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THE NEW COKE

Battered by competition from the sweeter Pepsi-Cola, Coca-Cola decided in 1985 to replace its old formula with a sweeter variation, dubbed the “New Coke”. Coca-Cola spent $4 million on market research.

Blind taste tests showed that Coke drinkers preferred the new, sweet formula, but the launch of New Coke provoked a national uproar. Market researchers had measured the taste but had failed to measure the emotional attachment consumers had to Coca-Cola.

There were angry letters, formal protests and even lawsuit threats, to force the retention of “The Real Thing”. Ten weeks later, the company withdrew New Coke and reintroduced its century-old formula as “Classical Coke”, giving the old formula even stronger status in the marketplace.

Questions:

1. Managers try to stimulate sales by modifying the four-Ps --- Analyze.

2. Customers are not always willing to accept an improved product --- Comment.

HISTORY

1985 - The Coca-Cola Company made what has been known as one of the biggest marketing blunder. They stumbled onto a new formula in efforts to produce diet Coke. They put forth 4 million dollars of research to come up with the new formula.

The decision to change their formula and pull the old Coke off the market came about because taste tests showed a distinct preference for the new formula. The new formula was a sweeter variation with less tang, it was also slightly smoother. Robert Woodruff's death was a large contributor to the change because he stated that he would never change Coca-Cola's formula. Another factor that influenced the change was that Coke's market share fell 2.5 percent in four years. Each percentage point lost or gain meant 200 million dollars. This was the first flavor change since the existence of the Coca-Cola company. The change was announced April 23, 1985 at the Vivian Beaumont Theater at the Lincoln Center. Some two hundred TV and newspaper reporters attended this very glitzy announcement. It included a question and answer session, and a history of Coca-Cola. The debut was accompanied by an advertising campaign that revived the Coca-Cola theme song of the early 1970s, "I'd Like to Buy the World a Coke"

The change to the world's best selling soft drink was heard by 81 percent of the United States population within twenty-four hours of the announcement. Within a week of the change, one thousand calls a day were flooding the company's eight hundred number. Most of the callers were shocked and/or outraged, many said that they were considering switching to Pepsi. Within six weeks, the eight hundred number was being jammed by six

thousand calls a day. The company also fielded over forty thousand letters, which were all answered and each person got a coupon for the new Coke. Many American consumers of Coca-Cola asked if they would have the final say. When Pepsi heard that the Coca-Cola company was changing its secret formula they said that it was a decision that Pepsi tastes better. Roger Enrico, the president and CEO of Pepsi-Cola wrote a letter to every major newspaper in the U.S. to declare the victory.

Coca-Cola management had to decide: Do nothing or "buy the world a new Coke". They decided to develop the new formula. 1985 - July 10, eighty-seven days after the new Coke was introduced, the old Coke was brought back in addition to the new one. This was greatly due to dropping market share and consumer protest. The market share fell from a high of 15 percent to a low of 1.4 percent. This was said to be a classic marketing retreat. Coca-Cola executives admitted that they had goofed by taking the old Coke off the market. The Coca-Cola company's eight hundred number received eighteen thousand calls of gratitude. One caller said they felt like a lost friend had returned home. The comeback of old Coke drove stock prices to the highest level in twelve years. This was said to be the only way to regain the lead on the cola wars.

New coke: an innovation case study

There was a report today of Coke employees selling trade secrets, which reminded me of the New coke saga, a tale of failed innovation.

Most who were around in 1985 recall this as a huge fiasco, where a bad drink was rejected by the public. But the details are much more interesting, as Coke did many things right from an “innovation as strategy” perspective.

What went right:

* Coke chose to move forward in response to real market pressure, rather than defending their existing products. * They had their best R&D & flavor people design the new product. * Extensive taste testing and veteran approval were sought, and all pointed to them having a better product. * They put big $$$ behind a major rollout campaign.

What went wrong:

* The press conference (April ‘85) was a disaster. Coke failed to explain why they made the change and did not acknowledge Pepsi taste test, or any taste testing done by Coke in R&D. * Pepsi attacked with counter-ads, including a full page ad in the New York Times. * According to Gladwell’s Blink and other sources, the successful taste tests of New coke didn’t suggest people wanted an entire 12 oz. portion of the new formula.

The result:

* There was initial acceptance and the product did well it’s first weeks, sales up 8% compared to previous year. * However public outrage grew, with groups protesting New Coke (especially strong in the south). * By June ‘85 there was enough public pressure and complaints from bottling suppliers that Coke execs were under pressure. * In July ‘85 Coke brought Classic Coke back to the market.

It’s a great story of the risks of innovation. Coke did many things right - their greatest mistake was underestimating their customers lack of interest in innovation: they were surprisingly happy with how things were.

(See wikipedia’s excellent entry on the New Coke saga).

History

Roberto Goizueta, CEO of Coca-Cola during the 1980s.[edit]

A new leader, and a problem

The original drink's market share had been shrinking for decades, from 60% just after World War II to under 24 percent in 1983, in the face of fierce competition from archrival Pepsi-Cola. When Roberto Goizueta took over as CEO in 1980, he pointedly told employees there would be no sacred cows in how the company did its business, including how it formulated its drinks. Not long afterwards, the company bought Columbia Pictures, a highly unusual acquisition for a soft-drink company.

He also made his point when Diet Coke broke a longstanding company tradition that the brand would not be diluted and that no other product would also be called Coca-Cola.

And instead of simply putting out Coke with an alternative sweetener (something the company only did with Coke Zero in 2005), Coca-Cola developed a newer, softer formula to go with the aspartame-sweetened drink.

Diet Coke was a runaway success, quickly becoming the fourth most popular soft drink in America, and eventually displacing 7-Up as the third.

This change in the industry ended up having an adverse effect on the Coca-Cola company. Diet Coke's success was coming at the expense of regular Coke as more consumers showed a preference for sweeter drinks, whether sugar-sweetened or not. And foremost among them was Pepsi, whose lead had narrowed to within a couple of percentage points of Coke. In the wake of its late 1970s "Pepsi Challenge" campaign, in which blind taste tests offered in public places had shown an overwhelming preference for Pepsi, it had begun to outsell Coke in supermarkets, and it was only due to fountain sales at McDonald's and Hardees fast-food restaurants that Coke was maintaining its edge.

While Coke's executives publicly disputed the results of the Pepsi Challenge, their own internal surveys found the same preference among cola drinkers. Other data worried them too — whereas in 1972 six times as many drinkers bought Coke exclusively as opposed to Pepsi, a decade later there was only a slight edge for Coke. This was occurring despite their much greater market penetration.

Trends for the future were even more ominous. Baby boomers were likely to purchase more diet drinks as they aged and remained health- and weight-conscious. Therefore any future growth in the full-calorie segment had to come from younger drinkers … who favored Pepsi and its sweetness by even more overwhelming margins than the market as a whole[1].

[edit]

A possible solution

Coke's executives then began to invest in research and development to discover the reason behind Pepsi's success over Coca-Cola.

They found that while most Pepsi drinkers strongly preferred Pepsi and rarely settled for others, Coke drinkers, although they preferred Coke, were more likely to buy and drink Pepsi, RC or a store brand if it was the only brand available.

That explained why Pepsi had actually been gaining customers despite an overall shrinkage of the sugared soft-drink market. To add to the problem, the Pepsi drinkers were generally a younger demographic, reflecting the success of the youth-oriented "Pepsi Generation" campaign the company had begun in the late 1960s.[2]

Instead of focusing on the demographic of customers, Coca-Cola focused on the substance (the nature of the product itself). As the success of Diet Coke showed, and as some executives believed, the market was leaning toward sweeter drinks. They pointed to some research suggesting the distinctive tangy, acidic quality of the formula was seen as harsh by some younger drinkers.

Appropriately, the development of Diet Coke had inadvertently offered a ready solution to this quandary. During that process, one chemist had experimentally sweetened the drink with high fructose corn syrup ("HFCS"), with which some bottlers had already been flavoring regular Coke, instead of cane sugar, a much more expensive ingredient. The move generated criticism from longtime Coke drinkers, who sometimes traveled to different areas to get their preferred mixture. It had proven to be popular with the development team.

[edit]

The market research

Coca-Cola's most senior executives commissioned the top-secret "Project Kansas", headed by marketing vice president Sergio Zyman and Brian Dyson, president of Coca-Cola USA, to test and perfect the new flavor for Coke itself. It took its name from a famous photo of that state's legendary journalist William Allen White drinking a Coke that had been used extensively in its advertising and hung on several executive's walls.[3] The company's marketing department again went out into the field, this time armed with samples of the possible new drink for taste tests and focus groups and surveys.

The results of that were very positive — the HFCS mixture beat both regular Coke and Pepsi quite overwhelmingly. Then tasters were asked if they would buy and drink it if it was Coca-Cola.

Most said yes, they would, although it would take some getting used to. A small minority, about 10–12%, were very angry at the thought and alienated by it, saying that they might stop drinking Coke altogether. Their presence in focus groups tended to skew the results from that research in a more negative direction as they exerted indirect peer pressure on other participants.[4]

The surveys, which standard marketing procedure at that time put more weight on, were less negative and were key in convincing management to move forward with a change in the formula for 1985 to coincide with the drink's centennial. But the focus groups had provided a clue as to how the change would play out in a public context, a data point that the company downplayed but was to prove important later[5].

Management also considered, but quickly rejected, an idea to simply make and sell the new flavor as yet another Coke variety, as the company's bottlers were already complaining about absorbing other recent additions to the product line in the wake of Diet Coke, and a number of them had a lawsuit pending over the company's syrup pricing

policies. A new variety of Coke in competition with the main variety could, if successful, also dilute Coke’s existing sales and increase the proportion of Pepsi drinkers relative to Coke drinkers.

Early in his career with Coca-Cola, Goizueta had been in charge of the company's Bahamanian subsidiary. In that capacity, he had improved sales by tweaking the drink's flavor slightly, so he was receptive to the idea that changes to the taste of Coke could lead to increased profits. He believed it would be "New Coke or no Coke",[6] and the change must take place openly.[4] He insisted that the containers carry the "NEW!" label, which gave the drink its popular name.[7]

Goizueta also made a visit to his mentor and predecessor as the company's chief executive, the ailing Robert W. Woodruff, who had built Coke into an international brand following World War II. He claimed he had secured Woodruff's blessing for the reformulation, but even many of Goizueta's closest friends within the company doubt that Woodruff truly understood what Goizueta intended.[8][9] To his own dying day, however, Goizueta insisted he had.

[edit]

Rollout

One of Coke's ads to promote the flavor change

Many of New Coke's problems developed during the rollout. Archrival Pepsi was able to undermine the public relations push, and Coke's own executives, particularly Goizueta, did not impress the media.

[edit]

Strategic Maneuvers by Pepsi

Coke let the media know on April 19 that a major announcement was planned for the following Tuesday, April 23, concerning a change in the product. While its press release did not explicitly say so, many recipients correctly guessed it could only augur a change in the flagship brand's formulation. So, too, did officials at PepsiCo, who had expected a major move but not something as drastic as this.

Despite a negative reaction by top Pepsi executives to a smuggled preview six-pack of the new flavor, they nevertheless concluded it was a serious threat. Roger Enrico, then director of North American operations, wasted no time taunting the venerable rival. He declared a companywide holiday and took out a full-page ad in The New York Times crowing that Pepsi had won the long-running "cola wars".[10][11] Since Coke officials were preoccupied over the weekend with preparations for the big day, their Pepsi counterparts had time to work the phones and plant seeds of doubt in the media, sounding themes that would later come into play in the public discourse over the changed drink.[12]

[edit]

Official launch

New Coke was introduced on April 23, with the slogan "The Best Just Got Better". Production of the original formulation ended that same week.

The press conference at New York City's Lincoln Center to introduce the new formula did not go over very well. Reporters present had already been fed questions by Pepsi, which was very worried that New Coke would erase all its gains, and did not give Goizueta, a man ill-suited to events such as these, an easy time as he changed a century of tradition. His stumbling description of the new taste, given his background as one of the company's flavor chemists, was widely ridiculed:

    [It's] smoother, uh, uh, yet, uh, rounder yet, uh, bolder ... it has a more harmonious flavor.[13]    

Goizueta defended the change by pointing out that the drink's secret formula was not sacrosanct and inviolable, as Asa Candler had obediently taken the cocaine out of the drink after it had been made a controlled substance.[14]

Goizueta and president Donald Keough toasting New Coke.

But he also purposely declined to admit that taste tests had in any way led the company to make the change (which he called "one of the easiest decisions we have ever made"[9]) to avoid giving Pepsi any credit[15], yet gave no other real reason for the change, further alienating reporters who had been well-worked by Pepsi in advance on this very issue. He came across as arrogant when, following a reporter's question about whether Diet Coke would be reformulated "if this is a success," he snapped "This is a success."

The emphasis on the sweeter taste of the new flavor also made a mockery of a recent tack taken by Coke in its advertising, in which spokesman Bill Cosby had touted its less-sweet taste as a reason to prefer Coke over Pepsi.[16]

Nevertheless, the company's stock went up on the announcement,[17] and market research showed that 80% of the American public was aware of the change within 48 hours[18].

[edit]

Early acceptance

While it is widely believed today that the new drink failed almost instantly, at the time that was not the case. The company, as it had planned, introduced the new formula with big marketing pushes in New York (workers renovating the Statue of Liberty were symbolically the first Americans given cans to take home[18]) and Washington, D.C. (where thousands of free cans were given away in Lafayette Park). Sales figures from those cities, and other regions where it had been introduced, showed a reaction that went as the market research had predicted. In fact, Coke's sales were up 8% over the same period the year before.[19]

Most Coke drinkers resumed buying the new drink at much the same level as they had the old one. Surveys indicated, in fact, that a majority liked the new flavoring.[20] Three-quarters of the respondents said they would buy New Coke again.[19]

The big test, however, remained in the Southeast, where Coke was first bottled and tasted and has always been such a market leader and cultural institution that "coke" is a colloquial term for all colas, or even all soft drinks, regardless of brand.

[edit]

Backlash

Despite its acceptance with a large number of Coca-Cola drinkers, a vocal minority resented the change in formula and was not shy about making that opinion known — again just as had happened in the focus groups. Many of these drinkers were indeed Southerners, some of whom considered the drink a fundamental part of regional identity, and viewed the company's decision to make it sweeter through the prism of the Civil War, as yet another humiliating surrender to the "Yankees" (although Pepsi was invented in North Carolina, the company has long been headquartered in Purchase, New York).

They were, nonetheless, joined by some voices from outside the region. Chicago Tribune columnist Bob Greene gave them added ammunition with some widely reprinted pieces ridiculing the new flavor and damning Coke's executives for having changed it. Talk show hosts and comedians made light of the switch. Ads for New Coke were booed heavily when they appeared on the scoreboard at the Houston Astrodome.[18] Even Fidel Castro, a longtime Coke drinker, got in on the act, calling New Coke a sign of American capitalist decadence.[21] Goizueta's own father expressed similar misgivings to his son, the only time he ever agreed with the man whose revolution had driven him and his son, nearly penniless, to America a quarter-century before.[22]

Company headquarters in Atlanta started receiving angry letters expressing deep disappointment and anger at executives. A psychiatrist Coke hired to listen in on phone calls to the company hotline, 1-800-GET-COKE, told executives some people sounded as if they were discussing the death of a family member.

Pepsi took advantage of the situation, running ads in which a first-time Pepsi drinker exclaimed "Now I know why Coke did it!"[23] However, in a bit of relief for the beleagured Coke executives, Pepsi actually gained very few converts over Coke's switch, despite claiming a 14% sales increase over the same month the previous year, the largest sales growth in the company's history.[19] The most alienated customers simply refused to buy New Coke rather than switch to Pepsi.[24] Their protests, Coke came to realize, were over the idea of changing the drink rather than what it had been changed to.

Gay Mullins, a Seattle retiree looking to start a public relations firm with $120,000 of borrowed money, formed the organization Old Cola Drinkers of America on May 28 to lobby Coca-Cola to either reintroduce the old formula or sell it to someone else. His organization eventually received over 60,000 phone calls. He also filed a class action lawsuit against the company (which was quickly dismissed by a judge who said he preferred the taste of Pepsi[25]), while nevertheless expressing interest in landing it as a client of his new firm should it reintroduce the old formula.[26] He had also twice in informal blind taste tests conducted by the Seattle Times either failed to distinguish New Coke from old or expressed a preference for New Coke.[27]

Still, despite ongoing resistance in the South, New Coke continued to do well in the rest of the country.[28]. But how it would be received in other countries remained to be seen. Sergio Zyman, the company's chief marketing officer, heard doubts and skepticism from

his relatives in Mexico, where New Coke was slated to be introduced later that summer, when he went there on vacation.

Goizueta publicly voiced a complaint many company executives had been making in private as they shared letters the company had received thanking them for the change in formula, that bashing it had become "chic" and that, as had happened in the focus groups, peer pressure was keeping those who liked it from speaking up in its favor as vociferously as its critics were against it. Donald Keough, the company's president and chief operating officer, reported overhearing this exchange at his country club outside Atlanta:

"Have you tried it?""Yes.""Did you like it?""Yes, but I'll be damned if I'll let Coca-Cola know that."[29]

[edit]

Revolt behind the scenes

Some Coke executives had begun discreetly considering reintroducing the old formula as early as May.[30] By June, as warmer weather began to spur soft-drink sales, sales showed that the new formula was leveling among consumers, and executives feared the peer pressure was now affecting their bottom line. Some consumers began trying to obtain old Coke from overseas, where the new formula had not yet been introduced, as domestic stocks of the old drink were finally liquidated.[31] Over the course of the month, Coke's chemists also quietly reduced the acidity level of the new drink in hopes that would assuage complaints about the flavor and allow its sweetness to be better perceived (ads pointing to this change were prepared, but never used).[32]

In addition to the noisier public protests, boycotts and bottles being emptied into the streets of southern cities, the company had more serious reasons for concerns. Its bottlers, and not just the ones still suing the company over syrup pricing policies, were expressing concern. While they had given Goizueta a standing ovation when he announced the change at an April 22 bottlers' meeting at Atlanta's Woodruff Arts Center, glad the company had finally taken some initiative in the face of Pepsi's advances[18], they were less enthusiastic about the taste.[33][34] Most of them saw great difficulty having to promote and sell a drink that had long been marketed as "The Real Thing", constant and unchanging, now that it had been changed.

The 20 bottlers still suing Coke had even more sport with the change in their legal arguments. Coke had argued in its defense when the suit was originally filed that the formula's uniqueness and difference from Diet Coke justified different pricing policies from the latter. But if the new formula was simply an HFCS-sweetened Diet Coke, how could that argument hold water, they asked?

Bottlers, particularly in the South, were also tired of facing personal opprobrium over the change. Many reported that some acquaintances had stopped speaking to them, or had expressed displeasure in other emotionally hurtful ways. Some deliverymen were even assaulted.[18]

On June 23, several of the bottlers took these complaints to Coke's executives in a private meeting[17]. With the company now fearing boycotts not only from its consumers but its bottlers, talks about reintroducing the old formula moved from if to when.

[edit]

Reversal

Humbled, Coca-Cola executives announced the return of the original formula on July 10, less than three months after the new Coke's introduction. So important was the development that ABC News's Peter Jennings interrupted regular programming to share it with viewers. On the floor of the U.S. Senate, David Pryor called it "a meaningful moment in U.S. history".[32]

The new product continued to be sold and retained the name Coca-Cola, so the old product was named Coca-Cola Classic, more commonly Coke Classic and later just Classic Coke. Many who tasted the hastily reintroduced formula were not convinced that the first batches really were the same formula that had supposedly been retired that spring. This is, in fact, partially true because Coca-Cola Classic differed from the original formula as all bottlers were using high fructose corn syrup instead of cane sugar.

"There is a twist to this story which will please every humanist and will probably keep Harvard professors puzzled for years," said Keough at a press conference. "The simple fact is that all the time and money and skill poured into consumer research on the new Coca-Cola could not measure or reveal the deep and abiding emotional attachment to original Coca-Cola felt by so many people." The company made peace with Mullins and those he represented by giving him the first case of Coke Classic.[18]

[edit]

Aftermath

At first it looked as if Coke's worst fears had come to pass as Pepsi pulled into the lead, running yet another ad teasing Coke by suggesting that the whole thing was very confusing and consumers should just stick with Pepsi. But by the end of the year, Coke Classic was substantially outselling both New Coke and Pepsi, putting the company back into the number-one position it has enjoyed ever since. New Coke, by contrast, had dwindled to a mere three percent in market share. (Later research, however, suggested that it was not the reintroduction of Classic Coke, but instead the less-heralded rollout of Cherry Coke, that can be credited with the company's success that year.[35])

Coke spent a considerable amount of time trying to figure out where it had made a mistake, ultimately concluding that it had underestimated the public impact of the portion of the customer base that would be alienated by the switch. This narrative would not emerge for several years afterward, however, and in the meantime the public simply concluded that the company had, as Keough suggested, failed to consider the public's attachment to the idea of what Coke's old formula represented. That has become conventional wisdom although it is not the case.

This populist version of the story served Coke's interests, however, as the whole episode did more to position and define Coca-Cola as a brand embodying values distinct from Pepsi than any deliberate effort to do so probably could have. Allowing itself to be portrayed as a somewhat clueless large corporation forced to back off a big change by overwhelming public pressure flattered customers and added to the legend (as Keough put it, "We love any retreat which has us rushing toward our best customers with the product they love the most."[32]). The bottles and cans continue to bear the "Coca-Cola Classic" title even though it has long since displaced its erstwhile usurper as the main brand.

While in the short term the fiasco led Cosby to end his advertising for Coke, saying his commercials that praised the superiority of the new formula had hurt his credibility, no one at Coca-Cola was fired or otherwise held responsible for what is still widely perceived as a misstep, for the simple reason that it ultimately wasn't (in contrast with Schlitz beer's disastrous change to a cheaper formula in the early 1970s, which was also based on market research into product taste yet unquestionably detrimental to the company in the long term). When Goizueta died in 1997, the company's share price was at a level well above what it was when he had taken over 16 years earlier and its position as market leader even more firmly established. At the time Roger Enrico, then head of Pepsi's American operations, likened new Coke to the Edsel [36] . But he admitted later, when he himself became PepsiCo's CEO, that had people been fired or demoted over New Coke it would have sent a message that risk-taking was strongly discouraged at the company[37].

In the late 1990s, Zyman summed up the New Coke experience thusly:

    Yes, it infuriated the public, cost a ton of money and lasted only 77 days before we reintroduced Coca-Cola Classic. Still, New Coke was a success because it revitalized the brand and reattached the public to Coke.[38]

   [edit]

New Coke after Coke Classic

In the short run the reintroduction of old Coke saved Coke's sales numbers and brought it back in the good graces of many customers and bottlers. Phone calls and letters to the company were as joyful and thankful as they had been angry and depressed ("You would have thought we'd cured cancer", said one executive).

But confusion reigned at the company's marketing department, which had to come up with a plan to market two Cokes where such plans had been completely off the table mere months before. Classic Coke didn't need much help, with a "Red, White and You" campaign showcasing the American virtues many of those who had clamored for its reintroduction had pointedly reminded the company it emobodied. But how to sell what was still just Coke? "The Best Just Got Better" could no longer be used. Marketers fumbled for a strategy for the rest of the year.[39] Matters were not helped when McDonald's announced shortly after the reintroduction that it was switching over to Classic Coke at every store across the country[40]

Max Headroom print ad from "Catch the Wave."

At the beginning of 1986, however, Coke's marketing team found a strategy by returning to their original motives for changing the drink — the youth market so beholden to Pepsi. Max Headroom, the purportedly computer-generated British media personality played by Matt Frewer, was chosen to replace Cosby as the spokesman (of sorts) for Coke's new "Catch the Wave" campaign. A very stylish figure in his jacket and sunglasses, he was already known to much of the U.S. youth audience through appearances on MTV, where he had first appeared in the The Art of Noise's "Paranoimia" video, and Cinemax. The campaign was launched with a memorable television commercial, produced by McCann-Erickson New York, with Max saying in his trademark stutter, "C-C-C-Catch the Wave" and referring to his fellow "Cokeologists".[1] [2] In a riposte to Pepsi's televisual teasings, one showed Headroom asking a Pepsi can he was "interviewing" how it felt about more drinkers preferring the new Coke to it and then cut to the condensation forming on the can. "Sweating?" he asked.[3]

It was a huge success, and surveys likewise showed that more than three-quarters of the target market were aware of the ads within two days. Coke's corporate hotline received

more calls about him than any previous spokesperson, some even asking if he was married. [41] Cartoonist Garry Trudeau followed suit with "Ron Headrest", a similar cyber-caricature of President Reagan, in some of his Doonesbury strips. The ads and campaign continued throughout the year and were chosen as best of 1986 by Video Storyboard of New York.[41]

However, some stutterers and advocates for them complained that the ads were insulting. Some viewers found them annoying, and ultimately Coke itself found that some viewers thought they were Pepsi ads.

[edit]

Coke II

A can of Coke II

In 1985, New Coke was sold only in North America, while the original formula continued to be sold in the rest of the world (although had the new version been a success it would presumably have been introduced worldwide). But New Coke was eventually returned to the company's product portfolio; it was test-marketed under the name Coke II in 1990 and officially renamed Coke II in 1992. So, having determined not to make it a second brand, the company ultimately did exactly that.

However, Coke, perhaps not wanting to get burned a second time, did little to promote or otherwise distinguish it, and in a market already offering far more choice of drinks calling themselves "Coke" in some fashion or another, the public saw little reason to embrace a product they had firmly rejected seven years earlier, and within a year or so Coke II was largely off the American shelves again. By 1998 it could only be found in some scattered Midwestern markets, and by 2002 was gone from the U.S. altogether. And yet it has found acceptance in some foreign markets. As of 2006, it was still selling in Yap (one of the four Federated States of Micronesia), along with Coca-Cola C2. It is also still very popular in the U.S. Territory American Samoa, where it is still sold in most Coke vending machines.

Evolution of the New Coke/Coke II cans.

[edit]

LegacyNew Coke had the spotlight for only three months but casts a long shadow, in both the business world and popular culture, that can be seen today.

[edit]

Commercial

"For a product so widely despised," noted AdWeek blogger Tim Nudd in 2006, more than two decades later, "New Coke (aka Coke II) still gets an admirable amount of ink." He noted Blink and another recent book that dealt with it at some length, as well as two recent mentions in Forbes and Sports Illustrated.[42].

It is most frequently mentioned as a cautionary tale among businesses against tampering too extensively with a well-established and successful brand.

[edit]

Cultural

Futurama spoofed the conspiracy theory in "Fry and the Slurm Factory". In it, Fry, Leela, and Bender are captured by the Slurm queen, who dangles Leela over a vat of Slurm fluid which the insectoid queen herself expelled out her cloaca.

Slurm Queen: "Soon, you'll be submerged in Royal Slurm, which in a matter of minutes will transform you into a Slurm Queen like myself!"Glurmo (Slurm soldier): "But your Highness, she's a commoner. Her Slurm will taste foul."Slurm Queen: "Yes. Which is why we'll market it as New Slurm. Then,

when everyone hates it, we'll bring back Slurm Classic and make billions!"

On VH1's I Love the '80s Strikes Back, comedian Michael Ian Black voiced his opinion on the development of New Coke: "The pope (Pope John Paul II) was involved...the pope was more than involved."

In "Erection Day", a ninth-season episode of South Park, stand-up comic Jimmy Vaulmer/Swanson says in a performance "Well, they're getting a new pope, have you seen this, have you heard about this? Apparently, they're going to call the new one 'New Pope' and the John Paul 'Pope Classic.' ...Wow, what a wonderful audience."

On the television show The Simpsons, one episode includes Bleeding Gums Murphy having a guest star spot on The Cosby Show. Bill Cosby then has to explain to his children why they have a third grandpa and why this one is also a jazz musician. Bill Cosby replies, "Oh, oh you see, the kids, they listen to the rap music, which gives them the brain damage. With the hippin' and the hoppin' and the bippin' and the boppin', so they don't know what the jazz is all about. You see jazz is like Jell-O Pudding Pop. No actually it's more like Kodak film. No, actually it's like the New Coke-- it'll be around forever. Heh heh heh."

In The Wedding Singer, which takes place in 1985, in the song "All About The Green," it is mentioned. It is said that all the stock should be bought for New Coke instead of Starbucks. (It was stated that in the future, no one would buy coffee for $3).

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Conspiracy theoriesCoca-Cola's sudden reversal on New Coke led to several urban legends and conspiracy theories that have circulated in the years since to explain how a company with the resources and experience of Coca-Cola could have made such an apparently colossal blunder.

The simplest was that the company had planned all along to reintroduce the old formula as a ploy to reinvigorate interest in the product. There have been apocryphal tales of employees seeing batches of the old formula continuing to be produced well after April, and others who say that long before July they saw the graphics for the Coke Classic containers (which Coke said at the time were hastily conceived and produced within a day, which raised some eyebrows as large corporations rarely do such momentous things with that much haste). The company denies the accusation to this day.

Other explanations that have been proffered:

The putative switch was planned all along to cover the change from sugar-sweetened Coke to much more inexpensive high fructose corn syrup (HFCS), a theory that was supposedly given credence by the apparently different taste of Coke Classic when it first hit the market (the U.S. sugar trade association took out a full-page ad lambasting Coke for using HFCS in all bottling of the old formula when it was reintroduced.[43]). However, as noted above, some Coke bottlers had been using HFCS for several years already, though it is true that eventually all bottlers would abandon cane sugar. Also, many of those who claimed the reintroduced Coke Classic tasted differently had not been able to sample the old drink for a couple of months and naturally their memories may have played a part in idealizing the taste.

In another theory, it provided cover for the final removal of all coca derivatives from the product to placate the Drug Enforcement Administration, which was trying to eradicate the plant worldwide to combat an increase in cocaine trafficking and consumption. While Coke's executives were indeed relieved that the new formula contained no coca, and were indeed concerned about the long-term future of the Peruvian government-owned coca fields that supplied it in the face of increasing DEA pressure to end cultivation of the crop, there was no direct pressure from the DEA on Coca-Cola to do so.[4]

Yet another theory agrees that the switch was meant ultimately to fail, but that it was not about providing cover for any substantive change in the product, instead a sort of pre-emptive flanking maneuver. Pepsi, this theory holds, had been developing and considering marketing a product called Pepsi Supreme which was to have tasted more like Coke as a way to increase its market share and attract yet more Coke drinkers to its product line. By pulling a similar move themselves, Coke guaranteed, it is believed, that any move by Pepsi would look like mere imitation and thus headed off a challenge to its flagship drink. (Pepsi supposedly had such a product in development at the time, and was going to introduce it if the combination of New Coke and Coke Classic had successfully cut into its market share; but since that never happened Pepsi Supreme never saw the light of day.)

Another theory calls the whole thing a stock manipulation scheme. The subsequent drop in Coca-Cola's share price made it easier for the company and its primary owners to buy back shares, un-diluting the company's ownership. Once sufficient shares had been purchased or taken off the market, "classic" Coke was returned to market to drive the stock price back up.[citation needed] However, as the company's share price went up on New Coke's introduction and closed the year up 33.5%, it is unlikely that such a scheme would have been successful, and indeed Coke's executives were looking to boost the share price through their actions.[44]

A final theory suggests that the company was attempting to increase the amount of shelf space for its products in supermarkets in order to make Pepsi look smaller by comparison. This is a common reason for line extension, as the introduction of Cherry Coke and more recent variations illustrates, but if that were the real goal, the new formula could have simply been introduced alongside the old one to begin with.

Keough answered all speculation by saying "We're not that dumb, and we're not that smart," as Coke Classic was reintroduced.

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Was it really necessary?Although the reason for Coke's early-'80s loss of market share was originally thought by both companies and all observers to be Pepsi's sweeter taste, later research has suggested otherwise.

The real culprit, according to this, turned out to be the 1965 merger between Pepsi and Frito-Lay that created PepsiCo. The new company was able to take advantage of Frito-Lay's highly developed retail distribution system to leverage more shelf space at supermarkets and other food retailers. With more shelf space available, sale specials were common for Pepsi products. Price, not loyalty, was the motivating factor for most retail consumers, and Pepsi gained substantial market share as a result[citation needed].

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Taste-test issues

In talks, and his book Blink, author Malcolm Gladwell relates his conversations with market researchers in the food industry who put most of the blame for the failure of New Coke on the flawed nature of taste tests. They claim most are subject to systematic biases.

Tests such as the Pepsi Challenge were what are called in the industry "sip tests," meaning that drinkers were given small samples (less than a can or bottle's worth) to try out. Gladwell contends that what people say they like in these tests may not reflect what they will actually buy to sit at home and drink over a week or so.[45] Carol Dollard, who once worked in new product development for Pepsi, told Gladwell, "I've seen many times where the sip test will give you one result and the home-use test will give you the exact opposite."[46] For example, although many consumers react positively to the sweeter taste of Pepsi when drinking it in small volumes, it may become unatractively sickly when drunk in quantity. Coke, on the other hand, may be more attractive for drinking in volume, precisely because it is less sweet. A more comprehensive testing regime could possibly have revealed this.

Gladwell reports that other market researchers have criticized Coke for not realizing that much of its success as a brand came from what they call sensation transference, a phenomenon first described by marketer Louis Cheskin in the late 1940s: tasters unconsciously add their reactions to the drink's packaging into their assessment of the taste[47]. For example, one of the researchers told Gladwell that his firm's research had found 7-Up drinkers offered a sample from a bottle with a distinctly more yellowish label believe the flavor to be more lemony, although it wasn't.[48]

In Coke's case, it is alleged that buyers, subject to sensation transference, were "tasting" the red color of the container and distinctive Coca-Cola script as much as the drink itself. It was thus, in their opinion, a mistake to focus solely on the product and its taste. "The mistake Coke made," said Darrel Rhea, an executive with the firm Cheskin founded, "was in attributing their loss in share entirely to the product"[48]. He points to Pepsi's work in establishing a youth-oriented brand identity from the 1960s onward[2] as having more bearing on its success.