COKE_CASE_STUDY by Shrey_Joshi

VIEWS: 11 PAGES: 19

									                                   CASE-STUDY
                                    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]

Legacy
New 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).

[edit]

Conspiracy theories
Coca-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.

[edit]

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].
[edit]

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.

								
To top