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Coca-Cola’s Failure That Taught The World

This entry is part 2 of 4 in the series The Biggest Product Flops in History

Don’t mess with the classic.

If the shoe fits, wear it. The “New Coke” debacle in 1985 has been heralded as one of the greatest business blunders of all time. Coca-Cola had the most powerful brand on the planet at the time. Their executives didn’t just think their iconic brand was broken; they considered it fully flat. So, the original taste of Coca-Cola was removed from the market. And all hell broke loose.

A recent report revealed that, although the market share of Coca-Cola remained the same, its rival Pepsi-Cola was now within such a close distance that Coca-Cola is being called “Old Coke.”

Blind taste tests caught Coca-Cola red-handed. After the so-called “Pepsi Challenge,” consumers were guzzling the red cans by the millions. Coke execs were horrified to learn from their own taste tests that people preferred the flavor of Pepsi. They were forced to admit Pepsi is better in a blind taste test! The results from the Pepsi Challenge were so shocking that Coca-Cola issued a new drink to regain its reputation.

As the world’s best-known soft drink, Coca-Cola has a formula that’s been tweaked several times. It used to contain cane sugar, for example. And then it used to contain sorghum syrup. But one thing hasn’t changed—the taste.

In a risky move, Coca-Cola created a sweeter version of its classic diet soda. Diet Coke was positioned directly against Pepsi to win back market share and become the number one soda. Though many questioned the decision at the time, it now seems like genius.

Coca-Cola bets everything on New Coke

On April 23, 1985, Roberto Goizueta stepped before the press to introduce New Coke to the world. He declared the new recipe “smoother, rounder, yet bolder—a more harmonious flavour.” New Coke was sweeter and tasted more like Pepsi. Goizueta might not have noticed, but the rest of America did.

The Coca-Cola Company, which has always been honest and up-front with its consumers, admitted that it was not merely embarrassed by the existence of the 99-year old recipe but scandalized by it. And so, the company decided to rid itself of all evidence of the formula’s existence. It was removed from its headquarters in Atlanta and locked in a bank vault for good measure. To date, there has been no indication that this decision will be reversed.

“Some may choose to call this the boldest single marketing move in the history of the packaged goods business,” Goizueta said. “We simply call it the surest move ever made.” Coca-Cola president Donald Keough echoed the certainty: “I’ve never been as confident about a decision as I am about the one we’re announcing today.”

Flat-line

To cut a long story short, when Roberto Goizueta and Paul L. Keough danced around each other to “Jingle Bell Rock” at a product launch in New York City in April 1985, the news was already beginning to fall flat.

A stock market was plummeting, and a rival of stocks rose, while that of Coca Cola’s dropped. Pepsi gave its employees the day off and declared victory in full-page newspaper advertisements that boasted, ‘‘After 87 years of going at it eyeball to eyeball, the other guy just blinked.’’

When New Coke was released, the Coca Cola Company was met with swift and severe backlash from loyal customers. Within weeks of the announcement, the company was fielding 5,000 angry phone calls a day. By June, that number grew to 8,000 calls a day, a volume that forced the company to hire extra operators. “I don’t think I’d be more upset if you were to burn the flag in our front yard,” one disgruntled drinker wrote to company headquarters. At protests staged by grassroots groups such as “Old Cola Drinkers of America,” consumers poured the contents of New Coke bottles into sewer drains. One Seattle consumer even filed suit against the company to force it to provide the old drink.

Coca-Cola executives underestimated loyal drinkers’ emotional attachments to the brand. After all, they only performed 190,000 blind taste tests on U.S and Canadian consumers. The Coca-Cola Co. uses an enormous amount of science to create and test its products. But it failed to think about the emotions either the formula change or its rollout announcement would trigger. Its market research testers never asked subjects how they would feel if the new formula replaced the old one.

Coca-Cola Classic returns

On July 11, 1985, just one year and 79 days after the “new” Coke was announced, Coca-Cola bowed to consumer pressure and brought back the old formula under the name of Coca-Cola Classic. “Our boss is the consumer,” Keough said. “We want them to know we’re sorry.” The news was so momentous that television networks broke into standard programming with special reports.

Coca-Cola Classic quickly outsold New Coke and had returned to its position as the top-selling sugar cola, ahead of Pepsi within a few months. However, the new Coke was not a grand success because it was only on the shelves for three years and was never made available for individual sale, only in a 2-litre bottle size. Despite its ultimate failure, New Coke is often perceived to have been a success because it strengthened Coca-Cola’s brand.

“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,” Keough admitted. The blunder was so colossal that some thought it must have been an intentional marketing gimmick. “Some cynics say that we planned the whole thing,” Keough said. “The truth is we’re not that dumb, and we’re not that smart.”

New Coke was a product failure, but it didn’t stop Coca-Cola from making billions.

Series Navigation<< The Flop of the Edsel.The Utter Failure of the Crystal Pepsi >>

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