‘Introducing New Coke’
I. Executive Summary
This paper features the “New Coke Case” which talks about the marketing decision which is considered by some as one of the biggest blunders in the history of marketing.
“Coke” was something an American in the 1920s to 1960s grew up with and it was more than just a soft drink for them. So the emotional attachment consumers had with Coke was never something that could be expressed in terms of marketing terms.
When Pepsi’s market shares caught up with that of Coke, the management reacted with introduction of “New Coke” to match Pepsi’s better tasting product. The consumer reaction to this move was so vehement that within 3 months of the introduction of “New Coke” the management repealed their decision.
The aftermath of this fiasco was that Coke was returned to its number one position both in charts and hearts of the consumers.
II. Situation Analysis
Since its inception in 1886, Coke was close to the heart of the American as freedom and patriotism. Coke was branded as the best refreshment to take a break. Several advertisements like “Things go better with coke” and “It’s the real thing” had groundbreaking success. The main appeal was the 100 year old secret formula which gave unchanging taste all around the world. Coca Cola was promoted through movies, TV shows and sports events. The “Coca cola Santa Claus” by Haddon Sundblom permanently changed the image of Santa for generation to come.
Throughout the 1970’s Coca Cola ruled as the number one soft drink in the world. But inside the company the top executives were more focused on the legal battles with the government and negotiations with bottlers over the price of syrup, than on marketing and sale of their main product.
By the late 1970s and early 1980s, Coke’s lead in the market share started to decline, even though under the chairmanship of Roberto Goizueta, Coke had a remarkable set of accomplishments like the acquisition of Columbia Pictures and the introduction of diet Coke.
Two advertisement campaigns by Pepsi, namely “Pepsi Generation” and “Pepsi Challenge” were extremely effective in their “Cola Wars” with Coca Cola. The former campaign classified the young and active consumers into a particular group called “The Pepsi Generation”. What really hurt Coke was the “Pepsi Challenge” where participants were asked to take blind taste-tests and to add insult to the injury, the tests were true: in blind taste-tests, Coke drinkers preferred Pepsi.
Coke’s response to Pepsi’s campaigns were rather disappointing. First Coke ads tried to laugh it off, then they changed the philosophy to "One sip is not enough" and finally Coke came up with identified taste tests versus blind ones where they won.
The loss in market shares and the humiliation from Pepsi’s advertisement campaigns, exerted pressure on the upper echelons of Coca-Cola management. They gave the technical division the task code named “Project Kansas” to brew a formula of Coke that can beat Pepsi in blind taste- tests. By early 1985 Project Kansas came up with a formula that beat Pepsi by as much as 6 to 8 points. Since most of the research and tests supported the “New Coke”, Coca Cola introduced it to the world on April 23, 1985.
Consumer response to New Coke was swift and strong. The diehard fans of coke acted as though they had lost something dear. They began stockpiling Old Coke in their homes, some turned to black markets and some were importing it from abroad. A group called “The Old Coke Drinkers of America” made more than 50,000 calls to Coca Cola national headquarters.
3 months after the introduction of the “New Coke” the sales began to slow down and consumer angst did not die down as the senior management had expected. By early June the company headquarters were receiving about 8000 calls per day and the negative coverage in the media continued.
On July 11th Coca-Cola announced that it would bring back Old Coke much to the relief of