Too Big to Fail? – New Coke: Things you need to know!

Today, the second most recognized word on the planet after “Hello” is “Coca-Cola”. However, a marketing disaster in 1985 almost brought the company to its knees. To bring things into context, this was the time when competition between the arch rivals Pepsi and Coca-Cola was at heating up. In the late 1950s, Coke outsold Pepsi by a ratio of more than five to one. However, during the next decade Pepsi repositioned itself as a youth brand and managed to narrow the gap.

New_Coke_can

In the 1970s, Pepsi introduced the “Pepsi Challenge” – a blindfolded taste test between Coca-Cola and Pepsi. Most of those who participated preferred Pepsi’s sweeter formula. Pepsi took the challenge global and signed up celebrities like Michael Jackson to appeal to its target market. By 1981, Coke’s #1 status was looking vulnerable. Coke tried to appeal to the market via advertising campaigns but these had little impact. The only thing keeping Coke above Pepsi was the former’s excellent distribution system.

Coca-Cola perceived the problem as related to its product (customers were preferring Pepsi’s sweeter offering). This perception was strengthened by the success of Diet Coke, which was closer to Pepsi’s sweeter formula. Thus, Coca-Cola started working on a new formula and a year later, New Coke arrived. Taste tests revealed that people preferred the new drink to both the original Coke and Pepsi.

Coke-vs-Pepsi5

Coke immediately scraped the original Coke and replaced it with New Coke. On April 23, 1985, New Coke was introduced and a few days later, the production of original Coke was stopped. This joint decision has since been referred to as the biggest marketing blunder of all time. A large % of the American population boycotted the new product. Public outrage was high due to the unavailability of the original product. Coca-Cola had little choice but to make a U-turn.

Coke learnt that marketing is about much more than the product itself. As the tests had been conducted blind, the taste was the only factor assessed. Coke had invented the entire category in the 1880s and the brand name had become the name of the product itself. In 1985, a century after the product launched, the last word people associated with Coca-Cola was ‘new’. You can’t tell the world you have the “real thing” and then come up with a “new real thing”.

Ironically, through the brand failure of New Coke, loyalty towards the original one increased. Some conspiracy theorists even claim that the entire thing was a planned move to appreciate brand equity. Pepsi’s then CEO Roger Enrico pointed out that Coca-Cola are caretakers of heritage – they can’t change the image of their flagship brand.

Key Takeaways

  • Concentrate on the brands perception
  • Don’t try to clone your rivals,
  • Don’t be scared to make a U-turn
  • Do the right market research

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Saket Joshi is a PGP2 student and a member of Niche. He did his Bachelor of Science (B.S.), Naval Architecture and Marine Engineering at BITS, Pliani (2010 Batch)

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