that made the most references to US history was Coca-Cola. William Allen White, the Pulitzer Prize-winning Kansas newspaper editor, had described the soft drink 50 years earlier as the “sublimated essence” of what America stood for. It was a good thing that was honestly made, widely distributed and constantly improved over the years.
The brand’s meaning was not to be reduced to taste. This was a complete misinterpretation. The brand’s image is often more important than what it represents. Pepsi has been a major brand for decades, but Coca-Cola was only a decade older.
You cannot create a new’real’ thing if you announce to the world that you are the “real thing”. Al Ries, a marketing expert, said it was “like introducing a new god”. Coke has been using the strapline ‘Coke it is’ since 1982. It told consumers that it had been wrong and they should have chosen New Coke. New Coke, despite its massive hype (one estimate put the value at more than $10 million), was doomed from the start. Coca-Cola’s market research team knew enough about brand recognition to realize that consumers will choose their favorite brand even if they are not blinded in the taste test. But, the researchers failed to recognize that the brand preference would remain after the launch of the product. Pepsi, it’s not surprising, was the first company to realize Coca-Cola made a mistake. In just a few weeks after the launch, the company ran an ad featuring a man seated at a park table, holding the can. He was visibly distressed when he replied, “They changed the Coke.” “I can’t imagine it.”
The media reacted positively to Coca-Cola’s relaunch of its original coke in the US, dubbed “Classic Coke”. ABC News as well as other US channels broadcasted news about this significant event. In just a few months, Coke returned as the leading soft drink and New Coke virtually disappeared.
Ironically, New Coke’s failure to gain market share increased loyalty for the’real thing’. Some conspiracy theories have gone as far to suggest that it was all a planned marketing strategy to reaffirm Coca-Cola’s popularity. Why not withdraw your global brand completely to let people know how valuable it is? Coca-Cola denied this, but it is clear that the company did not intend to do so. Donald Keough stated that cynics might claim Coca-Cola committed a marketing error, but others may say the company planned the entire thing. New Coke’s launch was understood in light of the competition between Pepsi. Pepsi had relied on its taste for many years as its main weapon. The Coca-Cola Company hoped that by launching New Coke it would weaken the marketing campaign of its main competitor. What did Pepsi make of this whole incident?
Roger Enrico, CEO of Pepsi, believes that the mistake made by New Coke was a valuable lesson to Coca-Cola. “I think they realized their true selves by the time they had finished their nightmare. Caretakers. They can’t change its taste. They cannot change the brand’s image. They can’t change its image.
