The New Coke

The New Coke

1. Introduction

Coke was invented by Dr. John Pemberton, an Atlanta pharmacist and his three-legged brass pot all the way back in 1886; by 1985 Coke was closing in fast on its centennial anniversary. (Cook, 2002) Coke along with the legendary chairman Roberto C. Goizueta had witnessed a remarkable set of accomplishments during the 1980's. There were some creeping problems, however. The 87-year old rivalry between Coca-Cola, the traditional market leader, and Pepsi Cola, the perennial runner up, took an unexpected turn in the mid-1970s. Pepsi's consumer research had discovered in blind taste tests that a majority of consumers preferred the taste of Pepsi over that of Coke. In fact, even a majority of loyal Coke drinkers were reported preferring Pepsi in the tests. Pepsi began communicating these findings to consumers through "Pepsi Challenge" television ads, during those days, showing taste tests where Coca-Cola drinkers expressed preferences for a cola which was then revealed to be Pepsi. (Schindler, 1992)

By 1977, Pepsi had actually pulled ahead of Coke in food store market share. (Schindler, 1992) Coke's lead had dropped from a better than two to one margin to a mere 4.9 percent lead by 1984. (Bastedo & Davis, 1993) Coke was clearly in danger of becoming the Number-Two soft drink. In April 1985, the management of Coca-Cola Co. announced its decision to change the flavour of the company's flagship brand. The events that followed from this decision, as well as the factors which led up to it, have been reviewed, discussed, and extensively analyzed in this report.

2. The Reformulation

The Pepsi Challenge campaign had contributed to Coca-Cola's slow, but steady decline of market share in the soft-drink category. This erosion was most apparent in food store sales, which reflect consumer preferences more directly than do vending machine or fountain sales. Coke's management began researching the possibility of reformulating Coca-Cola to respond to the apparent changes that had occurred in consumer tastes. By 1984, researchers had arrived at a new formula for Coke. Before Coca-Cola launched New Coke they had invested US$4,000,000 in market research and undertook 200,000 blind taste tests. (Anon, n.d.) In all these blind (unbranded) taste tests the New Coke had outperformed both Pepsi and existing Coke. (Skapinker, 2001) These blind taste tests and focus groups were the basis of the launch of New Coke in 1985. (Cook, 2002) In addition to beating Pepsi, cola drinkers chose this new formula over the old Coke formula by 55% to 45% in blind taste tests and loyal Coke drinkers chose it over the old Coke formula by 53% to 47%.