A Smart Move or an Error — The Story of the New Coke 1 In May 1985, the Coca-Cola Company made a big marketing error. After ninety-nine successful years, it threw away its original formula Coke! In its place came New Coke with a sweeter, smoother taste. The company announced the new taste with much advertising. 2 At first, New Coke sold well. But sales soon went flat. Coke began receiving more than fifteen hundred phone calls and many bags of mail each day from angry consumers. A group called Old Cola Drinkers protested and threatened to start a suit unless Coca-Cola brought back the old formula or made it public. 3 In mid-July, after just two months, the Coca-Cola Company brought old Coke back. Called Coke Classic, it was sold side by side with New Coke on supermarket shelves. The company said that New Coke would be its main brand, but consumers had a different idea. By the end of 1985, Classic was outselling New Coke in supermarkets by two to one. Thus Coke Classic became the company's main brand. 4 Why was New Coke introduced in the first place? What went wrong? Many analysts blame the error on poor marketing research. 5 In the early 1980s, though Coke was still the leading soft drink, it was slowly losing market share to Pepsi. For years, Pepsi had successfully started the “Pepsi Challenge,” and a series of taste tests showed that consumers preferred the sweeter taste of Pepsi. By early 1985, though Coke led in the overall market, Pepsi led in share of supermarket sales by 2 percent. This 2 percent of the big soft-drink market means millions of dollars in retail sales! Coca-Cola had to do something to stop this. The solution appeared to be a change in Coke's taste. 6 Coca-Cola began the largest new-product research project in the company's history. It spent over two years and millions of dollars on research. It conducted about two hundred thousand taste tests. In the blind tests, 60 percent of consumers chose the new Coke over the old, and 52 percent chose it over Pepsi. Research seemed to show that New Coke would be a winner and the company introduced it with confidence. So what happened? 7 Looking back, Coke's marketing research appears to have been too narrow. The research looked only at taste; it did not explore how consumers felt about dropping the old Coke and replacing it with the new Coke. The research consisted mostly of "blind comparisons" and did not look at the total product: name, history, packaging, and image. To many people, Coke, like hot dogs and apple pie, is a typical American product. The company failed to consider the people's emotions about Coke. 8 Perhaps Coke's managers used poor judgment. For example, they overlooked the fact that 40 percent still wanted the old Coke. The company might have been wiser to leave the old Coke alone and introduce New Coke as a brand extension. Furthermore, the new Coke should not have gone national immediately. Instead, it should have been introduced regionally to see how well it would do. 9 However, some observers thought that Coke's managers had made a smart decision. Supermarkets would have resisted adding another Coke flavor on their shelves. By first taking away its original Coke and then bringing it back again, the company got two brands on the shelf, really a clever trick in the struggle for shelf space.