The New Coke
In 1985 it seemed as if Coca-Cola was on its way to loosing the coke wars. The coke wars consisted of Pepsi and Coca Cola fighting for the number one spot in the soda industry. Yet, an event that seemed to be cokes downfall in the coke wars proved to elevate Coca Cola to a whole new level of sales. It seemed almost that the consumers near loss of their favorite beverage made them appreciate it that much more, and made the Coca Cola Company that much more successful. Yet, what lead up to this catastrophic decision to take the original Coca Cola product off of the market and how did Coca Cola pull out of it is the question this paper will examine.
Coca Cola has been a staple in American society ever since it was invented in 1886 by Dr. Pemberton. This was a product that whether Americans liked it or not they knew the taste they were getting, the Coca Cola formula had not been changed for nearly ninety nine years up till 1985. Besides the taste, another factor that remained stable throughout a large portion of Coca Cola history up until 1981 a few years before 1985 was the fact that the company was led by Robert Woodruff. Woodruff accomplished much during his reign as stated by Elliott, “he was head of the Coca Cola Company from 1923 until 1984, during which time sales increased from 31 million a year to $7.36 billion.” Woodruff clearly knew how to run a profitable company and one thing he was insistent on is as stated by Allen, “during his lifetime he had insisted on keeping the same formula.” Because of Woodruff’s consistency in bringing the same quality product to the market time and time again, Coca Cola customers never considered that they were at risk of losing their favorite product. Coca Cola had become a staple throughout America as can be seen when Bell states, “People in nearly 200 countries drink more than one billion eight ounce (237ml) servings of coke products a day”. It would seem unimaginable to bring this popular of a product off of the market. Not only as Coca Cola profitable but it was full of tradition, and people do not let tradition go that easily. It would seem like market suicide to bring your most profitable producer off of the market.
Yet, with Roberto Gizueta taking over the company in 1981 things were not looking too stable for the company. There had been a time where Coca Cola did not have any real competition, this is portrayed by Haig when he states, “In the late 1950’s, Coke outsold Pepsi by a ratio of more than five to one.” These times were over by the time Gizueta took the lead position at Coca Cola. Pepsi and Coca Cola’s ongoing competition about who had the best soft drink was coming to a head. Based on taste tests it was beginning to look as if the customers might really prefer Pepsi. These taste tests were not a joke as Lee states, “In 1975, Pepsi began airing a series of television commercials, called the Pepsi Challenge that depicted people looking astonished when, in blind taste tests, they picked Pepsi over Coke. And the truly terrible thing was that your own tests confirmed that the Pepsi Challenge wasn't funning. People seemed only to prefer Coke when it was labeled Coke.” This advertising move by Pepsi really worried Coca Cola. In fact Coca Cola had a right to be concerned as Pendergrast states, “In 1984, Coca Cola lost one percent of its market share, while Pepsi- Cola gained one and a half points.” The significance of this loss is better demonstrated as stated by Allen, “Each percentage point lost or gained meant 200 million dollars”. So to Coca Cola this was a huge loss. Even more concerning was the fact that as stated by Pendergrast, “The competition already sold more in the supermarkets and it was advancing on Coke’s superior fountain and vending sales.” It appeared as if customers were getting bored with Coca Cola and Roberto Gizueta was not one to sit by idly as his company took care of itself. Coca Cola may have been the drink that had brought the company this far but perhaps it was time to readjust to the times. Gizueta seemed to think coke might be holding the company back. If the taste tests said Pepsi was better, why not make a product that tasted better then both?
When running a successful business it is important to keep the customer happy. If customers were no longer finding the taste of Coca Cola appealing why not change it? This is how Roberto Gizueta felt in the year before his major 1985 decision. Gizueta thought that the only thing that went into the huge success of Coca Cola was its taste. Before making any sort of decision about changing the original coke formula Gizueta wanted to be sure this was the right decision as Hays portrays, “Coca-Cola's most senior executives commissioned a secret effort named "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”. Gizueta believed if he could find that winning flavor then he could turn the Coca Cola Company’s losses around without a problem. Yet, in order to come to come to any sort of conclusion Smith describes a lengthy process, “This historic decision was preceded by a top-secret $4 million survey of 190,000 people, in which the new formula beat the old by 55 percent to 45 percent.” This new formula was to have a sweeter taste that could rival its arch enemy, Pepsi. In fact, Pendergrast states, “The results of that were strong — the high fructose corn syrup mixture overwhelmingly beat both regular Coke and Pepsi.” With results such as this Gizueta believed the new coke was the answer to Coca Cola’s slump. This was not going to be just an additional product, Gizueta planned for the new Coke to replace the old coke as he stated, "New Coke or no Coke". Coca Cola was going into this venture with one hundred percent confidence. Yet, most taste testers did not realize that when they picked the new formula over coke they were voting to take coke completely off of the market. Consumers thought they would have the new coke alongside the old one, yet Gizueta saw no need for that. Here was a formula that would make people forget all about coke, so good was this new product in comparison.
When Gizueta decided to go ahead with the new formula and take the old coke off of the market, “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, a history of Coca-Cola, and many other elements”. As much hype as there was around this interview it did not go very well in fact as stated by Oliver, “Reporters present had already been fed questions by Pepsi”. Pepsi was sure to be there to profit from this. The response was not what Gizueta had hoped for, yet exactly what Pepsi had always prayed for. It did not take long for word to get around; in fact, “market research showed that 80% of the American public was aware of the change within 48 hours”. Coca Cola customers were furious and made their feelings known with letters and phone calls such as, “ To the Master Dodo this concerns: What ignoramus decided to change the formula of Coke?!?!The new formula is gross, disgusting, unexciting, and worse than Pepsi!!” And, “Real coke had a punch this tastes almost like its flat”. This is just a sample of the many responses Coca Cola got in as Hays states, “Company headquarters in Atlanta started receiving angry letters expressing deep disappointment and anger at executives. Over 400,000 calls and letters were received by the company”. It did not matter to customers that the new coke was proven to taste better. This was a matter of no longer having the choice to drink Coca Cola’s number one tradition; coke. Coca Cola had thought the new formula would bring them out of a slump, yet instead it seemed to put them in a further slump. Not only was Coca Cola still in a slump, but the new formula was threatening their place in the coke wars with many Coca Cola customers threatening to switch to Pepsi. In fact, Pepsi took this time to declare themselves the winner of the Coke wars with Enrico stating, “It gives me great pleasure to offer each of you my heartiest congratulations. After eighty-seven years of going at it eyeball to eyeball, the other guy just blinked. Coca-Cola is withdrawing their product from the marketplace, and is reformulating brand Coke to be more like Pepsi...There is no question the long-term market success of Pepsi has forced this move...Maybe they finally realized what most of us have known for years, Pepsi tastes better than Coke. Well, people in trouble tend to do desperate things...and we'll have to keep our eye on them. But for now, I say, victory is sweet, and we have earned a celebration. We're going to declare a holiday on Friday. Enjoy! Best Regards.” With Pepsi having been right on Coca Cola’s tail in the market world before this event, it only seemed as if it was a matter of time now before they would reign supreme. Coca Cola had dug itself into a hole that was going to be difficult to get out of.