new coke case

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One of Coke's ads to promote the flavor change.

Coca-Cola's most senior executives commissioned a secret effortnamed "Project Kansas" headed by marketing vicepresident Sergio Zyman and Brian Dyson, president of Coca-ColaUSA to test and perfect the new flavor for Coke itself. It took itsname from a famous photo of that state'srenowned journalist William Allen White drinking a Coke that hadbeen used extensively in its advertising and hung on several

executives' walls. [4] The company's marketing department againwent out into the field, this time armed with samples of thepossible new drink for taste tests, surveys , and focus groups .

The results of the taste tests were strong the sweeter mixtureoverwhelmingly beat both regular Coke and Pepsi. Then tasterswere asked if they would buy and drink it if it were Coca-Cola.Most said yes, they would, although it would take some gettingused to. A small minority, about 10-12%, felt angry and alienated

at the very thought, saying that they might stop drinking Cokealtogether. Their presence in focus groups tended to skew resultsin a more negative direction as they exerted indirect peer pressure on other participants. [5]

The surveys, which were given more significance by standardmarketing procedures of the era, were less negative and were key
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in convincing management to move forward with a change in theformula for 1985, to coincide with the drink's centenary . But thefocus groups had provided a clue as to how the change wouldplay out in a public context, a data point that the company

downplayed but which was to prove important later. [6]

Management also considered, but quickly rejected, an idea tosimply make and sell the new flavor as yet another Coke variety.

The company's bottlers were already complaining aboutabsorbing other recent additions into the product line in the wakeof Diet Coke. Many of them had sued over thecompany's syrup pricing policies. A new variety of Coke incompetition with the main variety could, if successful, also dilute

Cokes existing sales and increase the proportion of Pepsi drinkersrelative to Coke drinkers.

Early in his career with Coca-Cola, Goizueta had been in charge of the company's Bahamian subsidiary . In that capacity, he hadimproved sales by tweaking the drink's flavor slightly, so he wasreceptive to the idea that changes to the taste of Coke could leadto increased profits. He believed it would be "New Coke or noCoke", [7] and the change must take place openly. [5] He insisted

that the containers carry the "NEW!" label, which gave the drinkits popular name. [8]

Goizueta also made a visit to his mentor and predecessor as thecompany's chief executive, the ailing Robert W. Woodruff , whohad built Coke into an international brand following World War II .He claimed he had secured Woodruff's blessing for thereformulation, but even many of Goizueta's closest friends withinthe company doubt that Woodruff truly understood what Goizueta

intended.[9][10]

Goizueta always said he had.[edit ]Marketing response by Pepsi

Coke let the media know on April 19, 1985 that a majorannouncement was planned for the following Tuesday, April 23,concerning a change in the product. While its press release didnot explicitly say so, many recipients correctly guessed it meant a
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change in the flagship brand's formulation. So, too, did officialsat PepsiCo , who had expected a major move but not something sodrastic. [5]

Despite a negative reaction by top Pepsi executives to asmuggled preview six-pack of the new flavor, they neverthelessconcluded it was a serious threat. Roger Enrico , then directorof North American operations, wasted no time taunting Pepsi'solder rival. He declared a companywide holiday and took out afull-page ad in The New York Times proclaiming that Pepsi hadwon the long-running " cola wars ". [10][11] Since Coke officials werepreoccupied over the weekend with preparations for the big day,their Pepsi counterparts had time to cultivate skepticism among

reporters, sounding themes that would later come into play in thepublic discourse over the changed drink. [12]

[edit ]Official launch

To hear some tell it, April 23,1985, was a day that will livein marketinginfamy...spawning consumerangst the likes of which no

business has ever seen.

The Coca-Cola Company, on theNew Coke announcement [13]

New Coke was introduced on April 23, 1985. Production of theoriginal formulation ended that same week.

The press conference at New York City 's Lincoln Center tointroduce the new formula did not go over very well. Reporterspresent had already been fed questions by Pepsi, [12] which wasextremely worried that New Coke would erase all its gains. Also,Goizueta's description of the new taste, given his background asone of the company's flavor chemists, was less than impressive:
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[It's] smoother, uh, uh, rounder yet, uh, yet bolder... [14] a moreharmonious flavor. [15]

Goizueta defended the change by pointing out that the drink'ssecret formula was not sacrosanct and inviolable. (As far back as1935, Coca-Cola sought kosher certification from an Atlanta rabbi ,and made two changes to the formula so that the drink could becertified kosher [and, incidentally, halal and vegetarian ] andkosher for Passover . [16] )

But Goizueta also refused to admit that taste tests had in any wayled the company to make the change (which he called "one of theeasiest decisions we have ever made" [17] ) to avoid giving Pepsiany credit, [13][18] yet gave no other real reason for the change,further alienating reporters who had already heard from Pepsirepresentatives in advance on this very issue. [12] A reporter askedwhether Diet Coke would also be reformulated "assuming this is asuccess," Goizueta curtly replied, "No. And I didn't assume thatthis is a success. This is a success." [15]

The emphasis on the sweeter taste of the new flavor also rancontrary to previous Coke advertising, in which spokesman Bill Cosby had touted its less-sweet taste as a reason to prefer Coke

over Pepsi. [19]

Nevertheless, the company's stock went up on theannouncement, [20] and market research showed 80% of theAmerican public was aware of the change within days. [21]

[edit ]Early acceptance

The company, as it had planned, introduced the new formula withbig marketing pushes in New York (workers renovating the Statue of Liberty were symbolically the first Americans given cans to takehome) [21] and Washington, D.C. (where thousands of free canswere given away in Lafayette Park ). Sales figures from thosecities, and other regions where it had been introduced, showed areaction that went as the market research had predicted. In fact,Coke's sales were up 8% over the same period the year before. [22]
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Most Coke drinkers resumed buying the new drink at much thesame level as they had the old one. Surveys indicated, in fact,that a majority liked the new flavoring. [23] Three-quarters of therespondents said they would buy New Coke again. [22] The big test,

however, remained in the Southeast , where Coke was first bottledand tasted.

[edit ]Backlash

Despite New Coke's acceptance with a large number of Coca-Coladrinkers, a vocal minority of them resented the change in formulaand were not shy about making that known again just as hadhappened in the focus groups. Many of these drinkers wereSoutherners, some of whom considered the drink a fundamentalpart of regional identity. They viewed the company's decision tochange the formula through the prism of the Civil War , as another surrender to the " Yankees ". [24]

Company headquarters in Atlanta started receiving lettersexpressing anger or deep disappointment. Over 400,000 calls andletters were received by the company, [20] including one letter,delivered to Goizueta, that was addressed to "Chief Dodo, TheCoca-Cola Company". Another letter asked for his autograph, as

the signature of "one of the dumbest executives in Americanbusiness history" would likely become valuable in the future. Thecompany hotline, 1-800-GET-COKE, received 1,500 calls a daycompared to 400 before the change. [13] Apsychiatrist Coke hiredto listen in on calls told executives some people sounded as if they were discussing the death of a family member. [25]

They were, nonetheless, joined by some voices from outside theregion. Chicago Tribune columnist Bob Greene wrote some widely

reprinted pieces ridiculing the new flavor and damning Coke'sexecutives for having changed it. Talk show hostsand comedians mocked of the switch. Ads for New Coke werebooed heavily when they appeared on the scoreboard atthe Houston Astrodome . [21] Even Fidel Castro , a longtime Cokedrinker, contributed to the backlash, calling New Coke a sign of
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American capitalist decadence. [26] Goizueta's own fatherexpressed similar misgivings towards his son; the only time theyounger man recalled him ever agreeing with Castro, the manwhose revolution had driven him and his son, nearly penniless, to

America a quarter-century before. [27]

Pepsi took advantage of the situation, running ads in which a first-time Pepsi drinker exclaimed "Now I know why Coke didit!" [28] However, Pepsi actually gained very few converts overCoke's switch, despite claiming a 14% sales increase over thesame month the previous year, the largest sales growth in thecompany's history. [22] The most alienated customers simplyrefused to buy New Coke rather than switch to Pepsi, [29] or

purchased large amounts of remaining old Coke, including one Texan who spent $1,000 on his hoard of the old formula. [13] Coca-Cola's director of corporate communications, Carlton Curtis,realized over time that they were more upset about thewithdrawal of the old formula than the taste of the new one. [30]

Gay Mullins, a Seattle retiree looking to start a public relations firm with $120,000 of borrowed money, formed theorganization Old Cola Drinkers of America on May 28 to lobby

Coca-Cola to either reintroduce the old formula or sell it tosomeone else. His organization eventually received over 60,000phone calls. He also filed a class action lawsuit against thecompany (which was quickly dismissed by a judge who said hepreferred the taste of Pepsi [31] ), while nevertheless expressinginterest in landing Coca-Cola Company as a client of his new firmshould it reintroduce the old formula. [32] In two informal blind tastetests, Mullins either failed to distinguish New Coke from old orexpressed a preference for New Coke. [33]

Still, despite ongoing resistance in the South, New Coke continuedto do well in the rest of the country. [24] But executives wereuncertain of how international markets would react. Zyman hearddoubts and skepticism from his relatives in Mexico , where NewCoke was slated to be introduced later that summer, when hewent there on vacation.
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Goizueta publicly voiced a complaint many company executiveshad been making in private as they shared letters the companyhad received thanking them for the change in formula, thatbashing it had become "chic" and that, as had happened in the

focus groups, peer pressure was keeping those who liked it fromspeaking up in its favor as vociferously as its critics were againstit. 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."[34]

[edit ]Company dissatisfaction

Some Coca-Cola executives had quietly been arguing for areintroduction of the old formula as early as May. [35] By June, whensoft drink sales usually start to rise, the numbers showed the newformula was leveling among consumers. Executives feared socialpeer pressure was now affecting their bottom line. Someconsumers began trying to obtain "old" Coke from overseas,

where the new formula had not yet been introduced, as domesticstocks of the old drink were finally exhausted. [36] Over the courseof the month, Coca-Cola's chemists also quietly reducedthe acidity level of the new drink, hoping to assuage complaintsabout the flavor and allow its sweetness to be better perceived(ads pointing to this change were prepared, but never used). [37]

In addition to the noisier public protests, boycotts and bottlesbeing emptied into the streets of southern cities, the company

had more serious reasons to be concerned. Its bottlers, and not just the ones still suing the company over syrup pricing policies,were expressing concern. While they had given Goizueta astanding ovation when he announced the change at an April 22bottlers' meeting at Atlanta's Woodruff Arts Center , glad thecompany had finally taken some initiative in the face of Pepsi's
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advances, [21] they were less enthusiastic about the taste. [37][38] Most of them saw great difficulty having to promote and sell adrink that had long been marketed as "The Real Thing", constantand unchanging, now that it had been changed.

The 20 bottlers still suing Coca-Cola had even more sport with thechange in their legal arguments. Coca-Cola had argued in itsdefense when the suit was originally filed that the formula'suniqueness and difference from Diet Coke justified differentpricing policies from the latter - but if the new formula was simplyan HFCS -sweetened Diet Coke, Coca-Cola could not argue theformula was unique. Bottlers, particularly in the South, were alsotired 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.On June 23, several of the bottlers took these complaints to Coca-Cola executives in a private meeting. [39] With the company nowfearing boycotts not only from its consumers but its bottlers, talksabout reintroducing the old formula moved from "if" to "when".

Finally the board of Coca-Cola changed their mind and decided tobring back the old Coke. The president Donald Keough revealed

years later in the documentary "The people vs Coke" from 2002that they realized that this was the only right thing to do whenthey visited a small restaurant in Monaco and the owner of therestaurant proudly said that they had "the real thing, it's a realcoke" offering them a bottle of old coke. [40]

[edit ]Reversal

Coca-Cola executives announced the return of the originalformula on July 10, less than three months after New Coke's

introduction. ABC News ' Peter Jennings interrupted General Hospital to share the news with viewers. On the floor of the U.S. Senate , David Pryor called the reintroduction "a meaningfulmoment in U.S. history ". [37] The company hotline received 31,600calls in the two days after the announcement. [13]
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The new product continued to be sold and retained the nameCoca-Cola (until 1992, when it was officially renamed Coca-ColaII), so the old product was named Coca-Cola Classic, alsocalled Coke Classic, later just Coke and for a short period of time

it was referred to by the public as Old Coke. Many who tasted thereintroduced formula were not convinced that the first batchesreally were the same formula that had supposedly been retiredthat spring. This is partially true because Coca-Cola Classicdiffered from the original formula, as all bottlers who hadn'talready done so were using high fructose corn syrup insteadof cane sugar to sweeten the drink. [41]

"There is a twist to this story which will please every humanist

and will probably keep Harvard professors puzzled for years," saidKeough at a press conference. "The simple fact is that all the timeand money and skill poured into consumer research on the newCoca-Cola could not measure or reveal the deep and abidingemotional attachment to original Coca-Cola felt by so manypeople."

The company gave Gay Mullins the first case of Coke Classic. [21]

[edit ]Aftermath

By the end of the year, Coke Classic was substantially outsellingboth New Coke and Pepsi. Six months after the rollout, Coke'ssales had increased at more than twice the rate of Pepsi's. [42]

New Coke's sales dwindled to a three percent share of themarket, although it was doing quite well in Los Angeles and someother key markets. [42] Later research, however, suggested that itwas not the reintroduction of Classic Coke, but instead the less-heralded rollout of Cherry Coke , that can be credited with thecompany's success that year. [43]

Coke spent a considerable amount of time trying to figure outwhere it had made a mistake, ultimately concluding that it hadunderestimated the public impact of the portion of the customerbase that would be alienated by the switch. This would notemerge for several years afterward, however, and in the
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meantime the public simply concluded that the company had, asKeough suggested, failed to consider the public's attachment tothe idea of what Coke's old formula represented. While that hasbecome conventional wisdom in the ensuing years, some

analyses have suggested otherwise. This populist version of the story served Coke's interests,however, as the whole episode did more to position and defineCoca-Cola as a brand embodying values distinct from Pepsi thanany deliberate effort to do so probably could have done. Allowingitself to be portrayed as a somewhat clueless large corporationforced to back off a big change by overwhelming public pressureflattered customers (as Keough put it, "We love any retreat which

has us rushing toward our best customers with the product theylove the most." [44] ). Bottles and cans continued to bear the "Coca-Cola Classic" title until 2009 when the company announced that itwould discontinue the use of "Classic" to avoid confusion with theyounger generation. [45]

While in the short term the fiasco led Cosby to end his advertisingfor 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 widelyperceived as a misstep, for the simple reason that it ultimatelywasn't. When Goizueta died in 1997, the company's share pricewas at a level well above what it was when he had taken over 16years earlier and its position as market leader even more firmlyestablished. At the time Roger Enrico , then head of Pepsi'sAmerican operations, likened New Coke to the Edsel . [46] Later,when he was himself PepsiCo's CEO, he modified his assessmentof the situation, saying that had people been fired or demotedover New Coke, it would have sent a message that risk-taking wasstrongly discouraged at the company. [47]

In the late 1990s, Zyman summed up the New Coke experiencethus:
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Yes, it infuriated the public, cost a ton of money and lasted only77 days before we reintroduced Coca-Cola Classic. Still, New Cokewas a success because it revitalized the brand and reattached thepublic to Coke. [48]

New Coke continued to do what it had originally been designed todo: win taste tests. In 1987, The Wall Street Journal surveyed 100randomly selected cola drinkers, the majority of whom indicated apreference for Pepsi, with Classic Coke accounting for theremainder save two New Coke loyalists. When this group wasgiven a chance to try all three in a blind test, New Coke slightlyedged out Pepsi - yet many drinkers reacted angrily to findingthey had chosen a brand other than their favorite. [49]

Goizueta never once regretted the decision, even throwing ananniversary party for New Coke in 1995, and continued to drink ituntil his own death. [21]

[edit ]New Coke after Coke Classic

In the short run, the reintroduction of old Coke saved Coke's salesnumbers and brought it back in the good graces of manycustomers and bottlers. Phone calls and letters to the company

were as joyful and thankful as they had been angry anddepressed ("You would have thought we'd cured cancer", said oneexecutive. [50] ).

But confusion reigned at the company's marketing department,which had to come up with a plan to market two Cokes wheresuch plans had been completely off the table mere monthsbefore. Classic Coke did not need much help, with a "Red, Whiteand You" campaign showcasing the American virtues many of those who had clamored for its reintroduction had pointedlyreminded the company it embodied. But the company was at aloss to sell what was now just Coke. "The Best Just Got Better"could no longer be used. Marketers fumbled for a strategy for therest of the year. [51] Matters were not helpedwhen McDonald's announced shortly after the reintroduction that
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it was switching over to Classic Coke at every store across thecountry. [52]

Max Headroom print ad from "Catch the Wave."

At the beginning of 1986, however, Coke's marketing team founda strategy by returning to their original motives for changing thedrink: the youth market so beholden to Pepsi. Max Headroom , thepurportedly computer-generated media personality playedby 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 knownto much of the U.S. youth audience through appearances on MTV,where he had first appeared in the Art of Noise's "Paranoimia " video , and Cinemax . The campaign waslaunched with a memorable television commercial , producedby McCann-Erickson New York, with Max saying in histrademark stutter , "C-c-c-catch the wave!" and referring to hisfellow "Cokeologists". [53] 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 andthen cut to the condensation forming on the can. "S-s-s-s-sweating?" he asked.

It was a huge success, and surveys likewise showed that morethan three-quarters of the target market were aware of the ads
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within two days. Coke's corporate hotline received more callsabout Max than any previous spokesperson, some even asking if he had a girlfriend. [54] The ads and campaign continuedthroughout the year and were chosen as best of 1986 by Video

Storyboard of New York. [54]

[edit ]Coke II

A can of Coke II

In 1985, New Coke was sold only in Canada , the United States ,and United States territories , while the original formula continuedto be sold in the rest of the world (had the new version been asuccess it would presumably have been introduced worldwide).New Coke was eventually returned to the company's productportfolio; it was test-marketed in certain U.S. cities under the

name Coke II in 1990 and officially renamed Coke II in 1992,despite the company's original intention not to create a secondbrand. Filmmaker Miranda July is said to have suggested thename of Coke II while working as a tastemaker for an ad agency.[55]

However, Coca-Cola did little to promote or otherwise distinguishit. In a market already offering far more choice of drinks callingthemselves "Coke" in some fashion or another, the public saw

little reason to embrace a product they had firmly rejected sevenyears earlier, and within about a year, Coke II was largely off theAmerican shelves again. By 1998, it could only be found in somescattered Midwestern markets, and in 2002, Coke II wasdiscontinued entirely. On August 16 of that year, Coke announceda change of the label in which the word "Classic" was no longer so
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prominent, leading to speculation that it would eventually beremoved and the last legacy of New Coke eliminated from thecompany's packaging. [56] In 2009, Coca-Cola permanentlyremoved "Classic" from its North American packaging. [57]

It has found acceptance in some foreign markets. As of 2006, itwas still selling in Yap (one of the four Federated States of Micronesia ), along with Coca-Cola C2 . It is also still very popular inthe U.S. Territory American Samoa , where it is still sold inmost Coke vending machines. [citation needed ]

Evolution of the New Coke/Coke II cans.

[edit ]Commercial legacy

New Coke had the spotlight for only three months but casts a longshadow, in both the business world and popular culture, that canbe seen today. It is most frequently mentioned as a cautionarytale among businesses against tampering too extensively with awell-established and successful brand.

"For a product so widely despised," noted AdWeek blogger TimNudd in 2006, more than two decades later, "New Coke (a.k.a.Coke II) still gets an admirable amount of ink." He

noted Blink and Why Most Things Fail that dealt with it at somelength, as well as two recent mentions in Forbes and Sports Illustrated . [58]

Within Coca-Cola, the role the company's bottlers had played inforcing its hand led executives to create a new subsidiary, Coca-Cola Enterprises , which bought out several of the larger bottlers
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and placed distribution and marketing efforts more tightly underits control.

[edit ]Conspiracy theories

Coca-Cola's sudden reversal on New Coke led toseveral rumors and conspiracy theories that have circulated in theyears since to explain how a company with the resources andexperience of Coca-Cola could have made such an apparentlycolossal blunder.

Some explanations that have been proffered are:

The company intentionally changed the formula, hopingconsumers would be upset with the company, and demand theoriginal formula to return, which in turn would cause sales tospike. [1] Keough answered this speculation by saying "We're notthat dumb, and we're not that smart". [1][59]

The putative switch was planned all along to cover the changefrom sugar-sweetened Coke to much less expensive high fructose corn syrup (HFCS), a theory that was supposedly givencredence by the apparently different taste of Coke Classicwhen it first hit the market (the U.S. sugar trade association

took out a full-page ad lambasting Coke for using HFCS in allbottling of the old formula when it was reintroduced [41] ).

It provided cover for the final removal of all coca derivativesfrom the product to placate the Drug Enforcement Administration , which was trying to eradicate the plantworldwide to combat an increase in cocaine trafficking andconsumption. While Coke's executives were indeed relievedthe new formula contained no coca, and concerned about the

long-term future of the Peruvian government -owned coca fieldsthat supplied it in the face of increasing DEA pressure to endcultivation of the crop, there was no direct pressure from theDEA on Coca-Cola to do so. [5]

[edit ]Taste-test issues
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In talks, and his book Blink , author Malcolm Gladwell relates hisconversations with market researchers in the food industry whoput most of the blame for the failure of New Coke on the flawednature of taste tests . They claim most are subject to systematic

biases . Tests such as the Pepsi Challenge were what are called in theindustry "sip tests", meaning that drinkers were given smallsamples (less than a can or bottle's worth) to try out. Gladwellcontends that what people say they like in these tests may notreflect what they will actually buy to sit at home and drink over aweek or so. [60] Carol Dollard, who once worked in new productdevelopment for Pepsi, told Gladwell, "I've seen many times

where the sip test will give you one result and the home-use testwill give you the exact opposite." [61] For example, although manyconsumers react positively to the sweeter taste of Pepsi whendrinking it in small volumes, it may become unattractively sweetwhen drunk in quantity. Coke, on the other hand, may be moreattractive for drinking in volume, precisely because it is lesssweet. A more comprehensive testing regimen could possiblyhave revealed this, Gladwell's sources believe. [60]

Gladwell reports that other market researchers have criticizedCoke for not realizing that much of its success as a brand camefrom what they call sensation transference , a phenomenon firstdescribed by marketer Louis Cheskin in the late 1940s: tastersunconsciously add their reactions to the drink's packaging intotheir assessment of the taste. [62] For example, one of theresearchers told Gladwell that his firm's research had found 7-Updrinkers offered a sample from a bottle with a distinctly moreyellowish label believe the flavor to be more lemony , although itwasn't. [63]

In Coke's case, it is alleged that buyers, subject to sensationtransference, were "tasting" the red color of the container anddistinctive Coca-Cola script as much as the drink itself. It wasthus, in their opinion, a mistake to focus solely on the product andits taste. "The mistake Coke made," said Darrel Rhea, an
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executive with the firm Cheskin founded, "was in attributing theirloss in share entirely to the product". [63] He points to Pepsi's workin establishing a youth-oriented brand identity from the 1960sonward [64] as having more bearing on its success.

Coke considered but rejected gradually changing the drink'sflavor incrementally, without announcing that they were doing so.Executives feared that the public would notice and exaggerateslight differences in taste. In 1998, Joel Dubow, a professor of food marketing at St. Joseph's University , tested this "flavorbalance hypothesis" and argued that it was not true. He andfellow researcher Nancy Childs tested mixtures of classic Cokeand Coca-Cola II and found that the gradual changes of taste were

not noticed by a significant number of tasters. Coke, he said,would have succeeded had it chosen this strategy. [65]
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new coke case

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